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Drought, fires create multi-year agriculture rebuild

  • January 31 2020
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Invest

Drought, fires create multi-year agriculture rebuild

By Cameron Micallef
January 31 2020

Following the drought and bushfires, the Australian agriculture sector is facing an “extremely challenging” 2020, with production likely to remain low and farmgate revenue likely to diminish, an industry report has found.

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Drought, fires create multi-year agriculture rebuild

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  • January 31 2020
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Following the drought and bushfires, the Australian agriculture sector is facing an “extremely challenging” 2020, with production likely to remain low and farmgate revenue likely to diminish, an industry report has found.

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According to Rabobank’s agribusiness outlook for 2020, the sector is facing a multi-year rebuild, meaning higher prices for agricultural commodities in the coming years.

The report’s lead author, Rabobank head of food and agribusiness research Tim Hunt, said “2019 was marred by drought, fire and flood”.  

“It was the driest year on record, compounding the drought already being experienced by the eastern states in the years prior,” Mr Hunt said.

“And while recent rainfall across drought-affected regions has brought some optimism, farmers will need continued rain to replenish soil moisture and break the drought.”

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High agricultural commodity prices have gone some way to offsetting this pain, with firm global markets, a weak Australian dollar and reduced local supply contributing to a near-record year for farmgate prices.

“For the animal protein sector, Chinese imports will remain at elevated levels in the wake of China’s culling of livestock in response to African swine fever, with the rebuilding of their pig population to take several years,” Mr Hunt said, “while global markets for wool and dairy remain firm and the local market basis (wheat price) will be sustained by constrained domestic grain production.”

The report noted that even with higher prices, lower volumes produced will mean the agriculture sector will suffer.

“Physical constraints will also impede recovery. The beef herd and sheep flock will take years to rebuild from current lows, while refilling key storages in the southern Murray Darling Basin will likely take several favourable seasons,” Mr Hunt continued.

Financial constraints will also have an impact, the report said, with farmers likely to want to rebuild equity before investing to expand production once better seasonal conditions return.

Drought, fires create multi-year agriculture rebuild
Wild fire
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About the author

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Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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