It could be easy to think that the value of agriculture has dropped off a cliff given all the news about the drought.
But if there’s a bright spot among the dust, it can be seen in this week’s ABARES agricultural commodities report, which didn’t look too shabby.
Given the extent of the drought, you do have to wonder about how the overall value is expected to remain relatively unchanged, but the value of a lot of commodities have also risen due to scarcity.
The overall value of Australia’s farm production is forecast to remain relatively unchanged at $60 billion in 2018/19, well above the 10-year average of $55b.
The report says this was helped by broadacre farmers in NSW and Queensland entering the current drought in a strong financial position, following two years of the highest incomes recorded since 2001–02.
Reflecting the historically high incomes, the total value of farm management deposits held by Australian farmers was around $6.6b at June 30, 2018. Of this total, NSW accounted for 26 per cent and Queensland 21pc.
A minor counter to lower production has been the lower Australian dollar, which has fallen against the US dollar and Japanese yen, helping beef and wheat prices.
Meanwhile, the current US-China tariff dispute should give Australian exporters an advantage, but how much we can capitilise on this will depend on limitations due to drought-reduced volumes.
One area where we still hold a volume advantage globally is sheep and lamb products, including wool, all of which are forecast to improve in price into 2019.
We have already seen records broken multiple times in the past six months for lamb and wool, and a sniff of rain will no doubt send restocker ewe prices through the roof.
While all commodity prices have been good, the sheep and lamb business is quite amazing given where it has come from just a decade ago.
Plenty of sheep growers used to use the saying “wool buys bull”, and by the time this drought breaks, it might just be the wool check that also helps a few farmers get back into cattle.
The strength of a lot on-property sales this spring has indicated a greater confidence overall in re-investing in sheep genetics.
This has included good replacement ewes, as the sheep sector really seems to be holding up through the harder seasons, but has also remained strong for some years now.
