- This Grains Industry profile provides an overview of the location, structure and financial performance of Victoria’s grains industry.
- In 2010-11, Victoria produced 4.5 million tonnes of wheat, 2 million tonnes of barley, 477 thousand tonnes of canola, 237 thousand tonnes of oats for grain, and 70 thousand tonnes of other major crops, on 3.2 million hectares of land.
- In 2010-11, Victoria’s grain exports were valued at $1,126 million, an increase of $440 million on the previous year.
- Victoria’s grain growing area continues to expand south into the high rainfall zone on land previously used as pasture.
- Equity ratios on Victoria’s grain farms remain at over 85 percent.
- Following August 2011 rainfall, crop yields were significantly above average.
- The wheat industry in Victoria and nationally is adapting to new marketing arrangements and the Wheat Export Marketing Act 2008.
Figure 1: Grain Production in Victoria
Location of Victoria’s grain farms
Victoria’s grain farms are predominantly located in Western and Northern Victoria, with the majority in the Mallee and Wimmera regions (See Figure 1).
Grain growing in Victoria is continuing to expand into the high rainfall zones of southern Victoria and, to a lesser extent Gippsland, on land previously used exclusively for pasture production.
Structure of Victoria’s grain industry
Grain is grown on approximately 5,500 farms in Victoria, with around 3,000 grain ‘specialists’ and 2,500 who produce grain as part of a mixed farming enterprise. Victoria’s grain farms are primarily family run enterprises characterised by a large number of small farms and a small number of large farms. This contrasts with Western Australia, where 19 per cent of Australian grain farms produce roughly 37 per cent of total Australian production. Victoria is the third largest state in terms of number of grain (not including rice) establishments (22 per cent) and area planted (15 per cent).1
Victoria has approximately 150 off-farm grain silos2 located in the main production regions, with a storage capacity of approximately 8 million tonnes.3 Around 69 per cent of this capacity is owned and operated by GrainCorp.
These off-farm silos are supplemented by significant on-farm storage, which currently totals around 3 million tonnes. The growth in on-farm storage has increased growers’ financial flexibility and options to capitalise on post-harvest price rises.
Grains are transported to the domestic and export market via road or rail. Victoria has three grain export terminals - Melbourne (operated by Australian Bulk Alliance Ltd), Geelong and Portland (both owned and operated by GrainCorp Ltd). Victoria’s main grain exporters are GrainCorp, Australian Bulk Alliance and AWB Ltd. With deregulation of the grains market, new multinational grain exporters, such as Cargill Australia Ltd, Glencore Ltd and Louis Dreyfus Ltd, have also become exporters.
Victoria’s Grain Industry Production
In 2010-11, Victoria was Australia’s fourth largest grain producing state, accounting for approximately 16 per cent of Australia’s production.4 Primarily due to weather events, Victoria’s grain production has fluctuated over recent years, peaking at 6.95 million tonnes in 2003-04 and reaching a low point of 1.79 million tonnes in 2006-07.
In 2010-11, the gross value of Victoria’s wheat production was $1,198million, with barley at $401 million and canola at $293 million.6 The area cropped in Victoria is now over 3 million hectares.
Victoria's Exports and Consumption of GrainsVictoria’s domestic grain consumption is approximately 2.5 million tonnes per year,7 underpinned by relatively stable demand from the dairy, intensive livestock and flour milling sectors. The remainder of Victoria’s grains are exported.
On average, Victoria exports approximately two and a half million tonnes of grain per annum.8 In 2010-11, exports were valued at $1,126 million, an increase of $442 million on the previous year, reflecting the record harvest volumes. Victoria accounted for approximately 12.5 per cent of Australia’s grains exports in 2010-11.
In 2010-11, Victoria’s major grain export markets were Vietnam ($168 million), Indonesia ($107 million), Philippines ($102 million), and Netherlands ($64 million).9
Wheat Grain Exported from Victoria
Source: ABS data (Cat. No. 7307.0 Wheat Stocks and Exports, Feb 2012)
Domestic grain prices closely track international prices and, as with all internationally traded commodities, are subject to significant fluctuations.
Figure 2: Grain prices (Mar 2007 – Dec 2011)10
Total factor productivity
Total factor productivity in Australia’s cropping industry is highly variable across regions. Between 1977-78 and 2006-07 2008-09, Victoria’s cropping establishments achieved an annual productivity growth rate of 1.9 1.5 per cent.11 Total factor productivity for Australian cropping industries over the last three decades has varied considerably over time. Cropping shows much greater productivity volatility than other broadacre sub-sectors because it is so closely tied to seasonal conditions12. At -0.6 per cent per annum between 1993-94 and 2008-09, cropping industry productivity growth was much lower than the 4 per cent per annum achieved from 1977-78 to 1993-94. In recent years, however, productivity growth across all agricultural industries has slowed, in part due to the prevalence of dry seasons.
