Horizons #52 – Continuous improvement: why it matters

02 June, 2021

by Professor Ross Kingwell – AEGIC Chief Economist. 

Increases in grain production are mostly underpinned by continuous improvement. The cumulative impact of continuous improvement generates significant additional wealth.

The Story

Much media attention and hyperbole surrounds the importance of transformational change and breakthrough technologies. But the history of wealth creation in the grains industry is more often underpinned by less glamourous continuous improvement.  It’s the ‘one percenters’; the constant reaction and adjustment of cropping practices to changes in seasonal conditions, technologies and market conditions.

It’s the embrace of superior varieties, the trialling and adoption of productivity-enhancing land and crop management practices; the astute use of seasonal and market information; the avoidance of serious downside risks; the capture of size economies, the seeking of professional advice, when needed; the ability to spot exaggerated claims; the constant appetite to watch and learn; and the ability to work hard without needlessly sacrificing family health or connectedness on the altar of ambition.

When you glance back over the history of grain farm production across Australia you find that back in the early 1990s the average grain farm in Australia’s main grain-growing regions produced between 750 to 2000 tonnes of grain. In more recent years, however, the average grain farm produces anywhere from 1500 to 7500 tonnes per year. There has been a remarkable annual growth in grain production per farm (see Table 1) and a resultant lift in the volume of grain produced in each state of Australia.

Table 1: Growth in grain production in Australia from 1990 to 2020 (% per annum)

The data in Table 1 reveal that the average grain farm in Australia, year after year, regularly is producing between 3.6 and 4.3 percent more grain each year. A host of factors, especially increasing farm size, is contributing to that annual increase in grain production. The cumulative effect of that continuous improvement in grain production is that most grain farms in 2020 are producing around 4 times more tonnes of grain than they did 30 years earlier in 1990. That is a substantial difference in wealth or revenue that now underpins grain farms.

Across Australia, however, there are regional differences in the growth of grain production per farm. Victoria and WA’s annual growth rates for farm production of grain have been higher than other states like SA and NSW. The cumulative effect is that the grain production trajectories for farms in WA and Victoria are slightly diverging from those in some other states; although as is evident in Figure 1, there is much year-to-year variation due mostly to drought. The slight divergence in production trajectories is due to many factors including capture of economies of size, a stronger shift into crop-dominant farming systems, different exposures to prolonged drought and different potentials for soil amelioration.

Data in Table 1 and Figure 1 indicate that despite the challenges of a changing climate, Australian grain farmers are still finding avenues for continuous improvement that allow them to continue to expand their grain production and grow their wealth.

Figure 1: Grain production per average grain farm in NSW and WA: 1990 to 2020

Source: ABARES AgSurf data and estimates for 2020

 

HORIZONS: the AEGIC Economics and Market Insights blog

Expert grains industry analysis and commentary from AEGIC’s Economics and Market Insight Team on a range of big-picture topics that affect Australia’s export grains sector.

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