Agriculture has been on a roll for three straight seasons and all-time income growth has given farmers the appetite for expansion
We take a look at how record income levels were achieved from farm produce over the past three winter seasons and farmland prices that sometimes quadrupled at the same time in this exclusive AFDJ summary.
When a heady target of $100 billion dollars of farmgate income was instigated by the NFF in the Ag 2030 plan, and then seized upon by the Morrison government and pushed heavily by The National Party in 2018, it appeared a mighty dubious task at the time, a target the government would need to answer for if it failed.
But 2030 was a long way off, and many industry pundits took up the $100 billion dollar target, including AFDJ by putting in a reminder to the industry to achieve that target, whenever possible.
But almost as expected, the Morrison government would never have to answer if the target failed, as it was unceremoniously kicked out of office in May 2022 with a federal deficit of $1.1 trillion owing, a record debt level.
And when the new Albanese federal government came into power it went quiet on the $100 billion farmgate income target, but nevertheless, untamed forces have been at work catapulting the industry toward such a result.
When the $100 billion dollar target was set in 2018, farmgate income was a record $62.8 billion dollars from the 2018-19 season, but by 2021 our stocks rose to a level above $70 billion.
Take a look at how the Morrison government jumped back onto the bandwagon on this link.
Still a long way off the Ag2030 target at $71 billion earnt from the 2020-21 season, but there was the apparent get of jail card due to the COVID-19 pandemic.
However, no one told farmers about the pandemic so grain growers and livestock producers went on their merry way chalking up a farmgate income record of $85.6 billion in 2021-22, and an expected $85.0 billion from the 2022-23 season. See the latest predictions here.
With nine more seasons to go before we reach the 2030 target date, whoever is in power at the time, may very likely say, “I told you so, back in 2018.”
Where the money was spent
Not since the days of our grandfathers and great-grandfathers have farmers been so popular with store owners and bankers.
We need to go back to the 1950’s for a parallel in the quantum jump experienced for agricultural income.
At the time a sheep/wool boom created a market where farmers were getting the equivalent of 1688 US c/kg (£1 for every pound of wool) compared to a current value of 800 US c/kg and rural life was an important income earner for the country.
And as a result, farmers at the time took on enormous investments in new farm equipment to improve output and efficiency. With one of the biggest farm mechanisation growth areas being through the purchase of new-generation tractors.
No farmer should be surprised by an unexpected drop-in from a local banker to discuss their every precious need, and as far as farm reps are concerned, nothing is too much trouble to handle any grain, or livestock sales and even sell the family farm.
And while driving down the road in that shiny new Ute has accounted for a small portion of the outlay for farmers over the past season, there are other items to chalk up for a big portion of the major expenditure that has taken away much of the earnings gloss.
Farmers have splashed out what would once be thought a ridiculous $5.0 billion on farm equipment, headers and tractors on average for each of the past three seasons, 2020-21, 2021-22 and 2022-23. Enough to make machinery makers rich, with $15 billion in sales averaged across three seasons.
This is well up on the average spend of $2.5 billion a season just 5 years ago but seen as necessary to improve the on-farm machinery fleet to a level where a $100 billion farmgate income can be achieved and maintained.
But even before this high-cost farm machinery makes it to the paddock to commence work the price for inputs such as fertiliser, fuel, lubricants and chemicals all increased in cost for season 2022-23.
There was a jump that started at 30% for herbicides and pesticides while the price for fertiliser escalated over last year with a 100% plus jump. Growers expecting their usual $600 a tonne for Urea were left speechless when hit with up to $1400/tonne as the season progressed.
And essential fuel and lubricants flashed up by 150% more than the previous season in an unrelenting set of circumstances that offered farmers no respite from increased costs.
Taking a line through the previous season, broadacre farmers had the most to gain from an average income of around $850,000 but also the most to lose on expenses with about $600,000 taken away for interest repayments and farm input costs.
The strong position held by dairy farmers was highlighted with an average income of $1,000,000, but this was offset by high costs of $850,000 for interest repayments and unavoidable farm input costs.
Take a look at what to expect from the six main farming sectors moving forward, as covered in a recently released report available here, and while it paints a rosy starting point for most, many farmers will be mindful of the unexpected.
Holding our pecking order position
While growers made the most of three exceptional growing seasons in a row their fortunes have also been helped by high global prices, allowing them to achieve unprecedented levels of export value over the last three years.
The value of agricultural exports is tipped at record levels from the 2022-23 season with $72 billion expected to flow into the local economy with crop exports leading the charge at around $47 billion.
The combination of high farmgate production and prices has helped our overall agricultural exports to exceed $5 billion every month since November 2021.
And while world grain prices remain elevated due to uncertainty surrounding exports from the Russian/Ukraine region, there are further factors in play including the persistent dry seasons experienced in the United States, European Union, and Argentina.
But of course, that situation will change as La Niña conditions ease and the northern hemisphere returns to more neutral growing conditions and can once again supply its traditional markets.
But that return to normal for overseas producers will take more than one season to be able to replenish their grain inventories.
Once again suggesting the local winter cropping season for 2023-24 could still favour strong export values. See how our exports have already expanded on this link.
As conditions return to normal it will be imperative the drive currently generated by crop growers and livestock producers will be met with full government agency support.
This will need to be in the form of continued research and development to improve performance and investment. And anything else required to support farmers through any dry conditions ahead as La Niña dissipates and we see the return of El Niño seasonal influences.
While several international markets are currently experiencing supply shortages there is no wonder our local produce is gaining favour with hungry customers, but as northern hemisphere supply chains improve, expect our produce to fall back into a lower pecking order.
While there is an abundance of opportunity to market our product as clean and green to a significant number of consumers in high-income countries, those consumers demand quality produce grown at minimum levels of emissions from farm machines, and we simply can’t meet that level on an overall claim.
Australia does not have the emission standards required for product entry into the EU markets as we still run farm machinery that produces known Nitrogen Oxide (NOx) emissions levels that cause cancer, Tier 3 levels we still run were banned in all first-world countries except Australia in 1994.
Until this situation is addressed by legislation to ban Tier 3 emissions known to produce carcinogenic materials, that many farms still run, and make the standard the same as European markets at a minimum of Stage 6 emissions levels, entry into the EU will continue to be out of reach for our local produce as markets return to normal supply.
Engines in farm machines that run at levels of Euro Stage 6 are readily available to local farmers, but many importers continue to offer the cheaper Tier 3 versions as they are entitled to do under the current federal government legislation.
It will take a clean and green image to meet the expectations of an increasingly aware consumer used to a much higher standard of produce if Australian agriculture expects to maintain or increase its reach into international markets.
There is no doubt, Australian agriculture can be a leading contender in all world markets but needs government intervention to ensure quality produce levels are met, and ensure we are ready to adapt to whatever the next disruptive might be, including cleaning up our outdated and unhealthy farm engine emissions levels.
Take a look at why farmers had to have shiny new Tractors and harvesters in 2022 and spurred major manufacturers into record earnings territory, such as John Deere with a fiscal year 2022 profit of US$7.131 billion. See the full story on this link.
See the rapid advancement of crop sprayer technology that growers simply needed to buy and as a result, the market expanded by over 30% and turned into a segment heading towards $one billion a year in future sales, see this link.
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