Employment on Victoria’s grain farms
In 2006, around 8,800 people were directly employed on grain and mixed grain farms in Victoria.
|Grain growing||Grain growing plus sheep or beef|
|Source: ABS census data (Cat. No. 2064.0 - CDATA Online)|
Farm financial performance
Table 3 below includes average costs and receipts for total Victorian broadacre farmers and farmers from the Wimmera and Mallee, for the years 2007-08 to 2008-09. Financial performance data relating solely to grain farms is not available as it is embedded in broadacre farm information which includes sheep, wool, lamb and beef cattle activities.
|Average Costs and Receipts and Financial Performance per farm|
|Receipts||Total cash receipts ($)||418,000||356,000||453,500||360,000||312,100||279,000|
|Costs||Total Cash Costs ($)||287,400||286,000||303,700||313,000||240,500||228,000|
|Financial performance||Farm Cash Income ($)||130,600||70,000||149,800||46,000||71,600||50,000|
|Farms with negative farm cash income14 (%)||19*||40||8**||41||30||39|
|Farm Business profit ($)||62,600*||-24,000||29,300**||-67,000||-3,700**||-29,000|
|Farms with negative farm business profit14(%)||47||77||49||70||66||79|
|Farm equity||Equity ratio at 30 June (%)||86||n/a||88||n/a||90||na|
|Source: ABARES Farm Financial Performance – Australian Agriculture and Grazing Industries Survey|
Overall, farm financial performance for the broadacre industry declined from 2007-08 to 2008-09. Continued poor seasonal conditions resulted in average farm cash incomes for broadacre farmers in the Wimmera region declining from $130,600 in 2007-08 to $70,000 in 2008-09. Prices for grains, wool and beef cattle were lower than during the previous year.
Historically, the average farm cash income of Victorian broadacre farmers is lower than the national average. This reflects Victoria’s smaller average farm size.
Fertiliser, pesticides (herbicides, insecticides and fungicides) and fuel are the most costly inputs for broadacre grain producers in Victoria.15 Other expenses include repairs and maintenance, labour and seed for sowing.
Government policy/ regulation influences
A major government regulation is the Wheat Export Marketing Act 2008, administered by Wheat Exports Australia (the Act does not cover other grains). This regulation accredits wheat exporters and regulates Australia’s ports through access undertakings.
Also important is the Wheat Export Accreditation Scheme 2008, designed to establish a system of accreditation for exporters of wheat (other than wheat in bags or containers) in order to attest that an exporter is a fit and proper company to export wheat from Australia.
1 ABS, Australian Commodities, Australia 7121.0, 2009-10.
2 ESC review of grain handling and storage access regime, November 2008.
3 ESC review of grain handling and storage access regime, November 2008.
4 ABS, Principal Agricultural Commodities, Australia, Preliminary, 7111.0, 2010-11.
5 ABS, Principal Agricultural Commodities, Australia, Preliminary 7111.0, 2010-11.
6 ABS, Value of Principal Agricultural Commodities Produced, Australia,Preliminary 7501.0, 2010-11.
7 10 year average – ESC grain handling and storage issues paper, November 2008.
8 DPI, Agribusiness Group.
9 DPI, Victorian Food & Fibre Export Performance for 2010-11, DPI Agribusiness Group.
10 ABARES, Australian Crop Report (prices for US no.2 hard red winter wheat fob Gulf, bulk export malting barley & domestic canola delivered Melbourne).
11 ABARES, Unpublished Total Factor Productivity data 2011.
12 DPI, Economics and Policy Research Branch work in Agricultural Productivity, 2011.
13Figures in the table are based on ABARES estimates. Estimates with an Relative Standard Error (RSE) between 25% and 50% are annotated with the symbol ‘*’, indicating that the estimate should be used with caution as it is subject to sampling variability too high for most practical purposes. Estimates with an RSE greater than 50% are annotated with the symbol ‘**’ indicating that the sampling variability causes the estimates to be considered too unreliable for general use.
14 Farms with negative cash income are illiquid – that is they can’t earn enough to pay off all current liabilities such as worker claims, interest expenses, material purchases, etc. Farm cash income is a short-term measure of farm income because it takes no account of depreciation on assets. Farm business profit is a long-term measure of the profitability of farms because it takes account of depreciation and inventory changes. Farms with negative business profit are not earning enough to cover all costs including capital costs and rewards to family workers. Negative profitability could be short or long term.
15 ABARES, Commodity outlook and financial performance of key agricultural industries in the Mallee region of Victoria 2010.