26 May Drought, Fire and a Global Pandemic: Australian Agriculture Well Placed to Weather the Storm
Despite widespread drought, bushfires and the COVID-19 pandemic, Australian agriculture is well positioned to weather the economic uncertainty, according to recently released data.
Excellent opening rains in many regions along with a positive outlook for the rest of the season are working in the favour of Australian grain growers and livestock producers. While grain growers in Western Australia are awaiting decent rains, 20 per cent of New South Wales has moved out of drought.
Factors working against producers include the impact of social distancing measures on the food service industry, and the flow on effect to producers supplying the sector. There are also concerns about labour shortages and how they might affect sectors which rely on a high volume of staffing to manage peak seasonal work loads.
The exchange rate has fallen out of favour for those who rely on international markets for inputs, but this could also benefit growers who sell offshore.
The latest hit to Australian agriculture was the 80% tariff imposed by the Chinese Government as punishment for allegedly selling barley at a price cheaper than Chinese domestic barley growers. While a decision was expected on the case this year, it’s widely believed that the tariffs have also been motivated by China’s disdain for Australia’s position on an international inquiry into the origin of Corona virus.
In addition to the tariffs, China also put a stop to imports from four Australian red meat avvatoirs on account of “technical infringements”.
National Australia Bank reported that fresh fruit and vegetable prices increased by 10 and 20 per cent respectively in March this year, but labour shortages posed a risk to the horticulture sector’s ability to fulfil key seasonal tasks.
Another challenge for the industry is Australia’s dwindling livestock numbers with the national sheep flock at its lowest level for more than 100 years. Recent rains will encourage many producers to start restocking and breeding, which is likely to keep prices steady for the rest of the year.
“We’re going to be producing less meat if we have a restocking phase,” said Phin Ziebell, an agribusiness economist with NAB.
“Because cattle will be held over [for breeding] that actually means lower production, but I don’t think it’s a negative for the industry.”
On the fibre front, the wool sector could be facing a storm of uncertainty. Almost 75% of Australia’s raw wool is sold to China, and around half that is consumed domestically. The balance is sold to Europe and the United States, markets which have been deeply affected by unemployment.
The Australian fashion industry is experiencing a massive drop in sales with 43% of retailers surveyed saying that they were not confident that they would rebound financially and 23% reporting that they were certain they would never financially recover.