Farming systems and their business strategies in south-western Australia: A decadal assessment of their profitability

Abstract

This paper draws on a decadal dataset of 250 farms in south-western Australia. These farms, when categorised according to their type of farming system and business strategy, faced different trends in their terms of trade. Profitability measures of these farms for the period 2002/3 to 2011/12 were compared. Most farms, other than some highly crop dominant ones, applied a strategy of maintaining or increasing their cropping intensity and farm size over the decade. The strategy of a greater commitment to cropping was supported by cropping technologies and beneficial change in agronomic practices. Increased cropping was universally profitable among all types of farming systems, providing a statistically significant increase in operating surpluses. By contrast, irrespective of their underpinning farming system, farms which did not strategically increase their intensity of cropping generated statistically significant less returns to their business equity. By maintaining rather than increasing their cropping intensity these businesses failed to capture the operating surplus upside available from increased cropping. Overall, the results show that management of farming systems is not solely about tactics and flexibility. Strategic management can additionally influence the nature and profitability of farming systems.