Crop production in the Australian Wheatbelt
On average an area of 23 million hectares was planted to crops in Australia over the last 10 years (2001-02 to 2010-11). There has been a steady increase in the total area planted to crops from 14.7 million hectares in 1991-92 to 24.4 million hectares in 2010-11, an increase of 66%.
This increase has been led by wheat which has seen a near doubling from 7.2 million hectares to 13.6 million hectares during the same period, compared to only 43% for all other crops. Indeed, the area cropped to wheat is greater than the total area planted to all other crop types combined (including all other arable and perennial crops) with wheat accounting for 56% of the total area cropped annually over the last ten years (2001-02 to 2010-11).
Long-term trend in the area sown to wheat and other crops, 1991-92 to 2010-11
The great majority of the land area not planted to wheat is devoted to other commercial grains or oilseed crops, with non-arable crops accounting for only 2% of the total cropped area. The precise land use allocation by farmers to different arable crops fluctuates from year to year. This is primarily due to farm level management decisions based around rotational crop planning and the level of rainfall received before each growing season.
Relationship between the area sown to wheat and other arable crops, 2007-08 to 2011-12
As Australia’s single most important agricultural commodity by production volume and value, wheat accounts for over half of Australia’s grain production, with an average annual production of 23 million tonnes over the last five years (2007-08 to 2011-12). The average annual value of production from Australia’s grains industry was AU$11 billion over the last five years (2007-08 to 2011-12) of which AU$6.13 billion or 55% was from wheat.
Australian wheat and grain production, 2007-08 to 2011-12
Driven by higher yields and commodity prices the production value of wheat rose by 42% to $7.3 billion over the same period. Although also on an upward trend, the rise in the production value of other grains has been more variable due to fluctuating agricultural commodity prices. The value of all grains produced (including wheat) increased by 19% over the last five years.
Value of Australian wheat and grain production, 2007-08 to 2011-12
Western Australia produces more wheat on a larger area of land than any other state with an average annual production of 7.3 million tonnes sown on 4.6 million hectares over the last 10 years (2001-02 to 2010-11). During this period Western Australia accounted for 36% of Australian wheat production, followed by New South Wales which accounted for 30% and South Australia accounting for 16%.
Average wheat production and area sown by Australian state, 2001-02 to 2010-11
For more on the variability of yields in different states and how this affects investment returns, download our free report, Comparative Analysis of the Australian Wheatbelt. The document also addresses the key question: which region of Australia has delivered superior returns to agricultural investors in the past and is most likely to offer superior risk adjusted returns in the future?
References and data sources:
- Australian Bureau of Statistics, Value of Agricultural Commodities Produced Data Series (chain volume measure), 2012
- Australian Bureau of Statistics, Crops and Pastures Data Series, 2012
- Australian Bureau of Statistics, Agricultural Land Use and Selected Inputs Data Series, 2012
- Australian Government Department of Agriculture, Fisheries and Forestry, Australian Bureau of Agricultural and Resource Economics and Sciences, Agricultural Commodities Statistics, 2012
Farming is like any other business: all other things being equal, income is dictated by the quality of the management team. Even enterprises with similar soil, climate and business model can show a high degree of variance. This means tenant / manager selection is a critical component of the agricultural investment process.
Inefficiencies in the farmland pricing mechanism are one of least exploited opportunities to increase returns as a farmland investor. When it comes to buying agricultural assets, we are able to help our clients beat the market because of our unconventional approach to acquiring farms and the information advantage we have in the markets in which we specialise.
Investing in Australian agriculture
Australia’s robust economy, strategic location and investment friendly business environment have made the country one of the world’s top destinations for foreign investment, with FDI inflows of over twice the OECD average (% of GDP basis, 2011).
Geographic and sector focus
For investors, the choice of agricultural sector will be driven by your risk tolerance and overall investment objectives. As a general rule, arable agriculture (i.e. the cultivation of annual crops, in particular grain) is the least volatile farming sector.