Change and challenges ahead but our industry remains robust

Booming production, healthy rainfall and sugar on the table courtesy of the Australian Government’s instant asset write off scheme were all factors in record-breaking years for our industry.

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The question was always about how long it could be sustained.

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And while most of the various agriculture sectors are cyclical in terms of output and price, domestic and international factors – not to mention ideal growing conditions in many parts of the country – helped boost production to previously unforeseen levels.

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It led to peak bodies like the National Farmers Federation (NFF) back its 2030 Roadmap, conceived in 2018, which stated the ag industry would “…exceed $100 billion in farm gate output by 2030.”

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With output across 2021-22 exceeding AUD $90 billion, one could be forgiven for thinking the NFF was conservative with its estimate.

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Fast forward to late 2023 and while external factors and the climate are conspiring to flatten the record-breaking curve, the underlying structural footings of our industry are sound.

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Furthermore, the concerns around El Ni?o bringing dryer conditions to Australia’s east and west could well be turned around sooner than originally thought. Welcome rain in November in key farming regions added buoyancy to summer planting.

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When we examine industry data, the numbers are more than solid.

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Take winter’s crop planting – only slightly below the 10-year average – while the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) has this to say about summer crops:

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“It is also expected that summer crop plantings will fall from last year but remain above average, due to lower rainfall forecast for spring and summer being buffered by high levels of water storages.” Dr Jared Greenville

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Tractor market slowing but grass machinery sales healthy

While the tractor market across the country has slowed in year-on-year comparisons, the likely scenario is a return to pre-record unit sales.

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In other words, the market can viewed as ‘average’, with all manufacturers and distributors preparing to roll up the sleeves and work harder to meet customer preferences.

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In the short to medium term it is unlikely tax incentives such as the IAWO will return in the form and scale that typified the government’s response during the pandemic.

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Interestingly, when we turn our attention to the baler and out-front mower markets, there is definite growth compared to 2022, with rainfall delivering a confidence boost for the grass season ahead.

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While last year’s spring floods impacted the season, pleasingly the first week of October this year delivered much-needed rainfall across Victoria, New South Wales and southern Western Australia.

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Primary water storage facilities remain at healthy levels.

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Pricing – a mixed bag

The Department of Agriculture, Fisheries and Forestry (DAFF) recently updated its forecast for a reduction in domestic agriculture production while simultaneously forecasting an increase in global production.

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This will likely result in market prices softening in many of the major segments.

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Confidence remains strong, however, in key markets including grains, barley, hay, lucerne and sugar cane, all outperforming YTD 2022 numbers.

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The respective price positions of beef and lamb are causing concern, no doubt, with added pressure on the live export industry.

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Industry experts are now suggesting – and expecting – an upward correction in the coming six-to-nine months, with a return to a more normalised price position.

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While above average temperatures are forecast for this quarter, in addition to below average rainfall in some regions, there are positive trends in several critical areas, including the chemical market where pricing has now returned to pre-pandemic levels.

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A correction in production, in addition to the supply chain through shipping and logistics charges, is supporting the normalisation throughout the market.

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Price relief for fertiliser arrived late in the buying period for the 2023-24 season in Australia, but this improved affordability will positively impact demand and application rates for the next season.

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State of play

Despite a plateauing in local demand for new or replacement tractors and machinery, the industry overall is placed to deliver the third-highest production output ever.

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The market is also substantially different today, especially overseas demand, and after a year or two of stabilisation it is expected to continue to grow. Australia is increasingly viewed as the ‘food basket’ of Asia.

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Along with significant increases in output, there is also greater diversity in our agriculture now, as the graph from the Department of Agriculture, Fisheries and Forestry illustrates.

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It shows adaptability, in that newcomers to the industry, or even established players, can and do alter their farming applications to suit conditions, trends, policy and consumer tastes.

A perfect example of the rude health the industry finds itself in would be a comparison of crop exports from 2016 onwards.

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As demonstrated below, export crop value is expected to fall in 2024 but remain significantly higher than previous years. Compared to 2020, the anticipated value of crop exports next year is some 72 per cent higher, a remarkable figure.

Final thoughts

It is my belief that despite somewhat pessimistic sentiment in some quarters, especially regarding the potential impact of El Ni?o, the infrastructural foundations, adaptability and cleverness of our industry mean we are well placed to confront most challenges.

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Yes, some correction is in order.

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But if this means we return to average years in certain regions and certain sectors, then so be it. Demand for our produce continues to grow, likewise the diversity of our export markets.