Agriculture outlook dominated by recovery from drought

Australian Drought
Recovery from drought is the dominant force in the Australian agricultural outlook. Photo credit: Tim Rudman, CC BY 2.0

The latest forecast from Agricultural experts identifies the recovery from drought as dominating the very positive near-term outlook for higher farm incomes.

Even the COVID-19 pandemic that has presented its own challenges has been brushed off in a flurry that has seen dusty old planters heading for cropping paddocks.

Better seasonal conditions are expected to see the value of farm production increase to $61 billion for the 2020–21 season.

Part of the increase is driven by a strong forecast rebound in grain production, up 15 % to $30.8 billion.

While livestock production is forecast to fall 10% to just above $30 billion, as producers rebuilt their herds ending a run of very strong growth.

After three years of widespread drought, conditions have begun to improve, and re-stocking is coming to the fore.

At the same time, a pandemic-led global economic slowdown combined with higher agricultural production is going to weigh on prices – with falls forecast for most major commodities.

Red meat prices are expected to hold up, with the impact of African swine fever still driving protein demand in Asia, but with graziers looking to rebuild herds and flocks, slaughter numbers – and therefore exports – are forecast to fall.

On the whole, farm exports are forecast to fall by around $2.7 billion to $44.4 billion in 2020–21, driven by those falling meat exports and the rebuilding of domestic grain stocks.

Meat and live animal exports are forecast to fall by $3.5 billion and while exports of grain are expected to increase by almost $2.3 billion, with only 4 million tonnes of the 2020–21 grain harvest expected to be retained to rebuild domestic stocks.

And while domestic grains stocks are sufficient to see us through to the winter harvest, investment in storing grain is important in improving resilience in supply.

While COVID-19 has had a major impact on Australian business, agriculture has not been severely affected and has shown that it can adapt in most cases.

Exporters of high-value seafood, wine and meat products did face significant challenges, but have also demonstrated adaptation by expanding online sales and marketing directly to households.

However, there is still an enormous amount of uncertainty regarding the economic impact of our previous regular customer base, and the duration of the COVID-19 effects.

This will translate to more uncertainty in agricultural markets, but as we have seen to date, demand for Australian exports of food staples remains relatively steady, and the industry has shown it can adapt as conditions change.