Economists Predict a Bumper Year for Australian Agriculture

Rural Bank has forecast a solid year for Australian agriculture including strengthening cattle prices, farm gate milk values and an increasing average prices for lamb and mutton.

Despite the trying conditions of 2018, Rural Bank’s recently released Australian Agriculture Outlook indicated that strong global demand for Australian produce is likely to offset declining supply levels across many commodities. 

Widespread de-stocking of cattle properties together with an increase in slaughter rates has tightened supply for the market which, in conjunction with strong ongoing demand, lead to price increases in 2018. Supply has weakened into 2019, while producers wait for an improvement in seasonal conditions. Increasing global demand and a new trade advantage with Japan will see Australian prices continue to rise.

An increase to global wheat prices in 2018 was reflected in domestic terms, further fuelled by a significantly restricted national wheat yield. While rainfall will encourage many growers to switch from buying in feed grains, the demand on the east coast will continue to prop up domestic demand pressure. Barley values increased with the price of wheat (45% year-on-year), but China’s anti-dumping investigation makes it impossible to predict performance in 2019 given the country acquired 75% of Australia’s barley exports in the 12 months to October 2018.

The supply of Australian milk tightened in 2018, given the day season and increasing input prices. As this trend continues into 2019, a price increase is likely given more consistent export demand, particularly from China. Rural Bank predicts that farm gate milk prices should rise to $6.10/kg MS this financial year, possibly higher if supply fails to grow.

The 2018 Australian vegetable export value is expected to be around $281.5 million, a 13& increase on the previous year. Singapore and Saudi Arabia have significantly increased their demand of Australian produce, with broccoli, cauliflower, carrots, tomatoes, potatoes and onions being among the star performers. The report predicts 5% growth in global export values in 2019, however if our emerging market partners continue to demand more, this figure could further increase.

Strong domestic and export demand for Australian fruit will have a positive impact in 2019. Australian exports are expected to achieve a seven percent increase in 2018, compared with the previous year. Demand from China and Hong Kong continues to drive the volume and price of exported fruit, particularly citrus, stone fruit and cherries.

Stronger prices in 2018 has lead to an estimated 10% increase (year-on-year) in the value of exported nuts, with an estimate of $813.5 million for 2018, with a further 5% increase predicted for 2019. Chinese demand for Australian Almonds drove prices up by 205% in 2018, but the almond milk market shows significant promise as the fastest growing product in the no-dairy milk market.

Continued demand for lamb and mutton helped the industry weather drought conditions with lamb prices averaging higher for a sixth consecutive year, and mutton prices averaging higher for a fifth consecutive year. In 2019, supply will be largely driven by rainfall, while demand will remain strong with the US, Middle East and, in particular, China all eager to secure Australian lamb. Lamb prices are expected to float above 700c/kg for lamb, but mutton will see greater growth at 500c/kg.

2018 saw growers act conservatively with herd numbers, with a declining national flock helping to strengthen already strong wool prices. Demand is also up with the value of wool exports increasing by 22% in 2017/2018 ($3.9 billion), exclusively due to higher prices. While this level of demand is likely to continue, the US China trade argument, Brexit and the global economy could all influence future long term consumption of Australian wool. 

Sources: Rural Bank
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