On-farm economic analysis in the Australian macadamia industry (MC03023)

This is a final research report from Hort Innovation’s historical archives. Please note that as these reports may date back as far as the 1990s, the content and recommendations within them may be superseded by more recent research.

What was it all about?

Good financial information was important for sound decision-making for both new growers and investors entering the macadamia industry and for existing growers investigating how they could improve their profitability. Only limited financial information was available to the industry prior to this project.

The “On-farm economic analysis in the Australian macadamia industry” was a joint project between the Department of Primary Industries and Fisheries, Queensland, the University of Southern Queensland and New South Wales Department of Primary Industries and was supported by the Australian Macadamia Society and Hort innovation (which was then Horticulture Australia Limited). The purpose of the project was:

• To develop a complete picture of the economics of macadamia growing over the life of an orchard, and
• To develop a financial planner to assist macadamia growers to examine profitability over the life of an orchard by varying yield, prices and costs.

Financial and production data was collected from 2003 to 2006 from 41 farms representing a cross-section of the industry. The data was collected using a standard chart of accounts, developed in conjunction with Rutherfords, accountants and financial advisers in Lismore, to ensure consistency in cost recording.

Revenue and profit per hectare increased with increasing farm size, tree age and productivity. Larger farms spent a greater proportion of their total costs on employment and management and less on repairs and maintenance of plant and improvements, fuel and contractors compared to smaller farms. Larger farms also had more investment in assets but fewer assets per hectare due to economies of scale. Bundaberg farms were on average younger, larger and more productive and profitable than northern New South Wales and south-east Queensland farms.

Average costs/ha gradually increased from 2003 to 2006 for farms older than 10 years. Revenue/ha moved more strongly depending on yield/ha and unit price. The profitability/ha trend closely followed the revenue/ha trend.

The data collected in this project was used to develop example farm financial profiles in the planner to suit a broad range of situations. Growers and their advisers could vary information in the profiles and examine the effects on key financial indicators. Different analyses were provided in the planner to measure investment performance over time; to measure annual cash balances; to model the impact on variations in yield, kernel recovery, annual costs and price; and to compare and rank individual profiles according to key financial indicators.