Prices ease drought pain
ABARES predicts farm value to dip to $58B
STRONG commodity prices are cushioning the impact of drought and other natural disasters that are forecast to wipe 4 per cent off the value of Australian farm production in 2018-2019.
This is despite the overall volume of farm production declining by 6 per cent, and crop production down by 11 per cent, according to the latest agricultural commodities outlook released this week by the Australian Bureau of Agricultural and Resource Economics.
ABARES expects the value of farm production to dip to $58 billion this year, with drought in the eastern states and a significantly reduced winter crop in 2018-2019 behind the fall.
While livestock production is expected to decline by 2 per cent this year, strong export demand for wool and sheep meat is contributing to a small overall rise in the prices forecast this year for livestock and livestock products.
ABARES points to a cessation in live sheep exports in the northern hemisphere summer months and floods in north
Queensland as two factors behind a forecast fall in livestock production, along with drought-affected wool and milk production.
This year’s forecasts paint a picture of a fundamentally strong sector, if only it would rain.
Farm incomes have plummeted in drought-ravaged regions, while strong prices and strong cash incomes outside the drought zones are helping buffer the real impact of drought in the overall figures.
According to ABARES, farm profitability is expected to be lower in 2018-19 compared with the previous two years, due to the effects of drought in south eastern Australia on production and costs.
But it said farm incomes were still expected to remain comparatively high overall, and still well above the 10-year average in real terms.
“This is because generally favourable prices received for most commodities and a lower Australian dollar are boosting export returns,” the commodities outlook said.
“Average to above average production outside drought-affected regions is also supporting farm incomes at the national level.”
In 2018-19 grain prices are expected to increase by 11 per cent on average and contribute to a 3 per cent rise in farm gate prices.
The average farm cash income for all broadacre farms is projected to fall by 18 per cent, from $201,300 per farm in 2017-18 to $173,000 per farm this year – still well above the 10-year average of $140,000.
Cash incomes are lower for about 50 per cent of broadacre producers, largely those in Queensland, NSW, Victoria and South Australia, because of the drought.