Are we efficient enough yet? by Ben Henderson and Ross Kingwell

Efficient Farmer

Farmers often are told they need to be efficient to remain internationally competitive. Yet are graingrowers very efficient in practice? And what factors might affect farm efficiency?

A study of the production and technical efficiency of western region graingrowers is yielding some early answers. The study is supported by growers and the Federal Government through the GRDC.

A technically efficient farmer is one who is getting the maximum output from a given set of inputs.

In a cropping context, this means an efficient farmer has combined his inputs such as machinery, labour, fertilisers and herbicides in such a way as to produce the maximum amount of crop production possible in that season.

The study compiled complete data sets for 93 Western Australian farms over three consecutive years and uses two modern techniques to measure the technical efficiency of farm businesses.

The findings that are consistent across both techniques are that:

  • from 1997 to 1999 farms on average improved their technical efficiency. That’s obviously good news to those farmers and to the consultants who advised them, and
  • the distribution of technical efficiency is skewed. This means that there is a large proportion of farms that are either technically very efficient or are close to being so. However, it also means that there’s a proportion of farms that still record low levels of efficiency.

In some years up to 80 per cent of farmers in the survey could be classed as being highly efficient. Most farms remained fully efficient over several years.

Some factors were examined that might affect technical efficiency, such as farm size, adoption of new crops, age of the farmer, the farmer’s formal education, the main tillage method and seasonal rainfall. In any region farms with greater rainfall tended to display greater efficiency.

This is not surprising. More growing-season rainfall usually allows greater crop and pasture yields for a given set of enterprise inputs, so it makes that farm seem more efficient.

Larger farms tended to display greater technical efficiency, probably through economies of size.

Formal education also influenced efficiency. Farmers with greater levels of education tended to operate their farms at higher levels of technical efficiency.

Age of the farmer was also an influence. As the age of the farmer increased, so did the technical efficiency of the farm, up to a point; then the technical efficiency of the farm declined. Older farmers compared to middle-aged farmers were likely to be less technically efficient. And very young farmers were also less likely to be technically efficient.

The study relied on farm data supplied by some members of the Australian Association of Agricultural Consultants (WA Branch). While preserving farmer anonymity, the detailed physical and financial records of over 100 farm businesses were gathered, along with some farmer demographic data.

Program 2.1.1 Contact: Dr Ross Kingwell 08 9368 3225 Email rkingwell@agric.wa.gov.au