The discussion paper, produced by AUSVEG for the Australian vegetable industry, uses data from the Australian Bureau of Statistics (ABS) and the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) to identify the relationship between the size of vegetable growing operations and their ability to manage cash costs.

“Australian vegetable growers are struggling with the heavy burden imposed by high costs of production, and we know that their average profit has been on a continuous decline since 2010,” said AUSVEG spokesperson, Shaun Lindhe. “However, the vegetable industry is made up of businesses ranging widely in size, so looking at absolute financial indicators such as average profit or cash costs across the entire industry can give a misleading picture of how farms of particular sizes are faring.”

“For example, while the average profit across all vegetable-growing farms dropped to $39,000 in 2013-14, smaller operations – those under five hectares, and those between five and twenty hectares – actually lost money,” he said.

“With the release of this discussion paper, Australian vegetable growers will be able to compare their own financial performance to that of other operations within the same size category, giving them a more accurate idea of where they stand.” 

The discussion paper provides a breakdown of average cash costs and compares the ratio of cash costs to cash receipts across all ABARES farm size categories, as well as identifying the average total farm costs per tonne of production for farms of varying sizes.

Significantly, the paper has found that the costs to receipts ratio, which expresses average farm costs as a proportion of their receipts, is notably higher for farms of less than five hectares compared to all other vegetable growing farms.

“While all vegetable-growing farms struggle with high cash costs, the data suggests that larger farms are in a better position to dilute these costs across their operations and can therefore achieve higher profits, both in relative and absolute terms,” Lindhe said. “This kind of variability can skew analysis of the overall performance of the vegetable industry, making this discussion paper a valuable resource for any vegetable grower looking to gain an accurate idea of how they are performing compared to their immediate peers.”

The AUSVEG Economics program is funded by Horticulture Innovation Australia using the National Vegetable Levy and matched funds from the Australian Government.