Article Summary: Australia’s farming sector grew to over AUD 90 billion in 2022, breaking records for the third consecutive year. This is despite once-in-a-lifetime events like a global pandemic, catastrophic floods on the Eastern seaboard and a tightening climate change agenda. ABARES, the commodity forecaster, has warned this run of high numbers is unlikely to continue, although the future is still bright for Australian farming. A recent report from ANZ bank echoes the same. This article covers the key data and determining factors that have driven the boom, including good growing conditions and high commodity prices, and what it means for you, the farmer.
Australian farmers had a record year in 2022, producing $90 billion worth of food and fibre, with average yearly farm incomes ranging from $370,000 to $665,000, depending on the sector. This marks the third year in a row that Australian farm production has broken records. Wet growing conditions and high prices for a range of commodities drove this.
According to a recent report from the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES), farm exports are expected to soar to $75 billion this financial year - another first. The report also reveals that Australia's winter crop production has broken new ground, with an increase of 4 million tonnes on the previous record set last year.
What else did the ABARES report reveal about the state of agriculture in Australia?
Over 2022-23, 67.3 million tonnes of winter crops were harvested, with record production in Victoria, South Australia, and Western Australia. Western Australia produced 25.6 million tonnes, 61% higher than the 10-year average and 9% higher than the previous record of 23.4 million tonnes in 2021-22.
ABARES warns the sector not to expect the run of good years to continue, as three good seasons have only happened twice in the past - once in the 1990s and once in the 1970s. However, the sector's value will depend on pricing, and international markets will be crucial.
ABARES now expects the value of Australia's farm sector to fall to $81 billion and farm exports to $64 billion in 2023-24. Despite this, the latest report from ABARES shows high farm incomes for the 2022-23 year, with the average cropping farm income soaring to more than $660,000. The average farm income for dairy farmers also reached new heights in 2022-23 at $390,000, but it fell slightly for broadacre farmers. The average broadacre farmer would have earned over $371,000, about 7% down from last year but still around 46% above the 10-year average.
The fall in broadacre incomes could be attributed to rising farming costs, such as fertiliser prices that are two-and-a-half times the average, squeezing profit margins. However, the industry is still experiencing relatively high prices and high production, which has helped to offset and balance that issue.
There have been some setbacks, such as flooding that wiped out about 8% of the cropping area in New South Wales and 3% in Victoria. Fortunately, other states, plus Victoria, offset that, with strong results in Wimmera and the Mallee.
Experts have also acknowledged the impact of worker shortages that have long plagued farmers. On a positive note, the recent large expansion of the Pacific Worker's Scheme has eased some of that pressure.
ABARES notes that over 50% of horticultural firms have experienced increased difficulties in finding labour, but the reorganisation of the supply lines, as well as the good conditions, has meant there is just more volume available.
ANZ Market Intelligence Report echoes latest findings
Major Australian bank ANZ recently released a report called Greener Pastures 2, which compares the last ten years of Australian agriculture with the predictions made in their original Greener Pastures (GP1) report. The report provides a detailed analysis of the factors that have contributed to the growth of Australian agriculture over the past decade and predicts the factors that will influence its future growth.
According to the report, Australian agriculture has experienced more growth than predicted in their GP1 report, with a period of strong results that has placed the sector in a more competitive position globally. This growth has been driven by high prices for most agricultural commodities, with good production seasons and constant efficiency, resilience, innovation, and technology improvements.
One clear trend over the last decade was the surge in demand for meat, which overtook grain as the highest gross value product (GVP) in Australian agriculture. This was driven by rising exports, higher-than-forecast prices, and an increase in the consumption of meat and dairy products, particularly in Asia.
The GP1 report predicted that Australian agricultural exports would rise to between $33 billion and $80 billion over the decade. However, the actual figure was $111.5 billion, driven by China's rapid increase in importing Australian beef in the middle of the decade.
Despite concerns at the start of the decade that attracting investment to Australian agriculture may be challenging, the report notes that the sector has proven to be a compelling investment case for existing participants and external investors. Over the decade, the eventual investment of $212 billion in agricultural production exceeded the original forecast.
Another key trend over the last decade has been the capacity of Australian farmers to reinvest in their own sector. Many family farms emerged stronger than ever and are now in a robust financial and agronomic position, developing more innovative and efficient multi-generational farming operations and enabling them to make long-term strategic decisions.
Labour shortages were also a concern at the start of the decade, with estimates of a shortage of 100,000 workers. However, advancements in agricultural technology have seen a reduction in labour requirements in the major agricultural sectors, allowing for ongoing growth.
The report also notes that Australia's cost of production for most major agricultural products has decreased and is now among the best in the developed world because of advancements in technology. However, the nation remains a relatively high-cost producer of wheat.
Overall, the report agrees with the ABARES finding and predicts continued growth for Australian agriculture, with the sector well-positioned to capture opportunities and remain globally competitive.
But what does this mean for me?
Australian agriculture has experienced significant growth and success over the past decade, with rising demand for meat and dairy products driving higher-than-expected agricultural exports. ANZ's Greener Pastures 2 report highlights the benefits of constant improvements in structural efficiency, resilience, innovation, and technology, while also noting that Australian agriculture has proven to be a compelling investment case for both existing participants and external investors.
According to the ABARES report, Australian farmers can expect sustained growth in the coming years, but you will also need to manage risks associated with climate change, volatile commodity prices, and changing consumer preferences. To ensure your farm's future success, you must make plans to adopt innovative technologies and practices, diversify your income streams, and focus on sustainability and resilience. With careful planning and adaptation, Australia's farmers like you can continue to thrive and contribute to the country's economic growth for generations to come.
Until we meet again, Happy Farming!
- The Dedicated Team of Pasture.io, 2023-03-16