A look at what lies in wait for second half of year for farming income

The experts have given their predictions on likely outcomes for grain growers and livestock producers for the second half of 2022 in a just released report

How fortunes are expected to pan out for cropping, dairy, horticulture, beef, sheep and wool over the last 6 months of 2022 is the subject of a just released report

Agriculture is one industry that continued to thrive during the first half of 2022 despite at times challenging and volatile conditions affecting many other sectors with the possibility of curtailing the value of farm produce expectations.

But experts with plenty of money buried into the agriculture sector are expecting solid returns from a strong second half of the year production levels anticipated for the industry.

One thing pointing to this factor is seasonal conditions that continue to underpin strong production expectations across most agricultural sectors, even though heavy rainfall and flooding has provided a challenge for some farmers in Queensland and northern New South Wales.

And these current wet conditions are forecast to continue through to at least September 2022 and across most of the country, with an even chance of a third La Ni.a weather event over the summer.

This is the forecast farmers want and is expected to hold farm production in good stead during the second half of 2022 as both grain growers and livestock producers continue to cash in on high commodity prices and strong production results.

Taking a line through Rural Bank’s Australian agriculture mid-year outlook, it has provided an in-depth perspective on supply, demand, and price outlooks for our major agricultural commodities.

By analysing historical trends and considering future scenarios, the mid-year outlook presents a detailed view on what lies ahead for local farmers in the second half of 2022.

There are three key themes highlighted throughout the Rural Bank’s detailed report that will impact the performance of Australian agriculture in the second half of 2022 – seasonal conditions, trade conditions and supply chain disruptions.

Seasonal conditions remain a vital underlying factor across all agricultural sectors with current forecasts pointing towards favourable conditions heading into the back half of 2022 with an above average chance of rainfall forecast throughout most of the country.

Although southern parts of Western Australia and Tasmania will likely see average rainfall.

The report confirms that above average winter crop production is forecast for the third season in a row as a result of these favourable conditions. See more on Crop production here.

Horticulture is also expected to see strong production, with supply expected to rebound following recent flooding in Queensland which has negatively impacted production over the short term. See the likely expectations for horticulture here.

The wet conditions will allow the continued rebuilding of the nation’s cattle herd and sheep flock which will ensure strong beef, sheepmeat, wool and dairy production into the second half of 2022. Take a look at expected livestock returns here.

Export prospects

Global trade conditions remain challenging for local producers, though exporters have continued to adapt to trade barriers by finding alternative markets. The recently signed interim Australia-India Economic Cooperation and Trade Agreement (IA-ECTA) is one such example of this.

Australian sheepmeat, almond, wool, lentil, and wine producers are expected to see the largest benefits from the improved access to the Indian market with the agreement due to come into force in the back half of the year.

Australia’s relationship with our largest trading partner China has shown no tangible signs of improving, with trade relations likely to stay frosty while punitive tariffs remain on a range of Australian agricultural commodities including barley, wine, lobster, and beef.

Supply chain disruptions are expected to continue to impact the Australian agriculture industry at both a domestic and export level.

China’s ‘zero COVID strategy’ has seen several ports shutdown across China, further exacerbating supply chain disruptions and impacting freight rates. Reports of lockdowns ending should see ports begin to reopen and the subsequent easing of both container availability and freight rates, at least over the short term.

Russia’s invasion of Ukraine, which has cut off exports from the Black Sea region and seen a raft of economic sanctions placed on Russia, has further intensified global supply chain issues.

Grain exports from Ukraine remain almost non-existent which is driving strong demand for Australian grain, particular throughout Asia. Energy prices have also been driven higher by the conflict which has consequently sent the cost of inputs skyrocketing.

Elevated inputs costs are expected to remain a key issue throughout the remainder of 2022 with growers weighing up a reduction in the application of fertiliser for this season to better maintain their margins.

Australian agricultural producers are in a good position heading into the back half of the year with strong production estimates and high commodity prices helping to offset some challenging trade conditions and increased input costs.

The analysis included in the mid-year outlook report gives farmers the insight to start to look over the second half of 2022 and understand the key driving forces affecting agricultural markets both here and worldwide.

Predictions in a nutshell

Cropping – Above average production, strong export demand and high global prices will provide a continued positive outlook for cropping. See more details here.

Dairy – Higher farmgate milk prices and limited global supply will see an overall improved outlook for the dairy industry. See more details here.

Horticulture – Strong production is expected to be met by rising costs for producers. Rising prices may also weigh on domestic demand. See more details here.

Cattle – beef production to rise, with restocker demand to remain strong and cattle prices to be softer. See more details here.

Sheep – producers remain well positioned to increase production and capitalise on strong global demand. See more details here.

Wool – producers are positioned to have increased wool supply and stable prices. See more details here.