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Australia Agribusiness Report Q4 2009
Market |
Agriculture, Farming & Raw Materials |
Report Type |
Market Research |
Country |
Australia |
Published |
4 September 2009 |
Number of Pages |
52 |
Download |
|
Immediate |
|
Publisher |
Business Monitor International |
Australia's farmers fear further dry conditions during the upcoming 2010 summer due to El Nino
Just as Australia's agricultural sector appeared to be breaking free from the long drought that has gripped the country for most of the decade, fears are now rising of further dry conditions caused by the El Niño phenomenon. At the beginning of August, the Australian Bureau of Meteorology reported that conditions were increasingly indicating that this would be an El Niño year. The phenomenon, technically known as the El Niño-Southern Oscillation (ENSO), typically causes high temperatures and droughts in the Asia Pacific region and heavy rains in South America .
If the coming Southern Summer is indeed dry as feared, we would be forced to reduce our forecasts for 2010 crop production as yields are once again struck by water shortages. This would be a cruel blow to farmers who have seen crops ruined by dry weather in a number of years this decade. In 2009, grain production increased dramatically from levels seen in 2007 and 2008 owing to the greater availability of water. El Niño could put a stop to the continued recovery of the sector for another year, though we do not believe production will drop back to the level seen in 2008 even if the phenomenon does indeed materialise .
Australia's dairy sector is also under pressure, though it is now low prices rather than the weather which is the main difficulty for farmers. In July, the main dairy processors announced that the price they paid farmers for milk would be cut drastically in the coming year. Farmers will now be receiving less than AUD0.30 per litre of milk. For many this will be below the cost of production. Following the long years of drought, this new blow will see more farmers leave the sector as they are unable to cope with mounting debt. This will see milk production fall again in 2010 following a small recovery this year .
Despite this further setback, in the longer term we still see a bright future for the sector. As economic growth recovers, increasing demand for dairy products from emerging markets and restricted supply owing to the drawdown in dairy herds in major producers should see prices climb back up. We therefore expect milk production to see strong growth towards the end of our forecast period .
One sector already benefiting from a supply deficit this year is Australia's sugar industry. Tight global supply, mainly due to the collapse of sugar production in India, has driven a rapid rise in prices through 2009. This will bring a much needed windfall for Australia's sugar sector, which has been in decline in recent years. The high prices will go to making up for the poor production level with the 2010 sugar cane crop again negatively affected by heavy rains in Queensland. The rate of conversion of sugar cane land for other uses should also be lower now following the difficulties in the
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