Broadacre farm productivity and profitability in south-western Australia

Abstract

This paper examines broadacre farm performance in south-western Australia. This region has experienced pronounced climate variability and volatile commodity prices since the late 1990s. Relationships between productivity and profitability are explored using panel data from 47 farms in the study region. The data are analysed using nonparametric methods. By applying the Fare-Primont index method, components of farm productivity and profitability are measured over the period 1998–2008. Growth in productivity is found to be the main contributor of profitability. Gains in efficiency and technical change are identified as jointly and similarly important in their contribution to total factor productivity for the farm sample in the region from 1998 to 2008. However, across environments, efficiency gains play an increasingly important role in influencing productivity as growing season rainfall increases. We conclude that R,D&E that delivers further improvement in technical efficiency and technical change is needed to support the profitability of farms across the study region.