For the second time in a week the thirsty seasonal outlook has tarnished the news from commodity forecaster, the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES).
The gross value of Australian farm production is set to fall almost nine per cent to $58 billion this financial year, primarily because of a slump in crop production expectations.
Farm export earnings are also sliding from the highs of last year, likely to be 7pc lower at about $45b in 2017–18.
Although the value of total livestock production is expected to increase marginally as more cattle hit the market and sheepmeat prices lift, ABARES’ latest quarterly commodities report shows the withering national crop will take a big toll.
ANZ Banking Group also identified spring and summer rainfall – or lack of it, so far – as one of several key challenges shaping its ag sector expectations.
ANZ’s agribusiness head, Mark Bennett, said global market competition remained annoyingly strong, particularly Russia’s strength in the global grain trade and growing beef supplies on international markets from Brazil and the US.
The continuing strength of the Australian dollar also provides a tough sell for soft commodity exporters in crowded markets
“The continuing strength of the Australian dollar also provides a tough sell for soft commodity exporters in crowded markets,” he said reviewing the bank’s bi-monthly commodity insights research.
However, for sheep producers, the industry remained strong thanks to increasing wool and sheepmeat prices, while the domestic cattle herd continued its rebuild, although dry weather could slow this trend.
Importantly, growing international demand, new capital flows into agribusiness supply chains and productivity and output gains from agricultural technology were creating new trade and development opportunities “across all major Australian agri commodities”, Mr Bennett said.
ABARES chief commodity analyst, Peter Gooday said the fall in the total value of farm production was primarily driven by a forecast 39pc fall in total winter crop production compared to the record highs achieved last year.
He said agriculture’s outlook for 2017-18 had been affected by “mixed seasonal conditions”.
Last week ABARES highlighted the extent of those deteriorating conditions in the grain belt, noting wheat production was likely to slump 38pc to 21.6m tonnes, barley by 40pc to 8m tonnes and canola down a third to 2.8m tonnes.
The sober outlook for canola and wheat suggested harvest volumes would be at seven- to nine-year lows.
Mr Gooday said while this year’s harvest may still be near the 10-year average for winter crops prior to 2015–16, there was substantial variation in crop prospects across the country.
The drying seasonal picture would also drive cattle slaughter numbers to rise after two years of declining turn-off.
However, prices were expected to fall as domestic supply increased and Australia faced increased competition in export markets.
“Sheep and lamb prices are forecast to rise, supported by restocker demand, and lamb slaughter is forecast to increase.”
The forecast decline in farm exports has been largely caused by a 16pc fall in predicted export crop earnings to $23b
However earnings from livestock and livestock product exports are set to rise 4pc to $22b.
Mr Gooday said income growth in Australia’s major export markets was supporting demand for our meat, wool and dairy products.
In Australian dollar terms, export prices of barley, cheese, lamb, wheat, wine and wool should increase in 2017–18 according to ABARES.
But beef and veal, canola, chickpeas, cotton, live feeder/slaughter cattle, sugar and rock lobster export values were all forecast to fall.
Total export earnings for fisheries are forecast to remain unchanged at around $1.4b.