Fruit and vegetable prices are expected to rise further over the short term

Above average rainfall will drive increased production across most states but produce quality may be impacted as a result

Strong production is expected to be met by rising costs for Fruit and vegetable producers and as a result rising prices may also quell domestic demand

The Rural Bank’s Australian agriculture mid-year outlook outlines how a wetter than average winter and low water prices will continue to support above average horticultural output over the coming six months.

The Rural Bank’s report says this will be particularly evident across the south-east coast of Australia as the La Ni.a weather pattern persists through winter.

The Bureau of Meteorology’s (BOM) winter outlook has forecast above median rainfall for much of the country.

While this forecast will support strong production across most states, it may have a negative impact on produce quality, particularly throughout Queensland and northern New South Wales where several floods have already impacted horticultural producers.

The farmgate value of horticultural production has been forecast to rise to a record $13.5 billion in 2022/23 due to the strong nationwide horticultural production and high prices.

While the higher output is good news for producers, rising input costs and transport expenses are pushing production costs higher, which will continue to squeeze grower margins and may push prices higher.

Labour shortages are also expected to continue throughout the second half of the year with backpackers yet to return in significant numbers and strong production already stretching the reduced seasonal workforce.

A new horticultural award has placed a minimum wage on picking work which is further increasing competition for skilled horticultural labour.

Domestic demand for both fruit and vegetables is currently steady, though rising retail prices due to ongoing supply chain disruption may begin to temper domestic demand for fresh fruit and vegetable produce.

Export demand could strengthen if free trade agreements with both India and the UK come into force by the end of the year.

Australia’s export volume to south-east Asia is expected to increase thanks to lower freight costs, though ongoing COVID-19 restrictions in China are causing logistical issues at ports which may impact demand from China over the short term.

Fruit in strong demand

Generally favourable growing conditions are expected to continue over the coming six months, though increased expenses associated with seasonal labour and higher input costs will have an impact upon grower margins.

Domestic demand will begin to trend downwards as increased retail prices amidst rising inflation begins to weight on consumer demand for fresh fruit. Export demand will continue to rise with improved market access to India, while demand in south-east Asia is also expected to continue to trend higher.

While fruit production will remain high, increased rainfall and weather events may impact

fruit quality with citrus, bananas, and avocado crops in Queensland at particular risk, at least over the next couple of months.

Hass avocado supply remains near record levels due to strong production throughout almost all growing areas. This has been driven by favourable conditions, with additional plantings also continuing to mature.

While domestic demand is strong, the record production is continuing to drive an oversupply of avocados on the market, with retail prices still well below average, while prices are expected to trend higher, they are not expected to return to long term averages for some time.

The current price point remains unviable for most producers, particularly given the rising transportation and labour costs. This oversupply of avocadoes has seen an increase in lower grade produce being turned into compost rather than being processed.

This increase in domestic production has seen avocado imports reduced by 54.9 per cent for the year ending March 2022 in comparison to the 12 months prior with this trend to continue through to the summer months.

Australian citrus season is in full swing with the supply of mandarins and navel oranges increasing. A reasonably strong crop (despite smaller fruit) is forecast though there is likely to be an increase in marked fruit, particularly throughout Queensland and NSW.

While domestic demand will remain steady, export demand is expected to be higher than usual. This increase in export demand is being driven poor production in the US following drought across the west coast which will see stronger than usual demand from Asia as other countries look to cover the US shortfall.

The recent signing of the interim Free Trade Agreement (FTA) with India will see tariffs on Australian citrus exports reduced from 30% to just 15% for the first 13,700 tonnes.

The agreement is expected to come into force during July which will benefit this season’s produce.

Wholesale prices of both navel oranges and mandarins are broadly in line with last year though supply chain difficulties and strong export demand may see wholesale prices sit slightly above average as the season progresses.

Apple output is well down on previous forecasts, led by poor Pink Lady production. The Pink Lady variety typically makes up over 40% of national apple production. Early forecasts estimate Pink Lady Class 1 production at 70,000 tonnes, which was already a reduction on 2021 production.

