(Bloomberg) --
A year of bumper harvests has supercharged Australian farming, but the outlook for next season is less stellar with output value shrinking on lower prices and reduced volumes of crops and livestock.
The overall value of farm production is forecast to contract 4% to A$63.3 billion ($49 billion) in 2021-22, according to a report from government forecaster Abares. While that figure is expected to stay above A$60 billion over the next five years, the sector faces challenges -- including pressure on red meat prices as China rebuilds its hog herds and a highly variable climate.
“Shifting trade, along with macroeconomic and production uncertainties, will provide the backdrop for what we expect to be a more difficult environment in which to grow production and trade value,” Abares' acting Executive Director Jared Greenville said in a statement. Wine, beef and barley exports are among products hit by a raft of trade curbs amid rising political tensions with China.
The sector remained fairly resilient to Covid disruption last season, Greenville said, with production value rising 8% from a year earlier to A$66 billion, thanks to plentiful rains which boosted the winter crop to the second largest on record. While upcoming crops are set to benefit from residual soil moisture and improved water availability across the country, the overall 2021-22 harvest is unlikely to match the records set last season, the report noted.
Still, exports are expected to climb 6% in 2021-22, the first increase in four years, helped by increased demand for cotton, wool and dairy products.
Other highlights from the report:
- Close to average rainfall is expected for March to May across northern Australia and parts of eastern, western and southern Australia, which is likely to support average pasture growth and summer crop production
- Conditions for agriculture in Australia over the medium term are most likely to be adequate but not highly favorable, with an added likelihood of at least one dry year over the next five years
- Most climate models predict a neutral year in 2021–22
- Australian wheat production is forecast to fall to around 25 million tons in 2021–22, reflecting a return to more average yields, from a record 33.3 million tons a year earlier
- The total volume of agricultural production is not expected to increase over the medium term. The volume, while variable year-to-year, has been fairly stable over the decade to 2020–21
©2021 Bloomberg L.P.
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