The profits gap between Australia's richest and poorest farmers has soared, and shows no sign of closing, according to an official report which gives an insight into the buyout of the Packer cattle ranches.

The top quarter of Australia's farms raised operating profits by 50% to nearly Aus$300,000 last year, the country's agricultural economics bureau, Abare, said.

The rise took these farms' operating profits –production revenues minus everyday costs such as fertilizer and labour – to nearly three times that of 15 years ago.

And they looked set to keep raising profits, continuing a trend which has seen them claim 85% of Australian farm profits over the last five years. Since 1990, they have accounted for 80% of the increase in Australian agricultural production.

'Struggle' for profits

For the worst-performers, however, losses widened to about Aus$50,000 in 2007-08, extending a 10-year losing streak.

"The bottom 25% have struggled to generate positive farm incomes," Abare said, adding that these enterprises could expect to remain in the red.

"The trend line for this group is at best flat."

Abare attributed the growing profits gap on top farms' financial muscle, which allowed them to invest in productivity improvements beyond the means of weaker enterprises.

 The report, which estimated that the top farms return about 12% on capital, comes a month after Terra Firm Capital Partners, a UK private equity firm, bought the Packer family out of their Australian cattle ranch business in a deal worth about Aus$425m. The business, Consolidated Pastoral Company, is Australia's second ranked beef producer.

Dairy decline

The country's beef farms overall are expected to raise operating profits by 26% to an average of Aus$31,500 for 2008-09, thanks to higher sales and prices, the Abare report added.

But dairy farms looked set for a steep fall from a 20-year high of Aus$127,700 per farm last year to Aus$85,000 in 2008-09, reflecting the drop in international milk prices.

The average Australian farm could expect a 28% rise in operating profit to Aus$80,000 this year, although including depreciation and an imaginary labour charge for farm owners, they would report a loss of Aus$7,000, the fourth successive year in the red.

The Abare study included only Australia's so-called broadacre farms, which exclude hobby enterprises and manage 90% of the country's arable land.