Planfarm Bankwest Benchmarks2016 - 2017

1

ContentsKey insights

Snapshot: WA’s broadacre farming performance

About this research Farming sector 2016 performance

Diversification and cost control key to success

Top performers in 2016

2016 performance by rainfall region

WA’s long-term broadacre performance

Long-term performance ofthe regions

Appendix

Glossary

4

5

6

8

9

11

13

14

18

19

26

Richard Gator

Greg Kirk

Key insightsForeword

The Planfarm Bankwest Benchmarks is WA’s leading annual report into the financial and production performance of broadacre farm businesses.

In 2016, production was widely expected to be among the highest in many growers’ experience, however with extreme frost experienced and low grain prices, the end results were a different story for many. The sheer number of frost events in affected areas meant that most crops were exposed multiple times during the critical flowering period.

Large yield reductions from frost impacted heavily on the 2016 state-wide result, but mostly in central and southern regions. Areas less affected produced generally above average yields and returns.

Grain prices finished the season at low levels as a result of very large global stocks, and those with the need to sell grain at harvest were unable to take advantage of improving grain prices towards mid-2017. Wool and sheep prices continued to improve, having a very positive impact on sheep and cattle gross margins.

Farm equity dipped slightly in 2016 to 79%, due to frost in the central Wheatbelt impacting productivity in the region.

The 10-year analysis in the report supports the widely held view that broadacre farms can be a good long-term investment, particularly in a low interest rate environment. Over the last 10 years, WA farmers achieved average annualised cashflow returns of 4.5%, while the top 25% realised 8.6% over the same period.

The top 25% of farmers generated almost double the cash returns of the average farm business over a 10-year period, although there is large variation between regions.

We encourage the WA agricultural industry to use the information in this report to continue to improve their returns, and highlight that with strong management farming can compete with or exceed returns from other major investment classes.

Richard BatorState Manager, Rural and Regional Banking WABankwest

Greg KirkManaging DirectorPlanfarm

Richard Bator

Greg Kirk 4

Snapshot: WA’s broadacre farming performance.Farming is experiencing good returns, when you consider the combined returns from production and land value appreciation.

In 2016 the average WA farm business made an operating surplus of $667,815 from a turnover of $2,203,904.

Leading indicators:

Operating costs were higher than normal in 2016 as growers pursued high yield potentials, which for many exacerbated the impact of the frost in their businesses.

Record production and increased yields drove strong performance in 2016.

Farm size - 4,454 hectares

Cropping - 75%

Wheat yield - 2.2 (t/ha)

Flock size - 4,200 head

Lambing - 96%

10-year total farm return:

4.2%Return on

Capital

79%Equity

72%Operating Costs

20162015

Operatingprofit per/ha

Operating CostsEquityReturn oncapital

*Refer to appendix for detailed Whole WA Agriculture Region.

10.7%

6.6%

3.0%

Top 25%

Average

Bottom 25%

5

About this researchThis report is published for the benefit of farmers and those involved in WA agricultural industry. The 2016-2017 Planfarm Bankwest Benchmarks are derived from 550 businesses across Western Australia with data supplied by clients of Planfarm, Bankwest, BJW Agribusiness, AgAsset, and BusinessAg. We continue to be grateful to the contributors of data and all the farm businesses involved in the annual benchmarks for their support of this analysis.

Farming is a unique business that is evolving rapidly with changes in farm business structures, technology, data, research, consumer demand and global competition. The Planfarm Bankwest Benchmarks has become a powerful tool for WA farmers and investors to better understand the business of farming and the key aspects driving performance over the short and long term.

For more information about the products and services offered by Bankwest or Planfarm and any questions related to this report, please contact us.

MethodologyThroughout the report, analysis of Western Australia’s broadacre farming businesses includes both short and long-term performance. The methodology used to rank farms varies depending on the data period as follows:

1. Single year (2016) analysis - This aims to highlight the performance of the most recent production year. Farming businesses are ranked on operating surplus/ha/mm of rainfall recorded in the growing season. This is used as a measure of how efficiently a farm business has used the rainfall they received during the growing season.

2. Multi-year analysis – This is a rolling 6 and 10-year data set that considers how businesses perform over several years. Due to reduced seasonal variability in this data set, faming businesses are ranked simply on return on capital. The single year data should always be read in conjunction with the multiple year results, as these provide a better reflection of the longer term performance of businesses and consider actions of management over a number of different seasons. The 10-year data highlights the incredibly strong track record of performance through what has been a challenging series of years.

