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Bright outlook for agribusiness

By Corowa Free Press

In Australian agriculture, 2018 will be remembered for below-average rainfall, high feed costs, record lamb and mutton prices and the smallest grain crop on the east coast in nearly a decade. 

As we head into 2019, Rural Bank’s Ag Answers insights team has turned its attention to the year ahead for Australian farmers. 

In the Australian Agriculture Outlook 2019, Ag Answers has analysed the performance of six industries – cattle, horticulture, cropping, dairy, sheep and wool, plus the broader economy – to provide a forecast of what we can expect in 2019. 

“Drought and drier conditions have affected large parts of the eastern seaboard,” said Simon Dundon, General Manager Sales and Distribution for Rural Bank. 

“However, with improved seasonal conditions and continued strong export demand, farmers can expect more stability across agricultural markets.” 

The report identifies several possible agribusiness trends for this year. These include: 

1. Cattle prices strengthen due to reduced supply and strong export demand 

2. Farmgate milk prices continue an upwards trajectory 

3. Horticultural export value to rise 

4. Lamb and mutton set new annual average records 

5. Chinese sportswear market drives wool exports 

6. The wider economy will see growth 

2019 Outlook by sector: 

Cattle

• Reduced supply and continued strong export demand will support cattle prices in 2019 but seasonal conditions will be the major factor determining price trends. 

• Supply is expected to be lower in 2019 with producers across the country looking to hold on to current herd size until seasonal conditions improve. 

• China will continue to drive export demand, with the US, Japan and South Korea remaining big export players. 

Cropping 

• Chicago Board of Trade (CBOT) wheat futures rose 30 per cent in Australian dollar terms in 2018 and domestic values responded with Newcastle APW wheat firming 60 per cent year-on-year. These strong premiums have been built into domestic markets, reflecting the east coast feed grains shortage, and supporting local values at levels above export parity. 

• A return to average conditions could see an Australian wheat crop in excess of 24 million tonnes in 2019, a 50 per cent increase on the 2018 season. 

• As Australia’s largest barley market, China’s market access will be an important factor in barley export values in 2019. 

Dairy 

• It is predicted that farmgate milk prices will average $6.10/kg MS in southern dairy states, however with lower supply prices could edge higher. 

• Export demand for milk powder and cheese is expected to remain stable in 2019 driven by China and Japan. 

• Milk supply is expected to be lower in 2018-19, increasing competition between processors. 

• Favourable seasonal conditions in Tasmania and South Australia throughout 2018 has seen production begin to return to 2015/16 levels, with supply tipped to continue to increase in the new year. 

Horticulture 

• The value of fruit exports is expected to increase by 10 per cent in 2019 with China and Hong Kong driving the demand for citrus, stone fruit and cherries. 

• Domestic demand for vegetables remains stable, with producers looking to export markets to boost demand in 2019 particularly for carrots, potatoes and broccoli. 

• The value of nut exports is expected to grow by 5 per cent in 2019 due to growth in the price of almonds and macadamias. 

• A star performer in 2018 was fresh oranges, with export value and volumes increasing due to demand from China, and this will continue to be an important market in 2019. 

Sheep 

• Looking to set new annual average records, lamb and mutton prices are projected to increase again in 2019. 

• High slaughter rates in 2018 will see decreased supply in early 2019 with producers looking to hold onto remaining stock, however demand is showing no signs of weakening. 

Wool 

• Demand from China continues to drive high prices for wool, with the Chinese domestic market now consuming more than half of its imports, particularly the sportwear market. 

• There will be no supply shock to the wool market in 2019 which will aid the continuation of high prices. 

To view the full 2019 Outlook Report, visit: www.ruralbank.com.au/2019outlook