Agricultural production forecast to drop to $59 billion

Drought continues to bite farm incomes as production, export values dip, according to the latest ABARES forecast.

AUSTRALIA’s agricultural production value is tipped to just scrape over the $59 billion mark this financial year, as ongoing drought sees farm incomes plunge.

And the value of agricultural exports will also drop 11 per cent, down to $43 billion for 2019-20 from the previous year’s $48 billion.

The anticipated slide – forecast in Australian Bureau of Agricultural and Resource Economics and Sciences commodity outlook, released today – comes as the sector braces for more uncertainty due to the spread of coronavirus.

But ABARES chief commodity analyst Peter Gooday said the forecast was “surprisingly good” considering the ongoing challenges agriculture had faced including drought, bushfires and the US-China trade war.

“The value of production has held up well, but it is coming down,” Mr Gooday said.

“If we get a return to better seasonal conditions next year, things like crops will respond pretty quickly.”

Agricultural production value is predicted to reach $59 billion for 2019-20 – down from $62 billion the previous year – before climbing back to $64 billion in 2022-23.

That recovery will hinge on crop production: winter crop production in 2019-2020 is forecast to be almost half the record levels of three years ago, but could creep back toward those heights by 2024-25 if conditions improve.

Historically-high livestock prices will continue in the short-term, driven by demand from Chinese consumers looking for other types of protein after African swine fever decimated pig populations.

“Without those good prices, this year would look a lot worse,” Mr Gooday said.

In terms of farm income, it’s a tale of two Australias: NSW farmers struggling through drought will see farm cash incomes close to zero, while in Victoria some will experience their highest incomes in 20 years.

Mr Gooday said Victoria’s results correlated closely to winter cropping success.

“This drought hasn’t been as widespread as some of the others, it hasn’t been the entire country all at once, which has made the difference to aggregate value,” he said.

The average broadacre farm income will drop 8 per cent, from $165,700 in 2018-19 to $153,000; 31 per cent will report negative farm incomes, up on the 26 per cent last year and 15 per cent in 2017-18.

Dairy farms, however, could have some good news, with average incomes expected to jump from $120,100 to $165,000, with the higher farmgate milk price resulting in higher incomes for 73 per cent of farmers.

The 2019-20 bushfire crisis will not have a significant impact of agriculture as a whole – save for wine grape production, which is estimated at just 1.4 million tonnes this year, the smallest harvest since 2014.

The great unknown is coronavirus, which has already “greatly impacted” some high-end sectors such as wine and seafood, as consumers in China and beyond bunker down to avoid the contagion.

Mr Gooday said ABARES assumed the impact would be short-term, though there was uncertainty over how long the virus spread would last and how it might affect other sectors.

“A lot of our exports are concentrated in the region most-affected, about two-thirds go to developing Asian countries and that’s the centre of the outbreak,” he said.