Bankwest

Level 11, 300 Murray StreetPerth WA 6000(08) 9369 6629benchmarks@bankwest.com.au

Planfarm

6/43 Kirwan StreetFloreat WA 6014(08) 9284 1044graeme@planfarm.com.au

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Record wheat production in 2016.

A record 16.6 million tonnes of wheat was delivered in 2016 to Cooperative Bulk Handling (CBH), and operating profit per hectare increased by 13.4% year-on-year.

However, large yield reductions from frost impacted heavily on the 2016 results, mostly in central and southern regions.

Wheat

Barley

Canola

Lupin

2015 2016

1.9

2.2

1.0

1.2

2.2

2.6

1.6

1.5

Return on capital

Equity

Wheat yield (t/ha)

North South

7.0%

84%

2.6

2.9%

77%

1.9

2016 single year average

Mullew

a

Wubin

Gingin

Bencubbin

NO

RTH

SOU

THN

arrogin

Bridgetown

Katanning

2016 frost events*

Yields (t/ha)

There is little benefit to thinking about ‘what might have been’, but if crops in the southern half of the state had been allowed to achieve their potential, 2016 was well on target to exceed previous records by a considerable margin, and be an exceptionally profitable year, even with lowered grain prices at harvest.

Source: Department of Agriculture and Food, WA; DPIRD*September 2016 onlyFrosted barley crop

Mullewa

Wubin

Gingin

Bencubbin

NORTH

SOUTHNarrogin

Bridgetown

Katanning

Mullewa

Wubin

Gingin

Bencubbin

NORTH

SOUTHNarrogin

Bridgetown

Katanning

7

The farming sector performed well in 2016.

What can we learn from the top 25% of farmers?

2016 Income, Costs and Profit Comparison:

Top 25% Average Bottom 25%

700.00

600.00

500.00

400.00

300.00

200.00

100.00

00.00

Farm Receipts Operating Costs Operating Profit

Performance drivers:While the farm businesses in the benchmarks analysis are dominated by cropping, there is still a significant number of farm businesses with livestock enterprises generating a large portion of their income. The impact of this is starting to show through in the benchmarks as returns from sheep and cattle improve.

Lambing productivity increased to 96% from 93% in 2015

However, equity net of liquid assets fell slightly to 79% in 2016 from 81% in 2015 due to…

Frost impacting yield

Highest recorded wool price since 2005 ($8.10/kg)

Lower wheat prices*

As we have become accustomed to seeing, the difference in performance is not largely in costs, but rather the income generated from those costs.

Key traits of the top 25%:

Think ahead and plan for different scenarios

Be dynamic and adapt quickly to changing conditions

Keep a close eye on costs

Focus on the fundamentals and get the basics right

Pay close attention to detail

Get your chemicals and fertiliser on the crop on time

At the time of data collection, average grain inventory on hand was $560,112 so many farmers may have been able to take advantage of improving grain prices towards mid-2017.

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Diversification and cost control key to success.

Having run his farm business for more than 40 years before handing the reigns to his son, Ron Creagh, director of RR Creagh & Co has seen his fair share of good and bad seasons.

And despite the business achieving a return on capital of 8% in 2016 – nearly double the average WA farm business – he says the severity of last year’s frost impact on the business was a one in 10-year event.

“Had we not had those frost events we would have been up around 12% return on capital,” he says.

A fourth generation family business, today the farm boasts more than 12,140 hectares stretching from east of Nungarin to near Kununoppin – a far cry from the 1,214 hectare farm Creagh took over in the 1970s.

Recently, the business acquired another 2,509 hectares of neighbouring land which is being leased in the short-term.

Located in an area with variable seasons, the RR Creagh & Co business maintains low to moderate levels of debt, and always carries reserves in the form of farm management deposits and off farm investments.He says the farm has always made a profit despite frost and dry seasons due

to maintaining a balanced enterprise system and very good cost control.

“In terms of cropping we farm 70% wheat, 10% barley, 10% canola and then we run quite a few sheep as well,” he says.

“We think it spreads the risk because we have got a sheep operation; we’re not frightened of the work and the responsibility and my son has the same attitude. Certainly, at the moment with meat prices being so good, and wool prices, we’ve benefited from having a balanced enterprise system.”

From Creagh’s perspective, timing is a critical determinant of a good season in the eastern wheatbelt, which is why he says the farm is always ready to seed the crop in April.

“If there’s moisture there, then you’ve got to be ready to go as far as starting your seeding operation,” he says.

“We have our machines ready, we have the labour there, so we have the knowledge and the skills. That’s been one of the reasons for our success; we’ve always had stacks of labour and we’ve always run the farm as a business.”

