Sustainable farming practices and the Australian Wheatbelt
Having worked under challenging conditions of delicate soils and limited water resources for generations, Australians are amongst the world’s earliest and most committed adopters of sustainable farming practices.
The ‘bash and burn’ approach of field preparation for sowing and crop residue management of the last century has largely given way to minimum tillage. The majority of Australian farmers now conserve their crop residue for its proven and crucial role in minimising soil erosion and moisture loss. This trend has been helped by the greater availability and affordability of large scale farm machinery suited to Australian farming conditions.
Precision agriculture techniques have also been widely adopted by Australian farmers and the country in now recognised as a world leader in the development and commercialisation of precision agriculture techniques. It is now common practice for farmers and harvesting contractors to use Global Positioning Systems (GPS) to map the variation in crop yields across farms, apply fertilisers, nutrients and other chemical inputs and minimise soil compaction using auto-steer to avoid ‘operation overlap’.
Not only are techniques such as minimum tillage and precision agriculture which reduce the ratio of input use per unit of production good for the environment, they are also good for farm profits and asset values (because they improve soil health and productive potential). Indeed, the adoption of sustainable farming techniques and technologies has been instrumental in the rising level of productivity and water use efficiency achieved by Australian farmers (for more on this, see Trends in productivity growth in Australian agriculture).
Larger farms are more able to afford precision agriculture technologies and the specialised machinery involved. In combination with lower land prices on larger farms, this makes farm size one of the most important determinants of investment returns. For a more detailed analysis on the relationship between farm sizes and 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?
Minimum tillage (also referred to as reduced or zero-tillage) is a soil conservation system utilising the minimum level of soil manipulation necessary for successful crop production. In minimum tillage the soil is not turned over as with conventional tillage which involves ploughing and harrowing. Conventional tillage causes a decline in optimal soil structure and greater vulnerability to erosion, loss in organic matter content, and loss of moisture.
Precision agriculture is a farming management concept based on observing and responding to intra-field variations. Today, precision agriculture is about whole farm management with the goal of optimizing returns on inputs while preserving resources. It relies on new technologies like satellite imagery, information technology, and geospatial tools. It is also aided by farmers’ ability to locate their precise position in a field using satellite positioning system like the GPS or other GNSS.
References and data sources:
- 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
- Liao, B and Martin, P 2009, Farm innovation in the broadacre and dairy industries, 2006-07 to 2007-08, ABARE research report 09.16, Canberra, November.
- Nossal, K and Sheng, Y 2010, ‘Productivity growth: Trends drivers and opportunities for broadacre and dairy industries’, Australian Commodities, vol. 17, no. 1, March quarter, pp. 206–216, ABARE, Canberra.
- O’Donnell, C 2010, ‘Measuring and decomposing agricultural productivity and profitability change’, Australian Journal of Agricultural and Resource Economics, vol. 54. pp. 527–560.
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.