Climate change, and its associated variability, is posing a challenge for farm businesses in Western Australia. The grainbelt has experienced a 20% decline in rainfall over the last several decades, more than any other wheat-growing region in Australia.
The magnitude of drying, especially since the mid-1970s, has been far greater than was projected in the late 1980s by the then best-available global climate models.
Since the 1970s most parts of WA’s south west are yet to experience an extremely wet year. The absence of wet years makes runoff into farm dams problematic and dries soil, making plant growth very dependent on growing season rainfall. Crop yields become more vulnerable to spring conditions.
If such drier, warmer conditions signify southern Australia’s future agricultural environment, then learning about how Western Australian farm businesses are responding to these conditions has relevance for other regions also projected to experience similar climate change.
Resilience through productivity
Recent research published by the National Climate Change Adaptation Research Facility (NCCARF) today (May 17) has tracked the financial performance of a diverse set of 249 farm businesses in Western Australia from 2002 to 2011. These 10 years were a challenging period, underpinned by a warming and drying trend in climate, large frosts and volatility in farm commodity prices.
In spite of the climate and price challenges they faced, almost two-thirds (64%) of the farms were classed as financially growing or strong businesses, generating average annual rates of return to farmers’ equity of at least 8%. However, 15% of the sample were classed as having potential financial risk, with their annual returns averaging only 6%.
The profitability of these farms was supported by their productivity growth, rather than rising commodity prices. Productivity gains allowed most farm businesses, especially crop and mixed enterprise farm businesses, to prosper.
The pathway to profits was mostly due to farmers improving their use of existing technologies, including technologies that offered economies from increasing the size of farm operations.
Farmers shifted into greater dependence on cropping, especially wheat production, and this proved to be a sensible and successful adaptation strategy in many parts of the Western Australian grainbelt. Decades of wheat breeding and agronomic research, coupled with modern machinery and herbicide technologies, have allowed wheat to be a widely adapted crop that adds to the resilience of farm businesses.
Drought policy shifts to risk management
Droughts imperil crop production and frequent or long-lasting droughts can cripple some farm businesses. If climate change does lead to natural environments less conducive to crop and pasture production, then government policy and action that facilitates adaptation by farmers and communities will be important.
Agriculture Minister Joe Ludwig has said there will be “no lines on maps” where only farmers in a drought-declared region would receive assistance while adjoining neighbours across the “drought” line would not qualify for aid.
In early May, federal, state and territory primary industries ministers signed a joint agreement on drought policy reform. From July 2014 drought programs will focus on lifting farmers’ skills in risk management and business preparedness to respond to challenges like drought.
Elements of the program include:
- farm household support (payments based on need)
- continued access to Farm Management Deposits and taxation measures
- a national approach to farm business training
- a coordinated, collaborative approach to the provision of social support services
- tools and technologies to help farmers make decisions.
Western Australia conducted a successful pilot of these drought reform measures from July 2010 to June 2012.
These changes in drought policy mark a move away from providing subsidies for freight, fodder and finance. The shift in policy is towards a greater or maintained role in education, welfare and business skill enhancement.
Farmers scarred by natural events like drought may want more from their governments as they look enviously to their European and North American counterparts who receive generous government subsidies and support. However, the fiscal mood among state and federal governments in Australia is increasingly austere. This new policy that focuses on targeted spending to help farmers prepare for and better manage business risks is unlikely to dramatically change any time soon.