Exports tipped to fall as producers rebuild stock numbers

By Rodney Woods

Rural exports are expected to fall two per cent this financial year as farmers rebuild livestock numbers during the weakening drought.

The Federal Government's budget update, released last Thursday, gives an insight into the outlook for agriculture in 2020-21.

Increased rainfall is forecast to generate an above-average winter crop this financial year, but rural exports are still expected to fall.

That's because producers are gradually rebuilding livestock herds and flocks, which fell to historically low levels at the height of the crippling drought.

The two per cent drop in exports follows a 6.5 per cent fall in 2019-20 when the dry spell continued to weigh on crop and livestock production.

According to the Australian Bureau of Agricultural and Resource Economics and Sciences, gross value of farm production is forecast to increase by one per cent, despite the drought seemingly breaking this season.

The ABARES agricultural overview for the June quarter says the forecast increase is not higher due to falling prices.

“A global recession in the wake of COVID-19 is expected to result in reduced demand and lower world prices for many agricultural commodities in 2020-21,” the overview says.

“For Australia, this will be compounded by domestic grain prices falling back to export parity — and fodder crop prices falling — as the effects of drought subside.

“Price falls are expected in most grains, oilseeds, pulses, fibres, fodder and milk.

“Partially offsetting these falls are modest forecast price rises for red meat, due primarily to African swine fever-induced demand.

“The global pace of recovery from the pandemic is uncertain, and a prolonged slow recovery would result in prices lower than those forecast.”

While ABARES expects incomes to decline in 2020, the demand for Australian agricultural products is likely to remain steady.

“Global income per person is assumed to contract on average by four per cent in 2020,” ABARES’ economic overview says.

“This is a larger fall in incomes than occurred during the 2009 recession, when incomes fell by 1.6 per cent.

“Incomes are assumed to recover in 2021 by 4.7 per cent, in line with improved global economic conditions.

“The 2020 recession represents a significant shock to household incomes.

“However, overall demand for Australia's agricultural products is expected to remain relatively strong because food is an essential product.

“Demand for staple foods is less responsive to changes in incomes than demand for other goods, especially in the relatively high income countries that import Australia's agricultural exports.”