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Abstract
This paper examines broadacre farm performance in south-western Australia. This
region has experienced pronounced climate variability and volatile commodity
prices over the last decade or so. Relationships between productivity and
profitability are explored using panel data from 50 farms in the study region. The
data are analysed using non-parametric methods. Components of farm
productivity and profitability are measured over the period 1998 to 2008.
Economies of scale and scope are shown often to be positive contributors to
productivity and profitability. However, the main finding is that technical change,
much more so than technical efficiency, has supplied over 68 percent of the
improvement in total factor productivity for farms in the different climatic zones
of the region from 1998 to 2008. In addition, growth in total factor productivity is
the main contributor to farm profitability. By implication, technical change, often
accompanied by scale and mix efficiencies, is the main driver of farm
profitability. These findings indicate a vital role for innovation and R,D&E to
deliver technologies and practices that bolster farm profitability, as well as a
continuing role for scale and scope economies. The products and knowledge that
come from innovation and R,D&E are the springboard for technical change.
Through technical change and scale and scope efficiencies farmers in this study
have achieved higher profits.