December 11, 2019
Drought causes value of Australia's agricultural goods to drop for 3rd year in a row
The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) said there is a 3% drop in the value of all farm products, totalling $61 billion AUD (~US$41.4 billion; 1 AUD = US$0.68) during the 2019/20 season, reported Reuters.
The country last hit a third straight year drop 60 years ago, as the drought has caused production to drop and input costs to rise especially in affected areas such as New South Wales and Queensland.
ABARES said rural exports will be negatively impacted, with an 8% drop in agricultural export earnings to $45 billion AUD (~US$30.6 billion).
Australis's chief commodity forecaster has cut its estimates for wheat exports by 15.2%, and reduced milk production outlook by close to 2% as there has been no rainfall for months.
The drop has proved to be a challenge to growers and exporting companies. The rural sector in Australia contributes 2% of the country's economy.
Wheat exports were pegged by ABARES at 9.22 million tonnes, lower from its projected values in September of 10.87 million tonnes.
Australia is the fourth biggest wheat exporter in the world, but the drought could see it lose market share in South Korea and Indonesia, key markets for the commodity. Local millers have no choice but to use rare imports.
GrainCorp, Australia's biggest listed bulk grain handler posted its biggest loss in November, its worst in more than 20 years. The company said it could be worst in 2020.
Milk production in Australia hit 8.53 billion litres, lower from an 8.68 billion litres projection.
With production reduced, Bega Cheese Australia said in October that its profits next year will be affected.
While commodities are declining, beef production is on the rise as ABARES said farmers are forced to cull livestock because there is not enough water and feed to raise them once the pasture wilts and dams are empty.
2.26 million tonnes of beef have been produced, a 10% increase compared to the 2.05 million tonnes forecasted by ABARES in September 2019.