How will ag fare in a COVID-disrupted economy?

Mixed bag outlook, but NSW DPI's Scott Hansen positive

Coronavirus
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The fundamentals for ag produce are strong, especially given the need for protein in many parts of the world brought on by the loss of pork supply and growing demand for food.

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NSW DPI director-general Scott Hansen says the fundamentals for agriculture are strong. NSW is set to achieve its best harvest since the bumper harvest of 2016.

NSW DPI director-general Scott Hansen says the fundamentals for agriculture are strong. NSW is set to achieve its best harvest since the bumper harvest of 2016.

It was a mixed bag when leading agricultural experts were asked for their outlook at this month's NSW Farm Writers webinar, a bank economist giving a concerning prognosis for high-end food and fibre.

But the director of NSW Department of Primary Industries Scott Hansen gave a more encouraging outlook, also mentioning the potential for new markets in Africa, especially in Ethiopia and Eritrea.

Everyone agreed that NSW is on course for a strong harvest, backed by predictions from the Bureau of Meteorology that there was a strong chance of above average rain during the rest of the growing season.

NAB economist Phin Zeibell painted a disturbing picture for high-end agricultural goods due to the massive uncertainties caused by the COVID-19 pandemic.

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"This is the worst situation since the Great Depression, so we have to be cognisant of that," he said. "We expect a 26-29 million national wheat crop and that's pretty good. But the food service demand has problems. In my view, demand levels are weak. If people aren't dining out, that's a problem."

He doubted demand for wool would be strong as people "simply don't go to work in the office as much", so they "don't wear suits".

Mr Hansen said though he believed the fundamentals were strong, especially given the need for protein in many parts of the world brought on by the loss of pork supply and growing demand for food.

"The good news is, the improved seasonal conditions are shaping the 2020 winter crop up to be the best since 2016's bumper harvest," he said.

"State winter crop production is pegged at around 12 million tonnes, including 8 million tonnes of wheat, though that will again depend on the positive trend continuing with conditions.

He said the improved prospects of a large harvest this year unfortunately mean that grain prices are likely to return to export parity.

"Wheat futures also reflect this correction with near month contract prices still trading at a premium to post harvest contracts, suggesting the market is pricing in significantly higher local supply later in the year."

The decision by the Chinese Government to impose 80.5% duties on Australian barley exports will have an impact on the industry, however, he said some demand is expected to resurface with some opportunities potentially being:

  • The recently signed Indonesia-Australia Comprehensive Economic Partnership which will allow Australian exporters guaranteed access to 500,000 tonnes of feed grain from July onwards, increasing annually.
  • Potential for strong demand from our domestic feedlot and intensive livestock sector as a result of lower grain prices and elevated livestock prices.

"Demand remains strong for both beef lamb and mutton, although export volumes have declined."

More positively, demand remains strong for both beef lamb and mutton, although export volumes have declined. - Scott Hansen, Director-General, NSW Department of Primary Industries

"Broadly speaking we see COVID-19 as creating challenges for high value or discretionary products such as seafood, wool or high value horticultural crops, and conversely opportunities exist for food staples as lockdown measures continue to ease and food service demand gradually resumes," Mr Hansen said.

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