Australia: Gross Value of Agricultural Production Is on a Record Run but a Quiet Global Growth Expectation and Widespread Inflation May Keep Gains Subdued

Good weather that has dominated in many parts of the country, positive soil moisture levels and stores, and a wetter-than-normal weather outlook for the spring months are pushing the numbers for the 2022-23 Australian crops. The harvest is forecasted to be close to a record crop: wheat is forecasted at 32.2 million mt: albeit 11% down YoY, it is the second-largest crop in history; similarly, barley is projected to be at 12.3 million mt, the fourth largest crop on record. The Australian canola crop is estimated to be 6.6 million mt, down 2% from the previous year but also only second to the record crop last year.

That of livestock is also estimated to be relatively flat YoY on the easing domestic restocking. That said, herd and flock numbers are projected to return to pre-drought levels towards the end of the 2022-23 year. The current foot-and-mouth disease affecting some livestock in nearby Indonesia has caused Australia to be on a high alert and any threat of the disease coming into Australia will cause a major upset to livestock and property.

According to Australia’s Department of Agriculture and Fisheries and Forestry, the gross value of agricultural production is forecasted to be valued at AU$ 81 billion just a little under the 2021-22 gross value of AU$ 85.3 billion. This would all help to drive value exports going into 2023. So far in 2022, crop exports have increased significantly causing the value of exports for the 2022-23 year to be out at AU$ 70.3 billion.

Grain shipments going out of Australia alone in the first half of the year reached an average of 3.5 million mt per month. The pace of exports is expected to be sustained going into the 2022-23 crop year driven partly by the bumper harvest last year. Also contributing to increasing exports are the crops that saw delayed harvest in the 2021-22 season: the leftover stock, like in the case of cotton will go into the 2022-23 exports.

Although the outlook looks positive the increasing prices of food and rising input cost are fogging the picture. Fertiliser and agricultural input costs have been going up the roof for the last two months. According to Bojan Mijatovic, an analyst with Tridge, “Fertilizer indices are falling, but are still high in comparison to the beginning of 2021”.

Global prices will also continue to climb and will persist at least in the near term. Juan Carlos a market analyst at Tridge and an expert in the fruits and vegetables market summarises the situation by saying “Global food prices are for the most part increasing at a considerable rate this year in main producing markets. He concludes by contending that, “Increases have been driven by soaring costs of all agricultural inputs led by fertilizer prices, labour shortages and high costs in transportation. The situation he adds “is forcing a lot more economies to lower trade and work out to seek alternative and cheaper ways to get the same products”.

Although the agricultural output is expected to be high, the possibility of a subdued trade owing to the lower global growth expectations emanating from inflation on food and agricultural inputs is putting hope somehow lackadaisical.