Creagh says seeding paddocks selectively in areas with a higher frost risk helps manage the risk.

“We have our machines ready, we have the labour

there, so we have the knowledge and the skills.

That’s been one of the reasons for our success...”

(Ron Creagh, director, RR Creagh & Co)

Ron Creagh, RR Creagh & Co

9

“We would take the risk of sowing a lot of our crop in April even though there might be a frost risk there,” he says.

“We know our frost risk areas at Nungarin are white sand in low lying areas. We might only seed one or two of those paddocks early and then come back with another variety of wheat in a couple of weeks’ time.”

Creagh says seeking professional advice has also helped maximise the income generated from the farm.

“We have always sought professional advice from consultants and had access to agronomists and we have never been frightened to pay for that advice,” he says.

While there are certain proactive steps farmers can take when the season is not panning out as expected, Creagh admits some of the business’ success comes down to “gut feel” and good old-fashioned hard work.

“Regardless of all the technology we still have to work hard,” he says.

The growing season in 2017 has been difficult for many farmers due to weather conditions, and Creagh says while the business will make a small profit, the farm needs late rain.

“Our policy has been in the good years we’ve put cash reserves aside and made off-farm investments,” he says.

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The top performers in 2016.Compared to the industry average, the top 25% of farming businesses:

Generated double the return on capital

Boasted higher equity

Have a lower debt to income ratio

The top performers demonstrate superior efficiency, productivity and scale in the wheat market.

In 2016 the top 25% achieved:

Higher wheat yields Better water use efficiency Larger cropping area

24% 20.4% 9%

Although the return on capital for broadacre farmers in 2016 is similar to 2015, there was a much larger gap between the bottom 25% and the top 25% in 2016. This is largely due to the severe frost impact on growers causing larger negative returns, while for those less affected, 2016 was an above average year.

This is based on the single year measurement, as outlined in the methodology on page 6.Frosted barley crop

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Spotlight on the regions in 2016.

Return on capital from production was 4.2% in 2016, however the top 25% of farmers achieved 10.1%.

Return on capital distribution:

Average Top 25%

Frost in inner southern regions of WA was above the historical average in September, while the northern regions surrounding Geraldton, Morawa and Mullewa experienced the strongest returns.

North vs. South (Top 25%):

In 2016, relative to the top performers in the south, the top 25% of farm businesses in the north had:

25% higher wheat yield 69.1% larger farms

24.6% less rainfall 3.1% lower operating costs per hectare

In 2016, growing season rainfall was not a limiting factor for the majority of farms.

This is based on the single year measurement, as outlined in the methodology on page 6.

7.4%

2.2%

4.6%

2.2%

8.2%

4.5%

4.2%

2.0%

3.3%

12.4%

8.0%

4.9%

0.2%

8.9%

5.0%

8.7%

5.4%

10.9%

8.0%

11.9%

6.9%

10.1%

14.8%

13.9%

13.5 %

8.6 %

Mullewa

Wubin

Gingin

Bencubbin

Narrogin

Bridgetown

Katanning

6.5%3.2%

6.5%3.2%

6.2%2.5%

6.2%2.5%

6.2%2.5%

7.4%3.9%

7.4%3.9%

7.7%4.3%

13.3%8.2%

13.3%8.2%

6.9%4.2%

6.9%4.2%

6.9%4.2%

7.7%4.3%

7.7%4.3%

Mullewa

Wubin

Gingin

Bencubbin

Narrogin

Bridgetown

Katanning

NORTH

SOUTH

NORTH

SOUTH

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How is water use efficiency (WUE) measured?

2016 performance by rainfall region.

450-750 mm rainfall

325 – 450mm rainfall

In 2016, the low rainfall zone achieved higher returns than the medium and high rainfall regions.

325 mm or less of rainfall

Low Medium High

Return on capital

Equity

Wheat yield (t/ha)

5.2% 3.7% 4.0%

80% 79% 80%

1.8 2.2 2.8

However, the top 25% of farming businesses are using water more efficiently.

Top 25% - 12 kg/mm/ha Average - 10 kg/mm/ha

How is water use efficiency (WUE) measured?

Water use efficiency is a measure of how effectively rainfall is converted to grain and is a measure of kilograms of grain per mm of effective rainfall. This measure is as important for high rainfall regions as low rainfall as farming businesses manage too much and too little rainfall.

This measure should not be used in isolation in evaluating management actions, as events such as frost can distort the figures.

