Has growth in productivity in Australian broadacre agriculture slowed?

Productivity growth in Australian broadacre agriculture

The Australian Bureau of Agricultural and Resource Economics (ABARE) has conducted farm surveys since 1953 for broadacre agriculture, including grazing and cropping industries, and since 1989 for the dairy industry². Data from these surveys have been used to monitor trends in productivity using gross output measures³. Most farms in Australia jointly produce a range of crop and livestock commodities. Thus, ABARE also follows productivity within segments of broadacre agriculture such as crop, beef and sheep specialists (but only from stratified samples from the overall farm survey). In 2008, the total value of crop production was $21.4 billion, which included $9 billion of grains and oilseeds. Over the same period, the total value of livestock production was $19.8 billion, of which dairying contributed $4.6 billion; wool, $2.6 billion; and livestock slaughtering (including extensive and intensive stock), $12.1 billion (ABARE 2008).

Mullen and Cox (1996) assembled a TFP series from 1953 to 1994 using ABARE farm survey data. Since then, the series has been extended in a piecemeal fashion, again using ABARE data in several papers, most recently Mullen (2007). Recently, ABARE assembled a consistent productivity dataset back to 1978, which has been used to extend Mullen’s original series from 1978. Revisions to the sampling frame and the definition of some inputs and outputs used in the new dataset have shown that broadacre productivity growth is likely to have been overstated in studies until recently⁴. For example, broadacre TFP grew at the rate of 2.7 per cent from 1978 to 2004 using the dataset from Mullen (2007), whereas the new dataset used here suggests that the rate of growth over the same period was 1.7 per cent. Hence, in evaluating differences in the rate of agricultural productivity growth across time periods, it is important to be mindful of differences in measurement approach and use a consistent dataset.

The TFP index for Australian broadacre agriculture almost tripled from 100 in 1953 to 288 in 2000. It then declined to 193 in 2003, reflecting drought in that year, before reaching 277 in 2006 then falling to 218 in the drought year of 2007 (figure b). The index is highly variable, falling in 20 of the 55 sampled years, reflecting adverse seasonal conditions as well as some other unobserved factors (figure c). Such variability makes it difficult to discern trends in the more stable underlying rate of technical change. The average annual rate of growth over the entire period was 2 per cent, which was 0.5 per cent lower than the long-term rate previously reported by Mullen (2007).

Productivity growth in broadacre agriculture since 1978 came from output growth of 0.8 per cent a year and declining input use at the rate of -0.6 per cent a year (Nossal et al. 2009). Labour use declined (-1.7 per cent) more than the use of capital (-1.2 per cent) and land (-0.7 per cent), while the use of purchased inputs increased (2.4 per cent) which resulted in higher rates of growth in the partial factor productivity of labour (2.5 per cent) and capital (2.1 per cent).

As noted above, the ABARE broadacre dataset can be stratified to provide estimates of productivity growth for many of the most important industry sectors. According to the current stratification used by ABARE, the broadacre industry includes four sub-industries including cropping, mixed crop–livestock, beef and sheep⁵.

Since 1978, cropping (2.2 per cent) specialists have achieved much higher rates of TFP growth than beef (1.5 per cent) and sheep (0.3 per cent) specialists (table 1). Generally, output has grown while input use has been static or declining. However, for cropping specialists there was a large increase in the use of purchased inputs (4 per cent) and reduced use of labour (-0.2 per cent) and capital (-0.4 per cent) and strong growth in partial productivity of labour and capital (Nossal et al. 2009). A switch toward reduced tillage cropping also associated with more diverse cropping rotations and opportunistic cropping to exploit available soil moisture (as opposed to fixed rotations and fallows) partly explains the changes in input use and the strong rate of productivity growth.

1 Growth in TFP for broadacre industries and by state, 1978 to 2007 (%)
By industry	TFP growth	Output growth	Input growth
Total broadacre	1.5	0.8	-0.6
Cropping	2.1	3.1	1
Mixed crop-livestock	1.5	0.1	-1.5
Beef	1.5	1.7	0.1
Sheep	0.3	-1.4	-1.8
By state
NSW	1.2	0.3	-0.9
VIC	1.4	0.6	-0.8
QLD	0.8	0.6	-0.2
SA	2	1.5	-0.5
WA	2.4	1.8	-0.6
TAS	0.8	-2.1	-2.9
NT(beef)	1.7	1.6	-0.1
Source: Nossal et al. (2009) for the industry data. The state data comes from the same database but was not published in Nossal et al. (2009).