ONGOING seasonal challenges remains the key issue facing Australian agricultural commodities, with little respite in sight, according to Rural Bank’s Australian Agriculture Outlook 2020.
Dry conditions are likely to continue until March, due to a predicted late monsoon season in the tropics which will delay the breakdown of the Indian Ocean Dipole.
Drought, combined with high input prices and declining livestock numbers, has caused supply to decline in almost every agricultural sector.
However, for some horticulture commodities increased supply for export is expected in 2020.
Dairy, beef and sheep are all expecting higher demand levels but a lack of supply will limit Australian producers’ abilities to meet this.
Globally, African Swine Fever and trade tensions between the US and China is impacting multiple commodities.
The Outlook finds that whilst there are opportunities for other proteins to fill the gap left by African Swine Fever in China, grains are struggling with reduced demand and wool has been significantly impacted by trade tensions.
Australian milk production is forecast to decline four to six per cent due to ongoing unfavourable weather conditions.
A smaller herd, drought and higher input prices will continue to impact supply.
Demand for Australian dairy products is set to rise three per cent due to increase volumes of milk powder to China.
The farm gate milk price has increased slightly to $6.85 – $7.05/kg MS, however the outlook remains flat for this season.
“As drought continues to impact the Australian milk pool, diminishing supply is driving record prices,” said Josie Zilm, Regional Manager Agribusiness for Rural Bank.
Global demand is expected to rise four per cent.
The liquidation of Asia’s pig herd due to African Swine Fever continues to drive demand for alternative protein, particularly in China.
China recently replaced Japan as the number one export market for Australian beef, growing 81 per cent year-on-year.
Australian beef production is forecast to be 10 per cent lower in 2020, due to low herd size and declining carcass weights. Availability and cost of feed continues to be a challenge for Australian beef producers.
The Eastern Young Cattle Indicator is forecast to remain stable, averaging approximately 500c/kg in the next three months.
“We saw a major shift in 2019 with China becoming the number one export market for Australian beef. This increase in demand is likely to continue due to the pork shortfall created by African Swine Fever, however Australian supply will struggle to meet this increased demand due to low stock availability,” said Mark Pain, Regional Manager Agribusiness for Rural Bank.