This is based on the single year measurement, as outlined in the methodology on page 6. 13

WA’s long-term broadacre farming performance.Farming is a good long-term investment, particularly in a low interest rate environment.

The rolling 10-year data set considers how the same group of farm businesses perform over several years.

Strong annualised cash returns and land value changes in the 10 years to February 2016 highlight the strength of WA’s broadacre farming industry.

10-year total broadacre farm returns:

*Land value changes are taken from Landgate’s Rural Value Watch for the last 10 years.

Compared to the industry average, over the last 10 years the top 25% of broadacre farming businesses:

Generated nearly double the return

Enjoyed 20% higher operating profit

Realised only 0.4%higher costsWhile land value change over the last 10 years has averaged 2.1%, when considered over

the last 45 years, most shires have experienced a land value change of between 5 and 8%.

*

14

Farm equity remains solid over the long term.

Average farm equity over the last 10 years is 79%.

Farm debt and equity 1999 - 2017:

Debt Equity

700

600

500

400

300

200

100

00

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

700

500

400

300

100

00

This chart is based on the single year measurement, as outlined in the methodology on page 6. 15

Debt to income remains steady.

Higher average income in 2016 offset increased debt levels.

10 year debt/income and gross income ratios:

In 2016 debt to farm income remained below 1:1 with only a slight increase to 0.95:1 – an indication of the strength of West Australian farm businesses. Debt to farm income for the top 25% of farmers was just 0.72.

$/h

a

Debt to Income Farm Income $/ha

Deb

t to

In

com

e R

atio

This chart is based on the single year measurement, as outlined in the methodology on page 6. 16

Long-term production summary.Despite the setbacks, the state-wide average yield for wheat, barley, canola and lupins was well above the 10-year average.

Crop yields 10 year average vs 2016:

Farm land use 2007-2016:

Wheat dominates farm land useBoth farm size and crop area continue to grow, with most of the additional area for wheat production. The average cropping area has grown by 56.5% to 3,155 ha in 2016, up from 2,016 ha in 2007.

Increase in farm size from 2007-2016

20072,016ha

20163,155ha

Canola produced high yields for most farmers in 2016 and coupled with favourable prices saw the best gross margin per hectare for many businesses. The early sale of canola to support immediate cash flow needs meant farmers were able to hold onto more of their cereals into the new year in the hope of achieving a better price.

10 year average

2016

Wheat Barley Canola Lupins

3.0

2.5

2.0

1.5

1.0

0.5

0.0

Pasture Ha

Other

Canola Ha

Lupin Ha

Barley Ha

Wheat Ha

Ton

nes

/ h

ecta

re

Wheat Barley Canola Lupins

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

5000

4500

4000

3500

3000

2500

2000

1500

0

500

1000

This is based on the single year measurement, as outlined in the methodology on page 6. 17

Long-term performance of the regions.Farming businesses north of Gingin and Bencubbin achieved higher equity than their southern counterparts both in 2016 and over the last 10 years.

Return on capital varied greatly among the regions over the longer term, particularly in the north.

79%

83%South

Cash returns from farm businesses in the north also outperformed businesses in the south over the last 10 years.

Whole Group8.6% 4.5%

Top 25%

Average

4.0% 5.4%

South North

84%

87%North

10 year average2016

AverageTop 25%

7.3% 10.7%

10-year return on capital by region:

This is based on the single year measurement, as outlined in the methodology on page 6.

7.4%

2.2%

4.6%

2.2%

8.2%

4.5%

4.2%

2.0%

3.3%

12.4%

8.0%

4.9%

0.2%

8.9%

5.0%

8.7%

5.4%

10.9%

8.0%

11.9%

6.9%

10.1%

14.8%

13.9%

13.5 %

8.6 %

Mullewa

Wubin

Gingin

Bencubbin

Narrogin

Bridgetown

Katanning

6.5%3.2%

6.5%3.2%

6.2%2.5%

6.2%2.5%

6.2%2.5%

7.4%3.9%

7.4%3.9%

7.7%4.3%

13.3%8.2%

13.3%8.2%

6.9%4.2%

6.9%4.2%

6.9%4.2%

7.7%4.3%

7.7%4.3%

Mullewa

Wubin

Gingin

Bencubbin

Narrogin

Bridgetown

Katanning

NORTH

SOUTH

NORTH

SOUTH

18

Appendix

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Farm Group Statistics - Whole WA Ag Region

