1360.0 - Measuring Australia's Economy, 2003  
ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 03/02/2003   
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Contents >> Section 6. Prices and Income >> Prices Received and Paid by Farmers

From 1991-92 to 1994-95, the farmers' terms of trade index rose to a peak of 118.1 (on a base of 1997-98 = 100.0), as prices received increased more rapidly than prices paid. The terms of trade index then declined to 93.5 in 1999-2000, as prices paid increased while prices received fell. However, from 2000-01 prices received again increased more rapidly than prices paid, leading to an increase in terms of trade. It should be recognised that the index does not necessarily relate to gross returns received by farmers, since price movements may be offset by counteracting movements in the quantities of commodities traded.



INDEXES OF PRICES RECEIVED AND PAID BY FARMERS (1997–98 = 100.0)
Period
Prices received
Prices paid
Farmers’ terms of trade(a)
ANNUAL
1991–92
94.5
90.7
104.2
1992–93
93.7
89.5
104.8
1993–94
97.4
91.1
106.9
1994–95
112.0
94.9
118.1
1995–96
111.2
99.4
111.9
1996–97
101.6
99.3
102.3
1997–98
100.0
100.0
100.0
1998–99
95.0
100.0
95.0
1999–00
2000–01
2001–02
96.6
108.3
121.1
103.3
110.0
112.2
93.5
98.5
107.9
(a) Ratio of index of prices received by farmers to index of prices paid by farmers.

Source: Indexes of Prices Received and Paid by Farmers (ABARE, Australian Commodities, Sept. qtr 2002).


Explanatory Notes

The Australian Bureau of Agricultural and Resource Economics (ABARE) produces indexes of prices received and prices paid by farmers. The indexes measure movements in the price of fixed baskets of goods and services that farmers sell and purchase, respectively. ABARE revised the method for calculating farm, price and production indexes in October 1999. The indexes for the different groups of farm commodities are now calculated on a chained weight basis using Fisher's ideal index with a reference year of 1997-98.

The indexes of prices received and paid by farmers are not indicators of farmers’ incomes or costs, but are used to determine farmers’ terms of trade. Farmers’ terms of trade is equal to the ratio of prices received to prices paid. Farmers experience a rise in their terms of trade when, for example, the average level of prices they receive increases at a faster rate than the average level of prices paid. Farmers experience a fall in their terms of trade when, for example, the prices they pay increase at a faster rate than the prices they receive.

ABARE uses farmers’ terms of trade along with other information in the projection of income levels for producers of specific commodities. These forecasts are subsequently used by the Government in developing various agricultural and trade policies.


Further Reading

Agriculture, Australia (7113.0)
Contains detailed information on Australian agriculture. It contains detailed statistics on crops, livestock and livestock products, characteristics of farms, value of agricultural commodities produced (VACP) and summary trade data.

Australian Commodities
Contains Australian Bureau of Agricultural and Resource Economics (ABARE) forecast and historical data for agriculture and resource commodities. Includes data on quantity and value of production, quantity and value of exports, value of imports of selected commodities, annual and quarterly prices and world production and consumption, stocks and trade for selected commodities.



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