Crops lead the way as agriculture recovers

Australia's crop production value is forecast to increase 17 per cent to more than $32 billion.
Australia's crop production value is forecast to increase 17 per cent to more than $32 billion.

A rebound in crop production after three years of drought-hit seasons is not expected to deliver bumper earnings across Australia's agricultural sector.

ABARES' September Agriculture Commodities report released on Tuesday forecasts the gross value of production to stay unchanged at $61 billion.

"The value of crop production is forecast to increase by 17 per cent to over $32 billion on the back of much improved seasonal conditions, particularly in New South Wales," ABARES executive director Dr Steve Hatfield-Dodds said.

"But while crop production volumes are forecast to grow strongly, they will be offset by a hit to earnings brought about by strong global supply and COVID-19 induced lower prices."

As well, the rebuilding of herds and flocks will hit overall production with the value of livestock production forecast to fall by 14 per cent to $28.9 billion.

"These developments will hit the sector's exports significantly, with falling commodity prices, reduced livestock product exports and grain stock rebuilding expected to shave 10 per cent off the value of agricultural exports, which are forecast to fall to $43.5 billion in 2020/21," Dr Hatfield-Dodds said.

Agricultural trade has been less affected than other goods because shipping has been less disrupted than other forms of transport.

The sector is closely watching the appreciating Australian dollar as well as a potential shortage of horticultural labour for the summer harvest.

If labour shortages reduce harvests, fresh produce prices would increase.

There is also the risk that a new wave of COVID-19 restrictions in Australia or in key overseas markets could impact on consumer spending and supply chains.

The ABARES report also noted trade tensions with China could add further risks to the outlook.

"Agricultural trade with China continues to be very strong despite these tensions. China has ranked as the highest value destination for Australian agricultural exports every month since February 2011."

Australian Associated Press