THE AUSTRALIAN Bureau of Agricultural and Resource Economics and Sciences has released its preliminary estimates for the 2023 Farm Data Portal, providing insights into the financial performance of broadacre, beef, cropping, dairy, sheep and sheep/beef farms.

In the second half of 2023, the anticipation of poor seasonal conditions based on BOM forecasts led to a livestock market crash. To prepare for drought conditions, producers were turning off cattle earlier and faster, at unfavourable prices.

According to ABARES, farm cash profit for cattle businesses eased by 33 percent in Australia, with Victoria and WA incomes easing by almost 80pc compared to 2022.

In 2023, sheep operations didn’t fare much better, with declines of almost 90pc in NSW, and Victoria easing by 75pc. Sheep/beef operations followed in a similar vein with a 53pc decrease across Australia.

The rate of return, including capital appreciation, for beef operations in 2023 eased by 15pc to 63pc.

This substantial reduction in rate of return reflected the current economic conditions and the impact of declining cattle prices on businesses MLA market information analyst Emily Tan said.

A similar trend was seen in rate of return excluding capital appreciation, where across Australia the rate of return reduced by almost 50pc from 2022 to 2023, Ms Tan said.

Across all states, the rate of return eased for sheep, beef and sheep-beef operations.

Source: MLA. Click on image for a larger view

These two metrics are important because it indicated the reliance on land value to ensure producers borrowing capacity opposed to ongoing liquidity, Ms Tan said.

The rate of return (excluding capital appreciation) is also declining, as seen in the graph below (note: a mistake appeared in the first version of this graph – since amended – Editor). Producers are finding it harder to generate value as their capital, as land value continues to rise and profits reduced in 2023.

Operational efficiency cannot be achieved if profits cannot keep up with increases in land value, as this will inevitably decrease efficiency, Ms Tan said.

Source: MLA

“The data shows that the most valuable asset producers own is their land, as opposed to the business itself,” she said.