Growing conditions in the Australian Wheatbelt
The Wheatbelt is split into three ‘agroecological’ grain growing regions, each with its own broadly similar climate systems and soil types: the northern, southern and western region. There are wide variations in the productivity of farms within each of these regions (primarily due to differences in the extent and reliability of rainfall), but some generalisations are still possible.
Rainfall is the most important determinant of grain yields in dryland farming, with all three of rainfall dimensions having an impact:
- Extent – Total rainfall received in the average year.
- Timing – Proportion of rainfall received during the growing season; excessive rainfall damaging crops during the growing season; and untimely rainfall causing crop damage at harvest time.
- Reliability – Variability of rainfall from year to year.
It is the interaction between these factors which dictates both average yields and the annual variability of yields in different regions of the Wheatbelt.
As the long-term climate maps at the end of this section show, in broad terms, the further east the more volatile and less conducive to yield reliability climate conditions become. Western Australia has the most reliable rainfall of any Australian state and also receives the highest proportion of this during the growing season. Indeed, even medium or low rainfall areas of the Western Australian Wheatbelt can be more reliable producers than some high rainfall areas in the south east.
Furthermore, Western Australia also has the lowest incidence of crop damage due to summer rainfall occuring at harvest time, the lowest incidence of frost damage during the growing season and the lowest incidence of extreme weather events (for more on climate risk and the effect on yields, seeClimate risk in the Australian Wheatbelt).
As a consequence of its favourable climatic conditions Western Australia has the most reliable yields of any major grain producing state (for more on yields see Yields in the Australian Wheatbelt). This is of vital importance to agricultural investors, because yield reliability (as opposed to average yield extent) is one of the most important factors determining farm profitability.
For a more detailed analysis on the relationship between rainfall / yield variability and farm profits / investment returns, download our free report, Comparative Analysis of the Australian Wheatbelt. The document 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 Meteorology, Historical Climate Data, 2012
- Australian Bureau of Statistics, Agricultural Land Use and Selected Inputs Data Series, 2012
- Australian Bureau of Statistics, Crops and Pastures Data Series, 2012
- Australian Bureau of Statistics, Value of Agricultural Commodities Produced Data Series (chain volume measure), 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.