Wednesday, February 1, 2023
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Like water off an Aussie farmer’s back

Rural and regional Australia continues to show its resilience as the echoes from the third La Niña in a row spread through agriculture along parts of the East Coast and South Australia.

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On the bald figures alone it could be a case of what rain and floods? with the value of farm output forecast to hit a near record $85 billion this financial year.

Record West Australian and South Australian winter crops are making up for the record rain and flood damage along the East Coast and inland to help drive a near record performance.

As a result, record harvests and exports of rural products, wheat and canola are expected while barley will be close output and shipments are expected to be near all-time highs.

What this means for rural skewing companies like Elders, GrainCorp, United Malt, Australian Agricultural Co and Treasury Wine Estates is hard to quantify at this stage – all four did well in 2021-22 with solid revenue and earnings gains reported.

But on the face of while share prices will not surge, returns will probably be solid for another year.

But there are cost pressures growing – fertiliser and energy prices, labour shortages and costs and the fears of recession next year which could impact demand for some products in some markets. Diesel fuel costs are also higher as well as the wheat, barley and canola harvests get underway.

And as we heard yesterday, interest rates are rising as the Reserve Bank lifts interest rates for an 8th time.

But there is a silver lining in that for many farmers who hold billions of dollars in farm management deposit accounts which allow farmers to put some of their pre-tax income in times of plenty into special accounts that pay high rates of interest.

China’s continued easing of Covid restrictions could also be a positive, especially if China goes on to end the illegal tariffs and bans on imports of Australian wine, barley and meat (not to mention coal).

Winter crops, led by wheat, are forecast to generate the second-largest volume on record at 62 million tonnes and, combined with strong prices, will push agricultural exports to a record $72 billion in 2022-23, up from the previous estimate of $70 billion, according to the ABAREs, the government’s rural commodities forecaster.

Meat, barley, canola, wine and horticultural exports are all forecast to do well.

The value of rural exports has been running at $5 billion or more a month since late 2021 and topped a record $7 billion in September, according to the trade reports from the Australian Bureau of Statistics.

Wheat production is forecast at a record 36.6 million tonnes with 13.4 million tonnes of barley and 7.3 million tonnes of canola from the winter-crop harvest now under way, according to estimates released from, ABARES in its quarterly Australian Crop and Agricultural Commodities and Winter Crop reports.

The wheat figure is up 14% from the previous estimate released in September of 32.2 million tonnes, and will break the national production record set in 2021-22 of 36.3 million tonnes.

The four million extra tonnes will help make a contribution to the shortfall in Black Sea wheat harvests and exports caused by the Russian invasion of Ukraine.

The canola estimate is up 11% from 6.6 million forecast in September, and also breaks last year’s record of 6.8 million tonnes

Barley is up 10% on the previous estimate of 12.3 million tonnes and is heading for the fourth-largest crop on record for barley. But barley plantings are lower than last year while wheat and canola acreage is up. (That’s good news for beer makers here and offshore, especially craft beer companies).

ABARES’ December quarter Agricultural Commodities Report pointed out that Australian agriculture is still on track for an outstanding 12 months, despite the impact of the floods in the eastern states.

“The gross value of agricultural production is forecast to be a near-record $85 billion in 2022-23, just shy of the record set the previous year,” ABARES executive director Jared Greenville said in the release.

“The winter crop is forecast to be the second largest on record at over 62Mt.”

Dr Greenville said livestock production was expected to hold steady, contributing $34B to the national total.

“Another bumper year combined with high commodity prices means Australia’s agricultural exports are forecast to break records at over $72B in 2022-23.”

Dr Greenville said while spring rain has impacted production, yields and quality in some parts of the country, some states are experiencing their best winter crops on record.

“Crops in Western Australia and South Australia benefitted the most from spring conditions, with total production in both states forecast to reach new record levels.

“Total production in Queensland is forecast to reach the second highest on record, despite parts of the Darling Downs missing out on plantings after being impacted by the floods.

“In other parts of the country, the results are mixed with both flooding and waterlogging impacting winter-crop production.”

ABARES data shows a record amount of crops planted in Victoria this year.

“At the state level, high yields in the Mallee and the Wimmera will offset crop losses in central and northern border regions.

“However, the full picture of damage to crops from extensive waterlogging remains an unknown.

Total production for NSW has been cut by 2 million tonnes since the September crop report as the record spring rains and floods came followed above-average rain in August.

“Unfortunately, NSW has borne the brunt of the damage from the spring rains and subsequent floods.

“Considerable uncertainty remains over winter-crop harvest progress and grain quality in NSW and Victoria given ongoing high rainfall, which could lead to downgrades in production value.

“Harvests in Victoria and NSW are likely to run well into summer.”

The gross value of crop production is forecast to remain at near record levels in 2022–23 at almost $51 billion, driven mainly by forecast near-record crop production and high prices for grains and oilseeds.

The gross values of wheat and barley production are forecast to reach record highs, both surpassing the previous record levels reached in 2021-22, while the gross value of canola production is forecast to be the second highest on record in 2022-23.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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