Where from here? ABARES asks

By: Andrew Hobbs

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Experts from the Australian Bureau of Agricultural and Resource Economics predict the value of farm production to rise and exports to fall for 2021.

Where from here? ABARES asks
ABARES predicts wheat exports will reach 21 million tonnes in 2020-2021, more than double the previous year. Image courtesy Adobe Stock

 

The gross value of Australia’s agricultural production is forecast to rise by $4.2 billion to reach $65 billion in 2020–21, according to the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES).

In its December quarter 2020 Commodities report, the bureau says that the change is due to a predicted total winter crop of 51.5 million tonnes, up 76 per cent on last year, as well as a promising rainfall outlook.

ABARES executive director Steve Hatfield-Dodds says that agricultural production is bouncing back from the impacts of drought, which had cast a pall over production in recent years.

"We’re expecting a near all-time high winter crop, the best ever in New South Wales, and a more favourable outlook for summer cropping than we have seen in recent years," he says.

"Livestock prices have also stayed high with herd and flock rebuilding, and continued international demand."

But while the forecast rise in grain production will flow through to the export market, ABARES still predicts the overall value of exports to fall by 7 per cent on the 2019-2020 total, to about $44.7 billion.

Hatfield-Dodds says there are a number of factors that contribute to this, including lower global commodity prices and, of course, the impact of COVID-19 containment measures.

"Exports have continued to find markets during the pandemic but the residual effect of past dry seasons and trade uncertainties are pushing down export value," he says.

"Recovery from drought is limiting production and exports of livestock products and fibres, with meat prices also falling as the African Swine Fever impact on China’s pork production begins to lessen."

Australia’s wheat production is forecast to increase by 106 per cent to 31.2 million tonnes, the second highest on record, for the 2020-2021 year, at the same time as the world wheat price is forecast to increase by 11 per cent to an average of US$245 per tonne..

ABARES predicts Australian wheat exports will reach around 21 million tonnes in 2020–21, more than double 2019–20 exports, adding that there will also be an opportunity to rebuild local stockpiles after years of drought.

Barley production is forecast to increase by 33 per cent to 12 million tonnes, the second highest on record, but Australian prices are expected to ease, declining to $230 (US$167) per tonne.

ABARES predicts rising barley production on the east coast and declining domestic demand will result in a "substantial exportable surplus across Australia and a rebuilding of domestic stocks."

Despite the imposition of "prohibitive tariffs" on Australian barley exported to China, ABARES predicts barley exports will increase by 64 per cent year on year, to 7 million tonnes in 2020–21, with Saudi Arabia and the Middle East, Japan and South East Asia to be important markets.

Canola production is forecast to rise by 59 per cent to 3.7 million tonnes, the fifth highest on record – and with that, the domestic price is forecast to fall 4 per cent to the export parity price of $593 per tonne.

Australian canola exports are expected to rise by 71 per cent to 2.7 million tonnes in 2020–21, predominantly going into the EU biodiesel market – a sector ABARES says will face increasing competition from Canada in years ahead.

Fruit and vegetable prices are forecast to rise in 2020-2021 in line with a fall in production, due to a fall in overseas workers to harvest crops because of COVID-19 travel restrictions.

Australian shorn wool production is forecast to remain steady in 2020–21 at 282,000 tonnes, after falling by 5.5 per cent in 2019–20, but wool prices are forecast to be lower due to reduced demand, though premiums for superfine wool show signs of returning.

Australian cotton production is forecast to rise to 2.2 million bales in 2020-2021 – 35 per cent below the 10-year average to 2019–20, and cotton prices are forecast to be 2 per cent higher than in the previous year due to lower global production and higher demand.

After reaching record highs in the third quarter of 2020, cattle prices are expected to fall for the remainder of the 2020-2021 financial year, as favourable seasonal conditions support a rebuilding of Australia’s cattle herd.

Export volumes are also forecast to fall further, highlighted by a 50 per cent fall in volumes to China and a 17 per cent fall in volumes to Japan, reflected in both fresh and frozen beef.

After a period of COVID-19 related highs, the average saleyard prices of lamb are forecast to fall by 10 per cent in 2020–21, from 807 cents per kilogram to 726 c/kg.

But favourable conditions in the latter half of 2019-2020 will see Austalia’s total lamb slaughter rise 3 per cent to 21 million head, with lamb production forecast to rise by 4 per cent to 500,000 tonnes in 2020–21.

Farmgate milk prices in Australia are forecast to average 47.9 cents per litre in 2020–21, down by 9 per cent from high levels in 2019–20, with the increased production expected to ease competition between processors.

Total milk production in Australia is forecast to increase by 2 per cent to 9 billion litres in 2020-2021 due to higher pasture growth following a La Niña weather event.

That same La Niña is likely to bring above average rainfall to eastern and northern Australia in Spring and Summer, ABARES says, which could generate favourable growing conditions for summer crops and pasture through to the end of February 2021.

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