Australia has forecast a return towards trend for farm production and exports in 2017–18, before steady growth over the next five years.
The gross value of farm production is estimated to have increased at an annual rate of 2 per cent over the past six years to 2017–18, and the 5 per cent reduction forecast for 2017–18 follows an exceptional 2016–17, the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) said in The March 2018 Agricultural commodities Report.
“Our forecast farm production of $59 billion in 2017–18 is largely due to a return towards trend in the gross value of crops from record production in 2016–17,” ABARES Executive Director Dr Hatfield-Dodds said.
The price projections for the next five years have been influenced by two key drivers, the report said.
Global crop production is trending down from the very high levels of 2016–17, but is expected to be enough to keep stocks high and prices low out to 2022–23, provided no major supply shocks occur.
For livestock, the US beef cycle has moved to a phase of increased production, intensifying competition in Australia’s export markets and keeping beef prices below the recent highs associated with US production bottoming out in 2015–16.
According to ABARES, the flat outlook for prices should result in the growth in the value of agricultural production and exports coming mainly from increased volume, underpinned by rising demand as incomes and populations in importing countries grow.
In 2017–18, the value of farm exports is expected to decline by 4 per cent to $47 billion, before growing steadily to reach $50 billion by 2022–23.
The key highlights of the report:
- The gross value of farm production is forecast to decline by 5 per cent to $59 billion in 2017–18, reflecting an assumed return to average seasonal conditions, before increasing by 3 per cent to $61 billion in
- The gross value of farm production nevertheless remains high. If realised, the forecast value of farm production in 2018–19 would be around 11 per cent higher than the average of $55 billion over the five years to 2016–17.
- The gross value of farm production is forecast to grow steadily over the outlook period to around $63 billion by 2022–23 (in 2017–18 dollars). Strong demand for livestock and some horticultural products, and improved productivity in cropping, are expected to support growth.
- The gross value of livestock production is forecast to increase by around 3 per cent to $29.6 billion in 2018–19, following a forecast increase of 2 per cent in 2017–18.
- The value of lamb, wool and dairy production is forecast to contribute strongly to growth in the value of livestock production in 2018–19 (as in 2017–18), driven by strong export demand (particularly from China).
- The value of beef and veal production is forecast to fall slightly, as a decline in export prices offsets an increase in the volume of beef produced. Despite the fall in price, returns are well above the historical average and supportive of farm profitability.
- The gross value of crop production is forecast to increase by 3 per cent to $31 billion in 2018–19, after a forecast decline of 11 per cent in 2017–18.
- The decline in 2017–18 follows record production of wheat, barley and canola in 2016–17 due to very favourable seasonal conditions during winter and spring.
- In 2018–19 the value of wheat, coarse grains and canola production is forecast to underpin growth in the value of total crop production. Wheat yields are assumed to improve (and to be around trend) following the frosts, above average temperatures and dry conditions during the winter of 2017. Area planted to coarse grains is forecast to increase due to strong global demand for feed and rotational constraints to planting pulses. Canola production is expected to increase as prices become comparatively favourable to the low coarse grain and falling pulse prices.
- Export earnings from farm commodities are forecast to be $48.5 billion in 2018–19, slightly higher than the forecast $47 billion in 2017–18.
- Export earnings for fisheries products are forecast to increase by 1 per cent in 2018–19 to $1.5 billion, after increasing by a forecast 5 per cent in 2017–18.
- In 2018–19 export earnings are forecast to rise for canola (22 per cent), cotton (17 per cent), barley (12 per cent), lamb (9 per cent), wool (7 per cent), wheat (6 per cent), rock lobster (4 per cent) and live feeder/slaughter cattle (1 per cent).
- Forecast higher prices are a strong contributor to growth in export earnings. In Australian dollar terms, export prices of cotton (11 per cent), wheat (9 per cent), wool (4 per cent), barley (4 per cent), mutton (4 per cent), rock lobster (3 per cent), lamb (2 per cent) and cheese (1 per cent) are forecast to increase in 2018–19.