How drought affects the financial characteristics of Australian farm businesses

Abstract

The financial performance of 240 farms in a drought-affected agricultural region of Australia is analysed. The decadal study period included some years of widespread drought, as well as years with only subregional droughts or no drought. Some droughts created larger adverse financial impacts than others. Mostly, the more droughts farms experienced, the worse was their financial performance relative to farms within the same quantile of farm performance. Despite the incidence of drought, by the end of the decade, almost all the farm businesses were wealthier from increasing their farm size and becoming more crop dominant. Unexpectedly, consecutive years of drought had a significant positive effect on the operating profit per hectare and retained profit per hectare of farms in a majority of their respective quantiles. Many farms that experienced consecutive drought were forced to make structural changes, shifting away from livestock production towards additional cropping. These structural changes boosted farm performance over the decade. The incidence of drought affected some measures of farm performance differently whilst others were affected similarly. Understanding these metrics of farm performance and the structural changes underway in an agricultural region helps form a more complete view of drought impacts.

Quantifying the determinants of climate change adaptation strategies and farmers' access to credit in South Africa

“…In other words, credit managers are preferably interested in farmers with no drought experience, therefore, drought experience of farmers represents a key determining factor for credit access. The results related to the effect of drought found in this study is supported by the report of Kingwell and Xayavong (2017) who found that the financial performance of farmers heavily depends on the extent of drought experience of farmers.…”

Traditional farm expansion versus joint venture remote partnerships

“…A limitation to the modelling approach based on Equations (3) and (4) is that interyear cumulative financial consequences, and their impacts on the viability of farm expansion are not explicitly considered, yet these impacts can be important (Kingwell and Xayavong 2016). Under future, more likely adverse climate change, interyear effects overlooked in this study could more deleteriously affect farm asset values.…”

Droughts and farms’ financial performance: a farm‐level study in New Zealand

“…A number of studies have been carried out to measure the impact of droughts on agricultural activities using input–output tables (Wilhite ; Wittwer and Griffith ; Howitt et al ), farms’ business performance using data from agricultural consulting firms (Lawes and Kingwell ; Kingwell and Xayavong ), farmers’ consumption and income using household surveys (Garbero and Muttarak ) and farms’ resilience to droughts using district‐level production data (Birthal et al ).…”