OPINION: Measuring the agricultural sector’s production is a useful marker, but perhaps not as meaningful as its profitability.
AUSTRALIAN agriculture has effectively reached the $100 billion production milestone several years ahead of the original 2030 target.
While this has been widely celebrated, it raises a more important question. Was it the right target, and what should come next?
The Australian Bureau of Agricultural and Resource Economics and Sciences now forecasts the gross value of agricultural production to reach around $101 billion in 2025-26, pushing the sector beyond the long-discussed benchmark.
The $100 billion target was always simple and effective. It was easy to communicate and measure, and it provided a clear sense of industry scale.
However, the journey to $100 billion reveals that this outcome was largely inevitable. When the target gained traction in the late 2010s, production was already around $60 billion.
Looking further back, the trend was consistent. Output had grown from roughly $24 billion in the mid-1990s to between $35 billion and $40 billion in the early 2000s, then to about $55 billion by the mid-2010s.
The industry was already on a steady upward path and the target simply marked a point along that trajectory.
What accelerated the final push to $100 billion were factors largely outside the control of farmers and policy-makers. Strong seasonal conditions during La Niña years drove record production volumes across cropping and livestock regions.
At the same time, global commodity prices surged following supply disruptions, particularly after the war in Ukraine. Inflation also played a role, lifting the value of production even where physical output changed only modestly.
As a result, production values rose rapidly.
The sector moved from $72 billion in 2020-21 to $88 billion in 2021-22, then to around $94 billion in 2022-23, before surpassing $100 billion.
While impressive, these gains reflect a combination of volume, price and inflation rather than a fundamental shift in industry structure.
This highlights the key limitation of the $100 billion target. It measures the size of the agricultural sector but not its profitability.
Over the same period, production values increased, and farm costs rose sharply. Inputs such as fertiliser, fuel, labour, machinery and finance all became more expensive.
Farm costs, which were around $24 billion in the mid-1990s, climbed steadily to about $45 billion by the mid-2010s.
More recently, they have surged, with estimates suggesting costs could reach about $79 billion in 2025-26. This means a large portion of the growth in production value has been absorbed by rising input costs.
The distinction between scale and profitability is critical. With production at roughly $101 billion and costs near $79 billion, the surplus remaining within the farm sector is closer to $22 billion.
That figure provides a much clearer picture of farmers’ financial outcomes than the headline production number.
Viewed this way, the $100 billion milestone is significant but does not necessarily indicate a stronger or more resilient farm sector.
In some cases, elevated costs and easing commodity prices may be tightening margins rather than improving them.
As the industry considers its next benchmark, there is a strong case for shifting the focus toward measures that more accurately reflect farmers’ outcomes.
One option is to target net farm margin, measuring the difference between production and costs. This would place profitability at the centre of the discussion.
Another approach is to focus on value retention. Farmers currently retain around 20 per cent of total production value after costs. Setting a target to lift this share would encourage improvements in productivity, cost control and supply chain efficiency.
A third option is to simply extend the current framework and set a higher production target, such as $150 billion. While simple, this approach risks repeating the same limitation by focusing on scale rather than financial health.
Australian agriculture will likely continue to grow in size, as it has for decades. The more important question is whether that growth translates into stronger financial outcomes for producers.
The $100 billion milestone demonstrates the sector’s scale but not necessarily its strength. The next target should place farmers at the centre, focusing not just on how much is produced, but on how much value remains in farmers’ bank accounts.
• Andrew Whitelaw is co-founder and director of Episode 3 (EP3)
