Ground Cover brings you a two-part report on farm management issues that will continue to challenge farmers into the 21st century. Agronomic consultant Peter Wylie includes the perspective gleaned from an overseas farm management study tour supported by an Industry Development Award from the Grains Research and Development Corporation.
The farm manager of the 21st century will need to adjust to an era of even more rapid change. He will need to respond to trends in markets, consumer needs and environmental requirements.
The farm will need to be even more finely tuned and competitive to stay in business, during a period when farm profit margins may become smaller, with some time to wait for improved prices as world food demand catches up with supply.
The main reason agriculture continues to overproduce is that farmers improve their crop yields. In the UK and the USA, crop yields have doubled over the past 30 years and yields are still climbing. For example, European farmers have increased wheat yields from 5.9 t/ha in 1990 to 6.8 t/ha in 1996.
Australian farmers have not done as well in yield improvements. Crop yields in Australia are constrained by a less favourable climate and potential gains are being offset to some extent by land degradation, which is not being satisfactorily controlled. But just as important is that there are far too many farmers who do not see a need for change.
In the next decade, agricultural production will expand both in Eastern Europe and South America, as farmers in those countries improve their management and catch up with technology in Europe and North America. Demand will increase, but increased production from these countries is likely to maintain pressure on markets and prices.
World stocks of grain have declined in recent years as traders become more comfortable with ordering a few months ahead. This is causing increased price volatility when there are weather problems, and grain prices now vary by more than 50 per cent in most years.
Government support is being wound back. These programs in Europe have provided 48 per cent of farmer income, versus 23 per cent in the USA, but are now declining.
British farmer Tony Wirth says his approach to survival is to diversify, to do the job better and to market better. He has reduced his dependence on price-supported crops, such as wheat and sugar beet, with a focus on potatoes and other crops that are grown on contract or marketed through cooperatives.
Mr Wirth believes small farms will depend in the future upon the larger farms or cooperatives for marketing networks. He sees marketing trends in farming as being similar to those of the supermarket industry. Margins will become smaller and smaller in a competitive market arena, with small players needing to band together in buying and selling groups to survive.
Farmers in the UK and the USA believe Australian farmers, despite lower crop yields, have the edge on them, having had many years to adjust to unsubsidised prices and to become more efficient. Australian farmers stay in business by keeping machinery, overheads and labour costs down.
Despite different costs and production systems, I found that farmers in Georgia growing cotton and peanuts, or farmers in Indiana growing corn and soybeans, or farmers in Alberta, Canada, producing wheat and canola, had similar profit levels to those in Australia. The top farms can make 10 per cent return on capital, while the average is around 3-5 per cent.
The top Australian farmers are less productive but more efficient than those in the USA and Europe. But both here and overseas, there is still the problem of the average farmer who has a lot of work to do to improve his production and profitability to be sustainable in the long term.
Continuous fine-tuning is the way to do it. Enterprise mix, cropping practices, efficiency and marketing all require attention by the farm manager of the 21st century. Focusing on markets is a key factor in the business of making better margins, while sustainability of production and avoiding land degradation that reduces yields will also be paramount in the future.
Next issue: Sustainability, fertility decline and precision farming— tempering the promise with reality.