The extent of farm financial difficulty that has been confirmed in the ABARE broadacre farm surveys and it is expected to continue into the immediate future. A number of farms are forced to:

For the most part, these farms can be identified as farms which are under some pressure to reduce their capital base. These farms, in particular, need better analysis of present financial position to aid management strategy selection.

There is need for a set of farm business performance indicators to aid the categorization of farm business position and the diagnosis of farmers' adjustment needs. For farmers, bankers and others the use of these indicators should enable a firm grasp of the farm's position, and the selection of appropriate farm management strategies by farmers in consultation with their credit providers.

Calculating a range of performance indicators is the basis for an objective diagnosis of the farm's strengths, weaknesses and overall position. In turn, this enables a realistic assessment of adjustment options for the farm and the family.


Financial stress arises when market forces drive farm income or profits below their normal levels. However, the critical factor in determining whether the farm experiences such stress is its capacity to adjust to adverse economic events. When the farm system cannot adjust to such external stimuli, financial stress occurs.

The financial health of a farm business can be assessed by examining a number of measures including liquidity, solvency and profitability. However, no single measure is entirely satisfactory in its ability to indicate a firm's vulnerability to financial stress. Therefore, a number of measures are required.


It is now well recognised that the modern farmer requires a higher level of financial and economic skills above that of farmers a generation before. This can be achieved with better education and support groups. There is also evidence of higher risk for farmers who become involved in the export market for example, caused by the floating dollar:

Further, the Committee of Enquiry into Banking and Deregulation [Martin et al, 1991] made the following pertinent comments: