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The agricultural industry in Australia had a challenging year because of the drought throughout much of the broadacre crop growing regions. Rainfall was significantly below the median throughout the country. The sector produced the lowest crop production in the last decade with only 30.4 million tonnes from the 2018 winter crops.
While typically the leader in agricultural production, New South Wales experienced rainfall 45.5% below the median and winter crop production dropped by 60.3%. However, in Western Australia, rainfall was above the historical median and winter crop production was second highest on record with 17.7 million tonnes from 2018.
The livestock industry performed well because of Asian and Chinese demand. Its value increased by 17.7% in the 2017-18 period and while value forecasts for 2018-19 remain unchanged, wool and poultry are still expected to see modest increases. Western Australia is expected to produce the largest quantity of agricultural good, representing 58.3% of all crops nationwide. Production levels were strong because of innovation and new crop strains with higher yields.
New crop varieties like high-yield barley and weed-resistant canola hybrids increased production. Despite low rainfall in June, above average rainfall in July and August saw grain production in Western Australia which exceeded previous forecasts, led by wheat production of 10.1 million tonnes.
Middle class expansion overseas will likely drive demand for lamb and beef and Australia can capital on this trend with 76.2% of exports to Asia. However, the agricultural industry may face challenges such as overseas competition and climate change.
In 2018-19, New South Wales and Queensland had low crop productions because of low east coast rainfall. Victoria and NSW winter crop production decreased by 51.1% and 60.3% respectively. Only Western Australia increased its agricultural crop production, rising by 21.2%.
Livestock revenue dropped by 6.4% with $40.8 billion of revenue while crops revenue dropped by 17.3% with $14.7 billion of revenue. Other agricultural goods revenue dropped by 4.7% with $40 billion of revenue. A subdued dollar helped maintain profitability in the agricultural industry.
The demand for high quality food has been increasing globally and higher beef prices have led to an increase in beef cattle revenues by 45.8%. Investments allow for further production, maximising opportunities in the growing market. The organic food industry is growing; it has experienced revenue growth by 331.2% in the five years to 2018 and consumers are still increasingly demanding for more environmentally sustainable and healthier food. Revenue is expected to double to $1.6 billion by 2024.
The price of agricultural commodities has increased because of low production across key exporting countries. The price of wheat increased by 16.3% between 2017 and 2018. Low production of lamb to meet the high demand for sheep products from Asia has increased the price of lamb by 14.4%. Lamb, sheep, cotton, hay, vegetables, barley and wheat prices will likely increase this year.
Australian agricultural exports to China increased by 16.5%, US by 5.3% and Japan by 3.4%. However, exports to the European Union decreased by 13.6%. Volume of livestock goods produced and higher prices drive the agriculture industry but it faces climate change challenges and rising production costs. The cost of capital inputs is also rising. The cost of consumable inputs like fertiliser has increased by 5.7% while the cost of agricultural machinery has increased by 13.4%. The good news is new technologies may help reduce long-term operational costs.
Despite these challenges, the Australian agricultural industry outlook remains positive with revenue expected to increase by 7.5% over the next five years. Revenue is expected to reach $102.6 billion in 2023.
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