Poor global grain markets, a small crop and lower beef prices are largely responsible for Australian broadacre farm cash earnings slipping to an average $191,000 this financial year, down from last year’s record $212,600.
However, that’s still the second best result on the books at the Australian Bureau of Agricultural Resource Economics and Sciences (ABARES), and 32pc higher than the current 10-year average for farm earnings.
Agriculture’s national Outlook 2018 conference in Canberra has revealed vast areas of NSW, South Australia, Western Australia Northern Territory and even droughty Queensland will earn up to 75pc more than average (per farm) this financial year.
“So, while overall income in most states is down on last financial year, farm performance is still very strong,” said ABARES chief commodity analyst, Peter Gooday.
The national farm commodities forecaster is also tipping good news for farm sector exporters in the form of a sinking Australian exchange rate against the US dollar, and generally solid international growth to support export demand.
The dollar is expected to average US78 cents for 2017-18, but drift back to US76c next financial year and then down to US74c by 2020.
World economic growth has gathered steam and is tipped to strengthen to 3.7pc for the next two years, principally because of 4.7pc growth in emerging economies where more Australian farm commodities are selling.
While overall income in most states is down on last financial year, farm performance is still very strong
Developing Asia’s share of Australia’s total farm exports has jumped from 52pc to 69pc in the past decade.
ABARES even profers US tax reforms in January could further fuel economic growth internationally in 2018 and 2019, as could low expansionary fiscal policies in some large economies.
However, its forecast may also be undermined by more protectionist trade trends, and Middle East and Korean peninsula tensions.
Back on the farm, the biggest winners have been in the sheep and wool sector where producers have had their best real term cash incomes in more than 20 years (up a third to average $170,000/farm), most notably in fine and superfine wool districts.
Buoyant wool and sheepmeat earnings also bolstered mixed farm returns where crops were savaged by last year’s moisture stressed conditions and moribund prices.
In general, however last season’s disappointing harvest will wipe 5pc off the gross value of Australia’s total farm production results this financial year.
ABARES tips farm production to be worth $59 billion.
It is expected to recover in 2018-19 to $61b, and keep rising to $63b (in current dollar values) by 2022.
Grain farmer cash earnings will drop from an average $426,500 in 2016–17 to $266,000 this financial, or about 5pc below the 10-year real term average.
The smaller crop and poor grain values will also contribute to a 4pc drop in farm export earnings to $47b this financial year, but still better than 2016-17’s $45b and also likely to bounce towards $50b by 2022–23.
ABARES says Australian farm production earnings and exports are effectively “returning to trend”, before likely delivering steady growth for the next five years.
Executive director, Dr Steve Hatfield-Dodds, said the gross value of farm production grew 2pc annually for the past six years, buoyed significantly by the whopper 2016-17 harvest.
Global demand for sheepmeat, lamb, wool and dairy commodities had also helped.
Fast export growth in these sectors meant livestock’s contribution to the gross value of farm earnings has lifted from 41pc to almost half in the past five years.
The beef industry will also see a average farm incomes drop from $150,600/farm to $132,000 in 2017–18, but that’s still about 60pc per cent above the 10-year average to 2016–17.
Beef export prices are also forecast to remain high in historical terms and support farm profitability
With this flat outlook for grain prices, growth in the value of agricultural production and exports will come mainly from increased volume, underpinned by rising demand as incomes and populations in importing countries grow
Nationally, dairy farm cash income is forecast to rebound from an average of $89,600 to $137,000 farm, largely because of better prices and production in Victoria, South Australia and Tasmania.
ABARES’ Dr Hatfield-Dodds, said price projections for the next five years were influenced by two key drivers – continuing high grain stocks overseas restraining prices, and intensifying competition in Australia’s beef export markets as the US beef cycle moved to a phase of increased production.
Global crop production was trending down from the very high levels of 2016–17, but unless there were any production setbacks prices would remain under pressure for five years.
“With this flat outlook for prices, growth in the value of agricultural production and exports will come mainly from increased volume, underpinned by rising demand as incomes and populations in importing countries grow,” he said.
Steady increases are forecast to follow, with the gross value of farm production to increase by an average of around 1.2 per cent per year to reach nearly $63 billion in 2022–23.