Variables Unit Top 25% Ave. Bottom 25%

Effective Area ha 4324 4454 4414April To September Rainfall mm 272 261 253Permanent Labour person 2.5 2.3 2.0Casual Labour wks 18.9 17.6 15.7Eff Area/Perm Labour ha 1586 1835 2229Income/Perm Labour $ $1,183,692 $862,872 $611,942Op Surplus/Perm Labour $ $524,467 $282,763 $47,411Gross Farm Income (GFI) $/eff ha $759 $524 $319Operating Costs (OPEX) $/eff ha $444 $365 $315Farm Oper. Surplus $/eff ha $348 $178 $26

Farm Oper. Surplus /Mm Gsr Rainfall* $/eff ha $1.56 $0.80 $0.10

Opex As % Gfi % 58% 70% 99%Grain % Of Farm Income % 77% 74% 68%Sheep & Wool % Of Farm Income % 11% 18% 25%Assets $/eff ha 3115 2409 1975Debt $/eff ha 799 629 550Long Term Debt $/eff ha 458 358 319Equity % 81% 79% 79%Debt To Income Ratio 0.72 0.95 1.43Return On Capital % 10.1% 4.2% -2.8%Total Crop Area ha 3656 3354 3074% Effective Area Crop % 84% 75% 70%% Of Crop As Legumes % 9% 8% 7%% Of Crop Oil Seed % 15% 11% 6%% Effective Area Pasture % 16% 25% 30%Wheat Yld t/ha 2.68 2.16 1.72

* Top & Bottom 25% groups are sorted by Farm Operating Surplus/ Effective ha/mm Growing Season Rainfall. 20

FARM GROUP STATISTICS - WHOLE WA AG REGION

VARIABLES UNIT TOP 25% AVE. BOT. 25%

EFFECTIVE AREA ha 4324 4454 4414APRIL TO SEPTEMBER RAINFALL mm 272 261 253PERMANENT LABOUR person 2.5 2.3 2.0CASUAL LABOUR wks 18.9 17.6 15.7EFF AREA/PERM LABOUR ha 1586 1835 2229INCOME/PERM LABOUR $ $1,183,692 $862,872 $611,942OP SURPLUS/PERM LABOUR $ $524,467 $282,763 $47,411GROSS FARM INCOME (GFI) $/eff ha $759 $524 $319OPERATING COSTS (OPEX) $/eff ha $444 $365 $315

FARM OPER. SURPLUS $/eff ha $348 $178 $26

FARM OPER. SURPLUS /mm GSR rainfall* $/eff ha $1.56 $0.80 $0.10OPEX AS % GFI % 58% 70% 99%GRAIN % OF FARM INCOME % 77% 74% 68%SHEEP & WOOL % OF FARM INCOME % 11% 18% 25%ASSETS $/eff ha 3115 2409 1975DEBT $/eff ha 799 629 550LONG TERM DEBT $/eff ha 457.96 358 319EQUITY % 81% 79% 79%DEBT TO INCOME RATIO 0.72 0.95 1.43RETURN ON CAPITAL % 10.1% 4.2% -2.8%TOTAL CROP AREA ha 3656 3354 3074% EFFECTIVE AREA CROP % 84% 75% 70%% OF CROP AS LEGUMES % 9% 8% 7%% OF CROP OIL SEED % 15% 11% 6%% EFFECTIVE AREA PASTURE % 16% 25% 30%Variables Unit Top 25% Ave. Bottom 25%Wheat Area ha 2122 1919 1715Wheat Kg/Mm Ave kg/mm 12.20 10.13 8.23Lupin Yld t/ha 1.94 1.55 1.19Lupin Area ha 496 383 305Barley Yld t/ha 3.47 2.62 1.90Barley Area ha 677 731 693Canola Yld t/ha 1.85 1.58 1.18Canola Area ha 764 564 412N Use On Cereals kg/ha 58.07 50.87 44.69P Use On Whole Farm kg/ha 10.02 8.56 7.62Herbicide Costs $/ha crop $84 $82 $80Plant Investment $/ha crop $530 $501 $508Opening Sheep No. hd 4425 3955 3558Closing Sheep No. hd 4668 4200 3670No. Of Ewes Mated hd 2617 2316 2082Lambs / Wg Ha no. 3.8 2.0 1.4Total Sheep Shorn hd 5094 4800 4452Wool Price $/kg net $8.10 $8.07 $8.08Wool Cut/Grazed Area kg/wgha 23.7 19.7 16.4Stocking Rate dse/wgha 6.0 4.8 4.5Wool Production kg greasy 20838 20839 19249Ave Kg/Sheep Shorn kg 4.2 4.4 4.6Average Sheep Sale Price $/hd $100 $97 $94Lambing Rate % 99% 96% 95%Opening Cattle No. hd 433 266 169Closing Cattle No. hd 528 274 144Cattle Producers No 7 54 17

