Rural Bank’s latest Australian Agriculture Outlook report says favourable seasonal conditions are expected to extend into 2022 with continued improvement in supply and demand.
The bank’s report follows the Australian Bureau of Agricultural and Resource Economics and Sciences forecast released last week predicting a record year for Australian farmers due to “unprecedented favourable conditions with prices the highest in 30 years.”
ABARES forecast Australia’s agricultural production will reach a record $78 billion in 2021/22, with the most valuable winter crop ever expected to increase to even $22.3 billion (US$15 billion).
Australia has had two consecutive years of above average rainfall, contributing “great strengths” to agriculture. This has allowed production volumes to grow for cropping and horticultural producers with 2021 winter crop production expect to outdo 2020’s record winter crop production.
Wetter conditions have also allowed livestock producers to rebuild the nation’s cattle herd and sheep flock following reductions in response to droughts.
Cattle, winter crops and horticulture are among the key beneficiaries with increased demand, supply as well as outlook.
Dairy prices are expected to go up with a 1 to 2 percent increase in production.
Lamb and mutton prices expected to drop from 2021’s record prices but the outlook for sheep farmers is positive. Fruit and nut prices will also likely decline following strong production.
However, horticultural productions may face challenges due to the labour shortages, but production is expected to grow, with ABARES forecasting production to rise to a record $12.4 billion in the 2021/22 period.
Rural Bank also said that they expect beef production to begin to recover in the first half of 2022, with a rise of 12 percent in production in 2022 due to more cattle reaching ideal slaughter weights. Cattle prices are also expected to remain above average for the first half of the year.
Meanwhile, wool growers enjoyed strong performance with the US importing 11.3 percent more woollen household goods than the equivalent period last year, while cotton imports into the US also rose to 34.4 percent.
The report also commented on how China and Australia’s relationship may affect trade conditions in the future.
“For some commodities, with improvement in Australia’s relationship with China yet to be seen. As such, commodities such as barley, red meat and horticulture will continue to operate with restrictive trade barriers to the valuable Chinese market.”
However, the report added, despite posing challenges, exporters have adapted to trade barriers by finding alternative markets as China largely faded into the background.
Supply chain disruptions came into greater attention in the second half of 2021. Both exports and imports of agricultural commodities and supplies have been affected by high freight rates, port shutdowns and delays, and availability of suitable containers.
“These challenges will persist throughout the first half of 2022; however farmers should remain relatively sheltered from any significant direct impacts,” the report said.
Rob Clayton, Managing Director of Nutrien Ag Solutions’ latest report released on Dec. 11 made similar statements to that of Rural Bank.
Clayton said that they “are optimistic about the prices growers will continue to receive for their commodities, particularly grain and livestock, and the incentive that remains for growers to plant big next year on the back of a strong seasonal outlook.”
However, he also added that the volatile supply chain brings uncertainty around the availability and the pricing of inputs. Therefore, farmers will be looking to make quick decisions about what they do for next season.