As harvest progresses it is expected that Pink Lady production will come in at 64,000 tonnes, a 20% reduction on 2021. The reduced volumes are likely to see high retail prices maintained across most apple varieties over the coming months.

Vegetables prices at ten year high

Full water storages and strong seasonal conditions across much of the country have aided vegetable production, though flooding throughout the Lockyer Valley and parts of northern NSW has had a significant impact upon vegetable production within these key growing regions.

As a result, vegetable supply remains volatile with entire crops of vegetables impacted which will continue to see intermittent supply issues over the next three months or so before supply begins to stabilise.

Shortages of lettuce, capsicum and spinach will continue for at least the next couple of months with onion supply also impacted.

Domestic demand is expected to dip over the next couple of months with vegetable prices near 10-year highs, though demand will rebound as supply issues ease. This dip follows a rebound in domestic demand over the prior six months as the food service sector reopened.

Export demand remains steady, though the cost of freight is continuing to rise with the International Freight Access Mechanism (IFAM) subsidy now at an end and ongoing logistical challenges with sea freight.

Global freight capacity will improve over the next six months as port shutdowns across China end, helping to reduce global freight costs.

Vegetable prices are expected to continue rising over the next six months as high input costs, ongoing labour challenges, and supply chain issues offset increased supply throughout southeast Australia.

Favourable seasonal conditions throughout NSW and Victoria will prompt a high rate of sowing across several vegetable varieties including broccoli, cauliflower and leafy vegetables.

While sowing rates are expected to be above average, a reduction in the application of fertiliser due to high prices may negatively impact crop size and yields.

Nuts reach all-time record levels

Almond producers are facing a challenging second half of 2022 as low prices, high input costs and difficult weather conditions more than offset the record production currently forecast.

The Almond Board of Australia have forecast Australian almond production will reach a record 138,650 tonnes (without shell) in 2022, up from 127,000 tonnes last year though down on prior estimates as wet weather across key growing regions during harvest impacts saleable volumes.

Almond prices are hovering near 10-year lows with Select Harvest reporting an estimated average almond selling price of $6.64/kg over the last 6 months, for comparison, the average almond price was $8.60/kg in 2019.

Global almond prices have been impacted by consecutive years of record Californian harvests. Logistical issues have also led to increased US almond stocks.

Almond nuts are in plentiful supply due to US imports

Another year of decent Californian production (the world’s largest almond producer with 80% global output) is expected to continue to weigh on global prices.

Wet weather across the east coast of Australia during harvest has also negatively impacted almond quality, reducing this season’s amount of clean, unblemished, product, which Chinese buyers prefer.

This may support prices of higher quality product. Domestic demand from Australian almonds will be buoyed by low prices with export demand also strong as the rising middle class in countries such as India and China are boost demand for Australian almonds.

An interim FTA with India is also due to come into force in late 2022 which will see greater export opportunities for growers with a 50% cut to tariffs on the first 34,000 tonnes of exports into India.

Macadamia nut supply is expected to drop to 49,340 tonnes short of the 51,500 tonnes harvested in 2021

A ban on beehive movement in New South Wales following the discovery of the varroa mite is expected to impact the pollination of almond trees in August with over 300,000 beehives required to pollinate the national crop.

The Australian Macadamia Society has cut its 2022 macadamia crop forecast by 10% due to heavy rains and flooding in New South Wales and Queensland. The forecast is now 49,340 tonnes in-shell at 3.5 per cent moisture. This compares to the 2021 production of 51,500 tonnes.

Despite this cut, global output is expected to increase by over 13% as strong production throughout South Africa and China more the make up the shortfall. This rising production coupled with shipping and logistical issues are likely to pressure global prices over the next six months.

In better news for local producers, Australia’s recent interim FTA with India will see the removal of import tariffs on Australian macadamias over the next seven years. The tariff is currently sitting at 32%. This should allow greater export opportunities for Australian macadamia producers and will support prices over the coming seasons.