21

Whole WA Ag Region Farm Income & Operating Costs

Receipts Top 25%2016

Bottom 25%$/Ha %

Grain Sales 628.99 408.70 78.0% 228.13Wool Sales 33.10 37.39 7.1% 34.67Sheep Sales 44.90 45.87 8.8% 39.35Other L’stock Sales 12.54 8.87 1.7% 2.71Fuel Rebate 6.01 4.56 0.9% 3.92Other Farm Income 33.32 18.27 3.5% 9.81

Total Farm Receipts 758.86 523.66 318.59

Operating Costs

Wages 26.79 21.30 5.8% 17.40Contract 17.24 12.37 3.4% 9.33Rates, Licences, Water 12.31 11.30 3.1% 10.64Administration 12.06 10.39 2.8% 9.44Elec/Gas/Sundry 5.15 4.69 1.3% 3.73Cartage 34.22 28.67 7.9% 20.79Insurance 13.19 10.92 3.0% 9.65Fertiliser 101.95 79.87 21.9% 65.24Seeds/Grading 10.31 7.32 2.0% 6.25Fuel/Oil 29.95 24.27 6.7% 21.65Weeds/Pest 71.18 61.58 16.9% 56.55Plant Repairs 36.69 30.31 8.3% 27.93Blds/Fen/Water 6.68 5.80 1.6% 4.65Fodder & Agistment 3.65 3.54 1.0% 2.08

22

WHOLE WA AG REGIONFARM INCOME & OPERATING COSTS

RECEIPTS TOP 25%2015

Bot. 25%$/ha %

GRAIN SALES 628.99 408.70 78.0% 228.13WOOL SALES 33.10 37.39 7.1% 34.67SHEEP SALES 44.90 45.87 8.8% 39.35OTHER L’STOCK SALES 12.54 8.87 1.7% 2.71FUEL REBATE 6.01 4.56 0.9% 3.92OTHER FARM INCOME 33.32 18.27 3.5% 9.81

TOTAL FARM RECEIPTS 758.86 523.66 318.59

OPERATING COSTS

WAGES 26.79 21.30 5.8% 17.40CONTRACT 17.24 12.37 3.4% 9.33RATES, LICENCES, WATER 12.31 11.30 3.1% 10.64ADMINISTRATION 12.06 10.39 2.8% 9.44ELEC/GAS/SUNDRY 5.15 4.69 1.3% 3.73CARTAGE 34.22 28.67 7.9% 20.79INSURANCE 13.19 10.92 3.0% 9.65FERTILISER 101.95 79.87 21.9% 65.24SEEDS/GRADING 10.31 7.32 2.0% 6.25FUEL/OIL 29.95 24.27 6.7% 21.65WEEDS/PEST 71.18 61.58 16.9% 56.55PLANT REPAIRS 36.69 30.31 8.3% 27.93BLDS/FEN/WATER 6.68 5.80 1.6% 4.65

Operating Costs Top 25%2016

Bottom 25%$/Ha %

L’stock Expenses 5.70 6.48 1.8% 5.89Shearing 7.34 8.21 2.3% 7.94Rams 1.62 1.78 0.5% 1.76Sheep Purchases 3.56 4.70 1.3% 5.21CBH & Levies, Other 44.33 31.18 8.6% 28.51

Total Oper’ Costs 443.88 364.67 314.64

Farm Oper’ Surplus 314.98 158.99 3.95

Finance Costs 39.78 32.64 28.38Personal Costs 52.51 41.11 36.10Taxation 27.29 20.25 14.50

Surplus/Deficit# 195.40 64.98 -75.04

# - Surplus/Deficit Available for Capital Development (Including Plant Replacement).

23

Breakdown Of Farm Capital Whole WA Agricultural Region

Opening Values Top 25% Average Bottom 25%

Land Value $7,724,279 $6,097,399 $4,923,621 Stock Value $223,628 $273,032 $249,275 Plant $1,650,671 $1,399,474 $1,271,582 Seeds, Produce & Stores $539,143 $443,699 $346,357 Grain On Hand $707,481 $544,101 $569,781 Cash Accounts $402,463 $249,305 $144,363 Total Farm Assets $11,247,665 $9,007,010 $7,504,979 Total Farm Liabilities $2,880,137 $2,401,035 $2,033,688 Net Off Farm Assets $1,260,638 $859,436 $666,398

