In 2018–19 the value of farm production is forecast to decline by 3 per cent to $58 billion, which is 6 per cent lower than the record achieved in 2016–17, says the Department of Agriculture and Water Resources (ABARES) December quarter report.
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If realised, this would still be above the 10-year average of $56 billion (in 2018–19 dollars).
The value of crop production is forecast to decline by 7 per cent to $29 billion in 2018–19.
Substantially lower production of crops including cotton (down $1.1 billion), wheat (down $870 million), canola (down $800 million) and chickpeas (down $680 million) compared with last year have driven the fall.
Farmgate price rises provide buffer
Farmgate prices are forecast to increase for the mostly destined for export crops of canola, coarse grains and wheat in 2018–19.
Domestic prices for grains suitable for feed are expected to be high because of poor pasture growth and low availability of feed grains and fodder.
An enduring high demand from Asia and constrained production due to poor seasonal conditions are pushing saleyard prices for sheep to rise.
The aggregate index of prices received by Australian farms is forecast to increase by 3 per cent in 2018–19, after increasing by 4 per cent in 2017–18. Relatively strong growth in prices in 2017–18 mitigated the decline in the value of production and this is expected to continue with a forecast rise in prices in 2018–19.
Pressure on farm incomes
At the national level, farm profitability is expected to be lower in 2018–19 compared with the previous two years. This is due to the effects of drought in eastern Australia on production and costs.
However, farm incomes are expected to remain comparatively high. This is because generally favourable prices received for most commodities and a lower Australian dollar are boosting export returns.
Reduction in export earnings
In 2018–19 export earnings for agricultural commodities are forecast to decline by 7 per cent to $45 billion.
The value of crop exports is forecast to be $22 billion in 2018–19, 14 per cent lower than in 2017–18.
The main driver of the decline is lower production due to poor seasonal conditions and increased domestic consumption of coarse grains and wheat for feed.
Higher prices for lamb, mutton and wool are offsetting falling export volumes. Volumes of exported beef and mutton are forecast to increase by 5 per cent.
