Can corporate farms provide new pathways to improve profitability and productivity of family farms? Brendan Lynch
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Presentation from the WCCA 2011 conference in Brisbane, Australia.
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Can corporate farms provide new pathways to improve profitability and productivity of family farms? Brendan Lynch
- 1. Can corporate farms provide new pathways to improve the profitability and productivity of family farms? Mr. Brendan C. Lynch Co-authors Doctoral Student – Agribusiness Dr. Rick Llewellyn, CSIRO University of Adelaide & CSIRO Dr. Wendy Umberger, University of Monday 26th September, 2011 Adelaide
- 2. Productivity Growth Increases Value of Ag Production Without productivity improvement the value of ag production would have significantly declined (Sheng et al., 2010)
- 3. Flattening Productivity • Flattening TFP (Dark Blue) • Flattening TC (Orange) • Declining TE (Sky Blue) • Increasing productivity gap between leading farms and average farms (Nossal et al. 2010)
- 4. Factors driving productivity trends • management + capital constraints are often limiting technical efficiency (ABARE, 2010; Hughes et al., 2010) • Factors driving farm productivity increase: • land use intensity, • land area • corporate ownership • Corporate farms 12–28% more productive than the average non-corporate farm (ABARE, 2006)
- 5. Corporate farms and innovation • leading corporate farm models adopt new innovations by having greater access to: • Human Capital – Financial Capital – Natural Capital Do such models offer average-sized family managed farms new pathways to: • overcome constraints • enhance innovation adoption • boost productivity • and retain inherent strengths of family farms
- 6. Farm Attributes Influencing Technical Change Adoption Technical Efficiency Adoption Decisions Farm Attributes Human Capital Financial Capital Natural Capital - Access to Information - Access to Credit - Land Quality - Attitude to Risk - Enterprise Profit - Farm Size - Number of employees Expectations - Farm Tenure Status Core Attributes - Use of Crop Consultant - Farm Profitability - Cropping Intensity - Use of Contractors - Financial Risk - Enterprise Mix - Use of Farm Business - Market Risk - Climate Risk Consultant - Sources of Credit - Production Risk - Farmer Age - % Off-Farm Income - Farmer Stage of Life Unique Family Farm Attributes - Farmer Motivation - Farmer Education - Management Team -Investment Portfolio Balance - Agro-ecological Unique Corporate Education - Relative Investment Return Vs. zone diversity Farm Attributes - Management Team Alternative Investment Options Experience
- 7. 6 Unique Corporate Farm Models Identified Land Localised Hub Transformation Corporate Multiple Hub and Contract Spoke Farm Farming Models Management Crop Co-production Services
- 8. • Multiple Hub and Spoke • Geographical diversified over 1000km • 5 scale efficient management hubs • Efficiency achieved at multiple scales • 31,000 ha cropping land • 6,000 ha grazing land + feedlot • Specialised management and technical staff
- 9. Hybrid Farm Models....the best of both worlds? How do we bring some of the beneficial corporate farm attributes and characteristics into family farms? Are there hybrid models that combine the advantages of both family/corporate farms to increase innovation adoption and productivity?
- 10. Collaborative Farming Australia • Individual family farms constrained by management and capital • Formed new joint venture business arrangement: family farm - localised hub • Independent chairmen and board • New farm structure has provided: • Scale and improved efficiencies • Ability to specialise (labour specialisation) + increased flexibility • Improved farming practices (PA + no-til) • Skill based roles • Contracting of crop consultant • Increased bargaining power with suppliers • Marketing advantages (Riverland Weekly, 2009)
- 11. Summary • Productivity growth is slowing • Management + capital constraints impact innovation adoption • Corporate business models are providing potential new pathways for typical family farms • Examples of hybrid models emerging • Key question for future research: • What attributes of a hybrid model will be attractive to average sized family managed farms?
- 12. CSIRO Sustainable Agriculture Flagship Brendan C. Lynch PhD Research Fellow Phone: 08 8303 8479 Email: Brendan.Lynch@csiro.au Web: www.csiro.au/org/SustainableAgricultureFlagship.html Thank you
Editor's Notes
- Australian farmers have remained globally competitive despite the headwinds of declining terms of trade, a highly variable climate and a low subsidy production environment because of long-term improvements in productivity which has been largely due solid investment in ag RD&E combined with the important part of innovation adoption by Australian farmers.Without productivity growth.....the real gross value of ag production in Australia would be dismal
- The biggest driver of productivity growth is innovation adoption (adoption of new practices) represented by the orange line (technical change).....this is where the leading farmers operate
- Some evidence to show that corporate farms maybe 12 to 28% more productive
- A range of business models have emerged with various investment motivations/goalsThese models have revealed new technical, organizational and managerial innovations
- Insert technical change/effiSubstancial literature connecting farm characterics to adoption and technical change which drives productivity growthClassify these under 3 cat....Human, finanical, Natural capitalWhich have various attributes with some unique to corporate and family farms
- Initial research has ID six unique corporate farm models operating in the grain/mixed farming sector
- Individual family farmsContrained by managment, capital etc.New Joint venture business arrangement.Sub pointsProvided – scale (e.g access to land), ability to specialise, improved farming practices (PA + No-til), skill based roles, crop consultant, increased bargaining power with suppliers, marketing advantagesIndividual family farms constrained by management and capitalFormed new joint venture business arrangement.This providedScale (e.g access to land) ability to specialise, improved farming practices (PA + No-til), skill based roles, crop consultant, increased bargaining power with suppliers, marketing advantages