Return On Capital (%) 10.1% 4.2% -2.8%

Debt To Income 0.72 0.95 1.43Net Business Equity (Feb 2016) $9,628,167 $7,465,411 $6,137,689 Equity % (Feb 2016) 81% 79% 79%

Closing Values

Land Value $8,154,477 $6,290,015 $4,991,609 Stock Value $255,613 $298,407 $283,931 Plant $1,781,491 $1,497,378 $1,363,147 Seeds, Produce & Stores $588,995 $433,895 $278,502 Grain On Hand $747,868 $565,112 $538,558 Cash Accounts $542,198 $282,720 $164,654

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BREAKDOWN OF FARM CAPITAL WHOLE WA AGRICULTURAL REGION

OPENING VALUES TOP 25% AVERAGE BOTTOM 25%

LAND VALUE $7,724,279 $6,097,399 $4,923,621 STOCK VALUE $223,628 $273,032 $249,275 PLANT $1,650,671 $1,399,474 $1,271,582 SEEDS, PRODUCE & STORES $539,143 $443,699 $346,357 GRAIN ON HAND $707,481 $544,101 $569,781 CASH ACCOUNTS $402,463 $249,305 $144,363

TOTAL FARM ASSETS $11,247,665 $9,007,010 $7,504,979 TOTAL FARM LIABILITIES $2,880,137 $2,401,035 $2,033,688 NET OFF FARM ASSETS $1,260,638 $859,436 $666,398

RETURN ON CAPITAL (%) 10.1% 4.2% -2.8%

DEBT TO INCOME 0.72 0.95 1.43

NET BUSINESS EQUITY (FEB 2016) $9,628,167 $7,465,411 $6,137,689 EQUITY % (FEB 2016) 81% 79% 79%

closing valuesLAND VALUE $8,154,477 $6,290,015 $4,991,609 STOCK VALUE $255,613 $298,407 $283,931 PLANT $1,781,491 $1,497,378 $1,363,147 SEEDS, PRODUCE & STORES $588,995 $433,895 $278,502 GRAIN ON HAND $747,868 $565,112 $538,558 CASH ACCOUNTS $542,198 $282,720 $164,654

Top 25% Average Bottom 25%Total Farm Assets $12,070,642 $9,367,527 $7,620,399 Total Farm Liabilities $3,021,605 $2,498,600 $2,179,364 Net Off Farm Assets $1,261,632 $876,594 $675,072

Net Business Equity (Feb 2017) $10,310,669 $7,745,521 $6,116,108 Equity % (Feb 2017) 82% 79% 77%

Net Farm Equity Change (2016) $682,503 $280,110 ($21,581)

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Glossary

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AVERAGE

3,6671.67

2,166.67

Definition of terms.The Calculations

Example

Please note the numbers presented in the tables are averages. Be wary of undertaking calculations on these figures. Within the Planfarm Bankwest Benchmarks we use the average of the groups within the set as shown in the example below.

By using the average, we reduce the effect of a single large outlier on the results.

Effective haLabour unitsEffective ha/labour units

FARM 1

2,0001

2,000

FARM 2

4,0002

2,000

FARM 3

5,0002

2,500

Administration ($/Eff Hectare)

The cost of accountancy and farm advisoryfees with respect to the area farmed.

April – September Rainfall (mm)

Growing season rainfall of surveyparticipants. Please note that we have alteredthis measure in 2015 (from May to October)given the change in farming systems toearlier sowing and the earlier finishes toseason with climate change.

Average Sheep Sale Price ($/Hd)

The value of sheep sold with respect to thenumber of sheep sold.

Capital Expenditure ($/Eff Hectare)

The expenditure on any capital items including land purchases with respect to the area farmed.

Effective Area (Hectare)

The land area used directly for the purposesof producing crops or livestock. Does notinclude non-arable land such as salt lakes,rocks and bush.

Electricity / Gas / Sundry ($/Eff Hectare)

The cost of telephone and electricity withrespect to the area farmed.

Farm Assets ($/Eff Hectare)

Measures the value of all assets used for farmproduction with respect to the area farmed.

Fertiliser ($/Eff Hectare)

The cost of fertiliser applied with respect tothe area farmed.

Gross Farm Income

All income produced from farm relatedactivities. Includes proceeds from the sales ofall produce, Co-operative Bulk Handling (CBH)and diesel fuel rebates and receipts fromcontracting farm equipment.

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Gross Farm Income ($Eff/Hectare)

All income produced from farm relatedactivities with respect to the area farmed.

