Agriculture’s crop-led recovery from drought remains on track but falling prices and global economic uncertainty from COVID-19 is forecast to temper earnings, the Australian Bureau of Agricultural and Resource Economics (ABARES) said in a statement.
ABARES’ September Agriculture Commodities report forecast the gross value of production to stay unchanged at $61 billion despite a significant rebound in crop production.
ABARES executive director Dr Steve Hatfield-Dodds said agriculture is set up for a recovery after three years of drought-affected production and is in a solid position to see out falling prices and a pandemic-induced economic downturn.
“The value of crop production is forecast to increase by 17 per cent to over $32 billion on the back of much improved seasonal conditions, particularly in New South Wales,” he said.
While crop production volumes are forecast to grow strongly, they will be offset by a hit to earnings brought about by strong global supply and COVID-19 induced lower prices.
“The rebuilding of herds and flocks will also begin to hit overall production with the value of livestock production forecast to fall by 14 per cent to $28.9 billion,” Hatfield-Dodds said.
These developments will hit the sector’s exports significantly, with falling commodity prices, reduced livestock product exports and grain stock rebuilding expected to shave 10 per cent off the value of agricultural exports, which are forecast to fall to $43.5 billion in 2020–21.
Hatfield-Dodds said that agriculture appeared to be far less disrupted than other sectors of the economy, although there were some watchpoints.
“People still need to eat even if the economic downturn means they have to cut spending in other areas,” he said, adding that COVID-19 pandemic-related travel restrictions and manufacturing facility closures were not expected to result in meaningful reductions in Australia’s total agricultural production.
According to Hatfield-Dodds, agricultural trade has also been less affected than other goods because shipping, the main mode of transport for agricultural trade, has been less disrupted than other forms of transport such as airfreight.
“The appreciating Australian dollar is a watchpoint as is the supply of casual and contract labour for the horticulture sector, particularly for the surge in the number of required workers for the summer harvest.”
Hatfield-Dodds warned that forecasters were cognisant that the outlook could change dramatically due to the extreme uncertainly associated with the pandemic.
“If a wave of new infections were to hit Australia and our major international markets in early 2021, this would result in consumer spending continuing to fall, rising unemployment, and greater disruptions to domestic and international supply chains,” he said.