Australian agriculture faces ‘multi-year rebuilding’, says Rabobank



An “extremely difficult” year is shaping up for Australian agriculture with production likely to remain low and the sector facing the third consecutive contraction in exiting income, according to Rabobank’s Agribusiness Outlook 2020 report.

Although a strong rebuilding of national agricultural production is possible in 2020/21, the report says this is “less than likely” as most of the country’s agricultural sector continues to face low soil moisture and water storage, food shortages and localized impacts. bush fire.

After several bad seasons in many areas, “multi-year rebuilding” is now the most likely path for Australian agriculture.

There is some consolation for the industry, however, with Rabobank anticipating that current high prices for most agricultural commodities will continue for the coming year.

Difficult circumstances

Rabobank, Head of Food and Agri-Food Research and Lead Author of the Report, Tim hunt, said Australia‘s agricultural sector started the year under “extremely difficult circumstances” with much of the country still in the throes of a multi-year drought.

Tim hunt

“Many farmers have gotten into good shape in the current drought – after a long period of good seasons and prices have allowed them to build up equity reserves. However, after poor seasonal conditions over the past three years, the sector is in a difficult position heading into 2020, ”he said.

“2019 was marked by drought, fires and floods. It was the driest year on record, compounding the drought already experienced by eastern states in previous years. And, while recent rains in drought-stricken areas have brought some optimism, farmers will need continued rains to replenish soil moisture and break through the drought.

“Low soil moisture and food shortages are widespread, while the major water reservoirs in the southern Murray Darling Basin are at their lowest level in a decade. And the bushfires have also caused localized damage and disturbance. “

This had seen production volumes decline “pretty much across the board” for the 2019/20 growing season, with poor winter harvests, reduced cotton production, and a reduction in meat and dairy products in. due to the decrease in the number of herds.

High agricultural commodity prices helped offset this pain to some extent, with firm global markets, a weak Australian dollar and reduced local supply contributing to a near record year for producer prices.

That said, the 2019/20 season will see the third year in a row that producer revenues will contract.

Elusive production growth

The Rabobank Outlook indicates that the strong rebound in output growth is likely to remain elusive for Australian agriculture in the near term, hampered by weather conditions and physical constraints to replenishing supply.

“While the weather can change quickly, the equation is more difficult than usual,” Mr. Hunt said.

“Given the low level of soil moisture, farmers are likely to need above-average rainfall to achieve an average winter harvest, and current forecasts from the Bureau of Meteorology suggest that there is a lower likelihood of average precipitation over the next three months. .

“Physical constraints will also hamper the recovery. The ox herd and sheep herd will take years to rebuild from current lows, while filling major storage areas in the southern Murray Darling Basin will likely take several favorable seasons. “

Financial constraints will also have an impact, farmers will likely want to replenish their equity before investing to increase production once better seasonal conditions return.

Consolation prize

Rabobank says that while Australian agricultural production is likely to remain low in 2020/21, there will be some consolation for the sector with the forecast of continued high commodity prices.

“For the animal protein sector, Chinese imports will remain at high levels following the slaughter of cattle by China in response to African swine fever, with rebuilding their pig population expected to take several years, while the World markets for wool and dairy products remain strong. and the local market base (wheat price) will be supported by limited national grain production, ”Mr. Hunt said.

2020 things to watch out for

As 2020 promises to be a pivotal year for the global transition to tackling climate change, it will be important to rebuild a ‘robust and adaptive’ Australian agricultural industry after the drought.

“A number of factors accumulate to indicate that 2020 will see a significant transition in the global fight against climate change, which will create opportunities as well as threats to agriculture. It will be important for the Australian sector to rebuild after the drought to be strong and adaptable so that it can capitalize on these opportunities and mitigate the threats that lie ahead, ”Mr. Hunt said.

Other “watch factors” for the year include:

  • tensions with China, with the Chinese decision on its anti-dumping investigation on
  • Australian barley due by June
  • the impact of the phase 1 agreement between the United States and China on Australia
  • agricultural exports, especially almonds and cotton
  • the global economic impacts of the US presidential election and Brexit, and
  • the potential for improving trade agreements with the UK and the EU.


For specific products, the Rabobank report found:

  • Wheat – rain or no rain, an expected 4% year-on-year increase in world wheat prices, along with a depreciating currency, will support local wheat prices in 2020.
  • Grains and Oilseeds – there is always a “bear in there” for barley while canola is expected to shine thanks to favorable local and global factors.
  • Dairy products – the outlook for milk prices remains positive as the 2020/21 season approaches.
  • Beef – strong global demand and weak domestic supply to drive up prices.
  • Sheepmeat – Lamb prices are expected to weaken slightly in 2020, after hitting record highs in 2019, driven by limited supplies and strong demand.
  • Sugar – possibility of a smoother year for producers with improved prices and increased productivity forecasts.
  • Cotton – drought dominates the outlook for 2020, dampening export prospects for the year.
  • Wool – The eastern market indicator should end the season slightly lower from January levels.
  • Wine – Trade disputes and tariffs are expected to continue to disrupt global markets, creating opportunities for Australian exports.
  • Horticulture – demand for fresh produce remains strong, but local and global headwinds carry certain risks.

Source: Rabobank

Grain Central: Get our daily crop news for free straight to your inbox – Click here



Comments are closed.