18 September, 2020
Agriculture's crop-led recovery on track
Agriculture's crop-led recovery from drought remains on track, but still falling prices and global economic uncertainty from Covid-19 could temper earnings.
That’s according to ABARES’ September Agriculture Commodities report released this week, which says the gross value of production will stay unchanged at $61 billion despite a significant rebound in crop production.
ABARES Executive Director, Dr Steve Hatfield-Dodds, said agriculture was poised for a recovery following three years of drought and would see out falling prices and a pandemic-induced 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,” Dr Hatfield-Dodds said.
“However, while crop volumes will grow strongly, they will be offset by an initial hit to earnings brought about by strong global supply and COVID-19 induced lower prices."
Dr Hatfield-Dodds said the rebuilding of herds and flocks would also gather pace and the value of livestock production was set to fall by 14 per cent to $28.9 billion.
He said these developments would hit agricultural exports significantly.
“The combination of falling commodity prices, reduced livestock product exports and grain stock rebuilding are expected to shave 10 per cent off the value of agricultural exports,” Dr Hatfield-Dodds said.
“Yet agriculture will be far less disrupted than other sectors of the economy.
“People still need to eat even if the economic downturn means they have to cut spending in other areas,” Dr Hatfield-Dodds said.
Dr Hatfield-Dodds also said Covid-19 related travel restrictions and manufacturing facility closures would not result in meaningful reductions to the nation's total agricultural production.
“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 like airfreight,” Dr Hatfield-Dodds said.
Dr Hatfield-Dodds said the appreciating Australian dollar and the supply of casual and contract labour for the horticulture sector was a watchpoint.
He added that forecasters were cognisant the outlook could change dramatically due to the extreme uncertainty of the Covid-19 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,” Dr Hatfield-Dodds said.