Farm production value to hold firm despite bushfires, drought and pandemic

The corporates are driving more profits as they take over what was once family owned farms that previously had more emphasis on lifestyle than production

Even with the Australian winter crop production coming in under 29 million tonnes – down 5% on the previous year, the outlook for Agriculture is quite rosy.

Australian agricultural production is expected to remain high with overseas demand balancing drought-related falls in farm output and incomes.

The value of farm production in fiscal 2019-20 was down slightly to $59 billion, compared to the previous year’s $62 billion, but still above the 10-year average due to higher prices for livestock and other agricultural commodities.

Widespread bushfires over the 2019–20 summer in the main missed farming regions and did not have a significant impact on the agricultural sector as a whole.

The majority of Australia’s agricultural production and exports take place outside the most badly affected areas.

And to prove what a big country Australia is, in some regions the season was another drought impacted one with many regions having experienced their driest 12 months on record.

But other regions such as in Victoria saw improved crop conditions and strode forward to be 16% above the 10-year average to 2018-19.

This made for an uneven national outlook that saw overall farm production and average farm incomes fall for a second straight year in drought regions.

This has resulted in overall incomes for all broadacre farms to be down by 8% to $153,000 average per farm in 2019-20. This relates to around 4% below the 10-year average.

However, for many farmers in NSW they will look at these figures and ask “where is my share of that” because farmers in NSW overall have farm cash incomes close to zero for 2019-20.

This has been as bad as it gets, on a NSW state level, for the past 20 years – and some regions are substantially worse with very large crop/expense losses.

Dairy farmers fared a little better as a select group, and averaged a farm cash income increase from $120,100 per farm in 2018–19 to $165,000 per farm in 2019–20.

This improvement for around 73% of dairy farms was due to higher farm gate milk prices.

Those gains for dairy farmers come from what was comparatively low levels in Queensland, parts of Victoria and New South Wales.

Factors that held back producers from earning more were drought-related falls in milk production plus high feed and irrigation costs, all stalling improvement.

Meat and livestock prices have stayed high, driven by issues in African with swine fever (ASF) along with China’s swineherd issues.

This drove red meat prices up and requiring Chinese consumers to look elsewhere. Our local reliable product was blessed with good prices and saved a year that could have looked a lot worse.

Livestock prices in the medium-term are expected to remain at the same level, even with the threat of the coronavirus risk.

The Chinese demand for agricultural products is expected to return strongly, and in particular for items like seafood and wine.

Local livestock producers had such strong demand in the 2019–20 season they have been left with the lowest number of beef cattle since 1990 and lowest sheep flock since 1904.

Livestock production sits at 12% lower than five years ago, as a result of selling off breeders to fill orders.

Taking a look out to season 2024–25, this is when a gradual recovery in the production of livestock and livestock products is expected to follow herd and flock rebuilding.

Although many producers advise recovery of herd number will take several years and livestock related production in 2024-25 are still expected to be 8% below the 2014-15 peak.

The value of Australia’s agricultural exports overall fell by 11% to $43 billion in 2019-20.

In real terms this is 16% below the record value of exports in 2016–17, but it is expected as it reflects three consecutive annual falls in crop exports, due to drought and failing crops.

Grains and oilseed exports are expected to rebound quickly following the recent rain, and cotton will come back as well but could take some time to recover as it will be depending on how quickly irrigation storages are replenished.

What this most recent survey of farm production does reveal is an ongoing trend of more farms becoming corporate owned, getting bigger and driving productivity to higher levels.

A range of factors has seen large farms, those with cash receipts above $1 million per year, grow from around 3% to now be 15% of the farm population.

This has been a trend over the past four decades, and during that time their share of output has increased from 25% to around 58% of total output.

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