Pressure on farm incomes

By Country News

The gross value of Australian farm production is forecast to decrease by three per cent to $58billion in 2018-19, but drought-affected regions including northern Victoria are expected to take an even bigger hit.

ABARES executive director Steve Hatfield-Dodds said while drought was forecast to affect the production of some commodities — especially crops — increases in farm gate prices and strong production in Western Australia were providing a buffer to the national outlook.

‘‘The annual value of crop production is forecast to decline by seven per cent to $29billion in 2018-19, driven by a 23 per cent fall in winter crop production nationally, as a result of the drought in cropping regions in NSW, Queensland and Victoria,’’ Dr Hatfield-Dodds said.

‘‘On the other hand, the value of livestock and livestock products is forecast to increase by two per cent to almost $30billion.

‘‘Droughts tend to increase meat production, but high prices for lamb and wool are also forecast to support the value of production.

‘‘The high cost of feed is a significant challenge for producers in drought-affected regions and is resulting in higher-than-average cattle turn-off across eastern Australia.’’

Lower production from winter crops and higher input costs, particularly for fodder and feed-grains, are putting substantial downward pressure on farm incomes in drought-affected regions.

High prices for irrigation water in the Murray-Darling Basin are also affecting farm profitability in the irrigation sector, particularly in the case of dairy producers who are reliant on fodder and irrigation water for production.

‘‘For many producers, the increased costs will not be offset by higher forecast milk prices. Cow culling has increased and is likely to remain high as producers look to turn off less productive animals,’’ the report said.

‘‘The Australian herd is forecast to fall by three per cent and milk production by four per cent in 2018-19.

‘‘If realised, this would be the lowest level of production in over 20 years.’’

Rainfall for the first nine months of 2018 was the second lowest for the Murray-Darling Basin, third lowest for NSW and eighth lowest for Victoria since 1900 including the second driest September on record for Victoria.

The most significant reductions in crop prospects are in NSW and Victoria, where frosts and lack of rain damaged crops prior to harvest with production in NSW expected to be the lowest in 24 years.

The poor seasonal conditions will affect overseas markets with export earnings for agricultural commodities forecast to decline by seven per cent to $45billion.

‘‘This is largely the result of lower production due to poor seasonal conditions and increased domestic consumption of coarse grains and wheat for feed,’’ Dr Hatfield-Dodds said.