Australian agriculture riding a wave of recovery
Amid the social and economic gloom caused in Australia by the Covid-19 pandemic, a couple of shining export industries have stood out this year.
One is the mining sector, with iron ore exports at record levels. The other is Australia’s agricultural sector, which has bounced back from a horror drought in 2019.
Strong and consistent rainfall during the year have contributed to a bumper grain harvest now underway throughout Australia.
In fact, the ‘bounce-back’ of agriculture in 2020 might be a major understatement.
The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) on December 7 forecast that winter crop production would increase 76 per cent to 51.5 million tonnes.
That would rank this year’s national winter crop production as the second-highest ever, after the record high of 56.7 million tonnes of 2016-17.
In New South Wales, where drought ravished farm incomes in 2019, winter crop production in 2020 is tipped to be 17.6 million tonnes – a 427 per cent increase. Queensland is also forecast to more than double its winter crop, with healthy rises in Victoria, South Australia and Western Australia.
Among the major winter crops, the national wheat harvest is forecast to increase by 106 per cent to 31.2 million tonnes. Like the national wheat crop, Australia’s barley production looms as the second-highest on record, followed by canola, oats and chickpeas.
ABARES is also bullish about the prospects for summer crops such as grain sorghum, cotton and rice, boosted by healthy winter rains and replenished irrigation reserves. It is banking on weather patterns of the La Niña effect, which typically deliver wetter summers in Australia.
Grain trader Riverina (Australia), however, noted that recent heatwave conditions in Queensland and New South Wales posed a threat to summer crop yields.
Meanwhile, wool prices are moving upwards, with the benchmark Eastern Market Indicator hovering around the 1140 c/kg clean mark, up from 900 c/kg clean in early September, but down slightly from the 1219 c/kg level in late October.
Australia’s reliance on wool exports has subsided in recent decades. Less than 70 million sheep were estimated to have been shorn in 2019-20, compared to 181 million shorn in 1991-92, in the wake of the wool price boom of the late 1980s.
Of course, the volume of agricultural production is one factor in export performance. World commodity markets, and the prices they set, will determine export income.
ABARES also forecast that while overall the gross value of agricultural production would increase seven per cent to $65 billion in 2020-21, crop export returns would be affected by lower world grain prices.
In addition, the share of livestock products in farm exports would fall, as landholders seek to re-stock properties after being forced to de-stock cattle and sheep during the 2019 drought.
Another threat to export income is that of China, which earlier this year imposed restrictions on barley imports from Australia.
That is a significant move, with industry body the Australian Export Grains Innovation Centre noting that China accounted for more than two-thirds of Australian barley exports. In wheat, however, China took less than 10 per cent of national wheat exports.
But in wool, China – as a major clothing manufacturer – remains a major buyer of the Australian clip, or around 70 per cent of its total wool imports.
Regardless of export moves, the rebounding agricultural sector remains a highlight for Australia in 2020.
For regional towns around the nation, it represents a major economic shot in the arm, with flow-on effects for local investment and employment prospects.
Gavin Clancy is a Senior Consultant to Lunik and is a former writer for agricultural industry publications