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Australia Agribusiness Report Q2 2009
Business Monitor International, April 2009, Pages: 44
This Australia Agribusiness service provides proprietary medium term price forecasts for key commodities, including corn, wheat, rice, sugar, cocoa, coffee, soy and milk; in addition to newly-researched competitive intelligence on leading agribusiness producers, traders and suppliers; in-depth analysis of latest industry developments; and essential industry context on Australia's agribusiness service.
In the Australia Agribusiness Report for Q2 2009 we introduce the new Business Environment section. This gives an overview of agriculture in Australia and its significance to the overall economy and labour market. We also cover government support given to agriculture.
Australian agriculture in 2009 will be hard hit by the falling world prices for export commodities including grains, meat and dairy products. World prices for milk fell by around 50% from July 2008 and January 2009 and are not expected to see any significant recovery this year. Wheat prices tell a similar tale, dropping from around AUD500/tonne in July 2008 to AUD267/tonne at the end of the year, before recovering slightly to AUD300/tonne at the end of January 2009. Beef and lamb prices have held up better, but are still well down from mid-2008.
While some of these falls will be offset by similar movements in input costs such as fertiliser and fuel, which have also seen large price drops since mid-2008, farm profits are sure to be hit. The drops in commodity prices have come at a particularly bad time for Australian farms, many of which are just starting to see output recover after the drought years.
We forecast large increases in the 2009 harvest of key grain crops such as wheat, but the fall in prices will mean revenue will be little better than in the previous year. For farmers who have ran up large debts through the drought years, this will be especially galling.
In the longer run, however, once the world economy recovers Australia's farmers should be in a good position to benefit from rising demand for food in the emerging economies of Asia. Rising incomes will allow consumers to increase the amount of money they spend on high-value foods such as meat and dairy products as well as wheat-based goods.
The years of drought has forced farms to focus on cutting costs rather than just aiming to maximise production. In the next couple of years of anticipated flagging demand and low prices, maximising efficiency will remain vital. The drought also forced a consolidation of farming, with many smaller farmers forced out of business leaving larger, more efficient operators. Once world demand picks back up, the increased efficiency will enable farmers to maximise profits and ensure the long-term health of the sector. A worry, however, is that the long drought was not a once in a lifetime climatic event but a sign of changing weather patterns. If droughts become more frequent, as some scientists have predicted, Australia's already hard-pressed water sources could be further depleted leading to formerly fertile farmland becoming barren.
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