Insurance ($/Eff Hectare)

The insurance costs on buildings and vehiclesetc. excluding crop insurance costs withrespect to the area farmed.

Interest ($/Eff Hectare)

The interest paid on overdraft with respect tothe area farmed.

Long Term Debt ($/Eff Hectare)

Equals liabilities less seasonal or short-termliabilities such as funds drawn on an overdraft account and hire purchase expense, with respect to the area farmed.

Operating Costs (OPEX)

Relates to any payments made by the farmbusiness for materials and services excludingcapital, finance and personal expenditures.

Operating Costs ($Eff/Hectare)

Relates to any payments made by the farmbusiness for materials and services excludingcapital, finance and personal expenditureswith respect to the area farmed.

Operating Profit per ha per

mm of Growing Season Rainfall

This is the measure we use to rankperformance in the single year data and isa measure of how efficiently an individualhas used the rainfall they received duringthe growing season. While this measure issound it can be weak at the extremes – i.e.where a grower receives below the thresholdlevel of rainfall required to grow a crop andalso in some parts of the high rainfall areaswhen too much rainfall leads to leaching andwaterlogging and therefore loss of efficiencyof production.

Operating Surplus ($Eff/Hectare)

The farm income less operating costs.Measures the return on farming activitybefore account is taken of depreciationexpense.

Pesticides / Herbicides ($/Crop Hectare)

The cost of any pesticides or herbicides usedwith respect to the area cropped.

Personal Costs ($/Eff Hectare)

All personal expenses incurred by theprincipals of the farm business includingcontributions to superannuation with respectto the area farmed.

Plant Investment ($/Crop Hectare)

Measures the value of machinery with respect to the area cropped.

Plant Repairs ($/Crop Hectare)

The cost of repairs and maintenance on farmmachinery and vehicles with respect to thearea cropped.

Plant Repairs ($Eff/hectare)

The cost of repairs and maintenance on farmmachinery and vehicles with respect to thearea farmed.

Repairs Blds, Fence & Water ($/Eff Hectare)

The cost of repairs and maintenance onbuildings, fences and water supplies withrespect to the area farmed.

Seeds / Grading & Treatments

($/Eff Hectare)

The cost of seed purchased, cost of seedgrading and cost of any treatments used withrespect to the area farmed.

Seed & Treatments ($/Crop Hectare)

The cost of seed purchased, cost of seedgrading and cost of any treatments used withrespect to the area cropped.

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Taxation ($Eff/Hectare)

Taxes paid with respect to the area farmed.

Tax Liability ($/Eff Hectare)

Measures the provisional tax payable withrespect to the area farmed.

Total Assets ($/Eff Hectare)

Measures the value of all assets held bythe farm operators with respect to the areafarmed.

Total Crop Area (Hectare)

The area cropped.

Total Receipts

Includes all farm income plus interestreceived, funds from sale of capital items, anyloan funds advanced and any income derivedfrom off-farm investments or other activity.

Rates ($Eff/hectare)

The cost of shire and water rates with respectto the area farmed.

Rates, Licenses, Water ($Eff/hectare)

The cost of licenses with respect to the areafarmed.

Total Debt ($/Eff Hectare)

This relates to the amount of debt carriedby the farm operator with respect to thearea farmed.

Total Sheep Income ($/wg ha)

The income derived from sheep and woolsales with respect to winter grazed hectares.

Total Sheep Shorn

The total number of sheep shorn includinglambs.

Wages ($/Eff Hectare)

Payments made to any person for working onthe farm business with the exception of workundertaken by contractors.

Weeds / Pest ($/Eff Hectare)

The cost of any pesticides or herbicides usedwith respect to the area farmed.

Winter Grazed Hectares (wg ha)

The total effective area less the area cropped.

Wool Cut (Kg/wg ha)

The amount of wool cut with respect to winter grazed hectares.

Wool Price ($/kg)

The value of wool sold with respect to theamount of wool cut.

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For more information including detailed regional reports, please contact:

(08) 9284 1044graeme@planfarm.com.au

(08) 9369 6629benchmarks@bankwest.com.au

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The information contained in this report is of a general nature and is not intended to be nor should be considered as professional advice. You should not act on the basis of anything contained in this report without first obtaining specific professional advice. To the extent permitted by law, Bankwest, a division of Commonwealth Bank of Australia ABN 48 123 123 124 AFSL/Australian credit licence 234945, its related bodies corporate, employees and contractors accepts no liability or responsibility to any persons for any loss which may be incurred or suffered as a result of acting on or refraining from acting as a result of anything contained in this report. BWA-8960 110917 RGB