Poor global grain prices and a seasonally-stressed national grain harvest will wipe five per cent off the gross value of Australia’s farm production this financial year, but farmers are still expected to reap historically solid average incomes in 2017-18.
National farm commodities forecaster, Agricultural Bureau of Resource Economics and Sciences (ABARES) is tipping farm production to be worth $59 billion in 2017-18, then to recover in 2018-19 to $61b, and $63b (in current dollar values) by 2022.
This year’s depressed result is largely because of an 11pc fall in the gross value of crops following a record winter harvest 12 months ago.
The smaller crop and lower grain values will also impact on farm export earnings – likely to be down 4pc to $47b this financial year, but recovering towards $50b by 2022–23.
The latest forecasts come as ABARES hosts this week’s annual Outlook conference in Canberra.
It says Australian farm production earnings and exports are effectively “returning to trend”, before likely delivering steady growth for the next five years.
Executive director, Dr Steve Hatfield-Dodds, said the gross value of farm production had risen 2pc annually in the past six years, boosted significantly by the big 2016-17 harvest.
Projections for the next five years were influenced by two key drivers – continuing high grain stocks overseas restraining prices and intensifying competition in Australia’s beef export markets
However, global demand for sheepmeat, wool and dairy commodities had also helped.
Fast growth in these sectors meant livestock’s contribution to the gross value of farm earnings lifted from 41pc to almost half in the past five years.
Farm incomes dip
Overall broadacre farm incomes will likely drop to an average $191,000 according to ABARES, because of less grain production in most regions and lower beef cattle prices.
That compares with $212,600 last financial year – the highest average farm cash income result in two decades.
However, incomes will keep rising for sheep producers, up more than a third in 12 months to average $170,000 per farm.
ABARES has also tipped the overall financial performance of Australian broadacre farms will stay high in historical terms.
The most obvious losers will be grain growers’ farm cash earnings, down from an average of $426,500/farm in 2016–17 to $266,000/farm this financial to about 5pc below the 10-year average (in real terms).
The beef industry will also see a average farm incomes drop from $150,600/farm to $132,000 in 2017–18, but that’s still about 60pc per cent above the 10-year average to 2016–17.
Beef market competition
Beef export prices are also forecast to remain high in historical terms, while crop price expectations less positive, although croppers incomes are likely to be bolstered by productivity improvements.
ABARES has pointed to significant re-investment of recent high farm sector returns into land, machinery and infrastructure as likely to help cropping efficiency.
Nationally, dairy farm cash income is forecast to rise from an average of $89,600/farm to $137,000, primarily driven by better prices and production in Victoria, South Australia and Tasmania.
ABARES’ Dr Hatfield-Dodds, said price projections for the next five years were influenced by two key drivers – continuing high grain stocks overseas restraining prices and intensifying competition in Australia’s beef export markets as the US beef cycle moved to a phase of increased production.
Shrinking grain crop
He said global crop production was trending down from the very high levels of 2016–17, but unless there were any shock production setbacks, prices would probably stay under pressure for five years.
“With this flat outlook for prices, growth in the value of agricultural production and exports will come mainly from increased volume, underpinned by rising demand as incomes and populations in importing countries grow,” he said.
The gross value of farm production was forecast to rise an average 1.2pc a year until 2022–23.