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Australia Agribusiness Report Q4 2011
Business Monitor International, Oct 2011, Pages: 42
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.
The wettest year on record in 2010 should boost yields and output significantly of numerous agriculture commodities such as rice, cotton, livestock and dairy over the next two years. For some crops such as wheat, production patterns are also expected to return to more normal patterns. A higher Australian dollar should boost export values and keep agricultural exports as an important contributor to the country's earnings.
Key Forecasts
- Rice Production growth to 2014/15: 554.5% to 898,600 tonnes. Weather-permitting, we expect the Australian rice sector to expand considerably although it will still remain below 2005/06 levels.
- Wheat Production growth to 2014/15: 27.6% to 27.9 tonnes. Australia will remain an important player in the wheat market, as the fourth largest exporter in the world.
- Milk production and consumption growth to 2014/15: 4.5% to 9.4mn tonnes and 12.7% to 2.7mn tonnes respectively. Consumption growth will be driven mainly by population growth, since at close to 110kg per year, Australia already has one of the highest global per capita milk consumption rates.
- 2011 Real GDP Growth: 1.8% (down from 2.6% in 2010; predicted to average 2.4% from 2010 to 2015).
- 2011 Real Interest Rate (% ave): 5.1% (Down from 5.6% in 2010).
Industry Developments
Strong milk production in 2010/11 will mark a significant turnabout from the previous years' poor production performance. Indeed, we are forecasting fluid milk output to grow by 1.4% and 1.3% to 9.1mn tonnes and 9.3mn tonnes in 2010/11 and 2011/12 respectively. These growth rates are markedly higher than the average growth rate of -15.2% between 2002/03 and 2009/10. We believe that this improvement in milk production comes on the back of better pasture conditions after the record floods in Australia in Q110. In northern Victoria and southern New South Wales, where the dairy industry is concentrated, fodder availability and pasture conditions have been positive, thus boosting milk yields and reinforcing our outlook.
We note that the distribution of wheat production across the states is now returning to regular patterns for 2010/11 and 2011/12. In 2010, as the western parts of the country suffered from extreme droughts and the eastern states experienced the wettest weather in centuries, the eastern state of New South Wales displaced Western Australia to be the country's top wheat-producing state. Typically, Western Australia contributes up to 40% of the country's total wheat output, with New South Wales coming in second at approximately 30%. For the upcoming 2011/12 season, however, wheat output in Western Australia is expected to double from the previous year, coming in at 8.7mn tonnes, according to the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES). This will bring the state's contribution to the country's total wheat output to 33%, up from 18% in 2010/11.
Australia accounted for roughly 7% of world sugar exports in 2009/10, making it the third largest exporter globally. For 2010/11, exports are expected to dip on the back of the weaker crop. According to ABARES, export volumes are projected to fall by 31% to 2.4mn tonnes, in contrast to an average of 3.7mn tonnes between 2004/05 and 2009/10. Export values are also forecast to decrease by 28% to AUD1.37bn and we note that the effect of the production downturn has been mitigated by the current high price of sugar. Export volumes and values are expected to grow to 2.5mn tonnes and AUD1.4bn respectively, posting moderate growth on a year-on-year basis.
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