Positive season trumps virus uncertainty

Positive season trumps virus uncertainty

Agribusiness
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The positive seasonal conditions outweigh the current COVID-19 inspired uncertainty in most ag commodities according to Rural Bank.

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Will Rayner, Rural Bank chief operating officer, says many parts of the country have enjoyed one of their best starts to the season on record.

Will Rayner, Rural Bank chief operating officer, says many parts of the country have enjoyed one of their best starts to the season on record.

VICTORIA may be gripped in an ominous second wave of COVID-19 that has Garden State residents fearful of another bout of lockdowns and the rest of the nation watching anxiously, but most ag sectors are still tracking well according to a Rural Bank report issued this week.

The bank's mid-year outlook found that 2020 had one of the best starts on record in many region, even allowing for the summer bushfires.

Sectors looking at improved performance this year include sheep, not including wool, cattle and grain while there is a neutral outlook for dairy and horticulture.

Will Rayner, Rural Bank chief operating officer, said the improved rainfall, which has seen a marked turnaround in states such as NSW, had driven solid restocker demand and was leading to higher grain production forecasts.

However, he cautioned that COVID-19-inspired trade volatility, which has caused a drop in wool and dairy prices, would remain a potential headwind.

"Australian agriculture has generally proven resilient to the economic devastation caused by COVID-19, but the sector needs to be wary of volatility and trade disruptions," Mr Rayner said.

He also pointed to escalating trade tensions with China as an area of concern, particularly for broadacre croppers.

On the flip side, the ongoing protein shortage in China caused by African Swine Fever has led to an increase in demand for Australian red meat.

"Australia's reliance on China as an export market means that any change will significantly affect producers - both positively and negatively," Mr Rayner said.

In the cattle sector, Rural Bank is predicting tight supply will be the defining characteristic of the cattle market in the second half of 2020 with production restricted by the smallest national herd since 1992.

Donna Slevin, regional agribusiness manager with Rural Bank for northern Victoria said prices will continue to remain high, supported by tight supply, strong restocker demand and recovering consumer demand in Australia and abroad.

The cropping front is set to be dominated by a return to more normal production in NSW and Queensland, with Rural Bank regional agribusiness manager for western Victoria Greg Kuchel pointing to a forecast 59 per cent year on year increase in wheat production.

Mr Kuchel said Australian grain prices would likely come back off the historic highs created by drought induced local demand.

However, he said the increased production meant there was still strong confidence in the sector.

"Winter cropping areas have enjoyed their best start to the season in several years, buoying hopes of a turnaround in the cropping sector's fortunes," Mr Kuchel said.

In dairy there is good news and bad news for producers.

Josie Zilm, Rural Bank regional agribusiness manager for southern Victoria said that production was set to rise 4-5pc, but prices would fall due to uncertain demand.

Ms Zilm said exceptional seasonal conditions would lead to lower costs with less feed needing to be purchased.

However, she said milk prices are expected to remain below last season, with both milk powder and cheddar prices expected to remain under pressure on the international market.

In regards to sheep and wool, Tony Williams, Rural Bank's regional agribusiness manager for NSW, was upbeat about the sheep meat sector.

He said strong demand from restockers would provide a solid floor in the market while consumer demand for sheep meat is set to improve once COVID-19 restrictions ease.

"Australian sheep producers are well placed to benefit from sustained high prices driven by below average supply and relatively strong export demand, despite headwinds from COVID-19," Mr William said.

However, Mr Williams' colleague Mark Pain, regional agribusiness manager for northern NSW and Queensland, painted a less rosy picture for wool.

Mr Pain said global demand for wool was likely to remain low for the foreseeable future, cancelling out good projected production due to the favourable seasonal conditions.

Mr Pain said it was unlikely there would be a strong upswing in demand until at least the 2021-22 northern hemisphere winter.

The story Positive season trumps virus uncertainty first appeared on Farm Online.

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