Agricultural overview: December quarter 2022

The gross value of agricultural production is forecast to reach $85 billion in 2022−23, just shy of the record set the previous year (Figure 1.1). The combined value of agriculture, fisheries and forestry production is forecast to reach $91 billion. Extremely high rainfall and low temperatures have led to upgrades to crop production forecasts in many areas adding an additional $4 billion in crop value compared to ABARES September estimates. Grain and milk prices are forecast to average higher in 2022−23, and livestock prices, while forecast to fall, will still be at relatively high levels. Favourable conditions are also driving the continued rebuild of livestock numbers. Considerable uncertainty remains over winter crop harvest progress and grain quality in New South Wales and Victoria given ongoing high rainfall, which could lead to downgrades in production value.

Unfortunately for some producers, seasonal conditions have also created significant challenges. Waterlogging and associated flooding has been widespread on the east coast for a second year, damaging winter crops and delaying harvest. Flooding has also caused widespread logistical issues for supply chains - slowing livestock slaughter, shearing, milk production and deliveries of inputs. It is likely that further severe weather events will occur over summer, so further challenges lie ahead (see the Seasonal conditions overview for more information).

Figure 1.1 Gross value of agricultural production and value of exports, 2010–11 to 2022–23

The value of agricultural exports is forecast to reach a record of over $72 billion in 2022−23, driven by crop exports. The combination of high production and prices has seen Australian agricultural exports exceed $5 billion in every month since November 2021 (Figure 1.2), despite widespread reported port congestion. Exports have only previously beaten this mark once, in the month of December 2016. Wheat exports alone have accounted for over $1 billion a month during 2022 (to September). World grain prices are remaining elevated due to uncertainty surrounding exports from the Black Sea region, and persistent dryness in the United States, European Union, and Argentina (see the Outlook for crops for more detail). Even when more neutral conditions return to overseas producers as La Niña conditions ease, it will take more than one season to replenish grain inventories.

Figure 1.2 Monthly exports of agricultural goods, January 2016 to September 2022

Widespread flooding on the east coast of Australia has damaged winter grain crops, restricted planting of summer crops, caused livestock losses and increased the risk of some pests and diseases (Figure 1.3). The Australian Crop Report estimates that crop abandonment will account for 16% of planted area in NSW, 7% in Victoria and 5% in Queensland. Restricted field access for harvesting can also lead to production losses and quality downgrades like those seen in NSW and Queensland last season. Damage is also likely to have occurred to irrigated fruit crops in regions of Victoria and Queensland. Damage to infrastructure has also caused delays along food supply chains, contributing to consumer food inflation.

Figure 1.3 Flood extent for Queensland and New South Wales, November 2022

Several independent public estimates of the cost of recent flooding events have been published, although these have been limited to some types of agricultural production or to specific regions. It is too early to tell what the true costs of flooding are, particularly given most crops are yet to be harvested. Such costs may never be accurately quantified due to the complex nature of agricultural production systems, since yields are normally determined over the course of an entire season rather than by a single event. For example, in addition to crops destroyed or abandoned, the associated rainfall can also lead to quality downgrades for crops or delayed/reduced plantings for summer crops which cannot necessarily be attributed to one specific rainfall event.

Total crop or livestock losses due to flooding are generally isolated to low lying paddocks and riverine areas, so most agricultural land is not directly affected. Impacts on individuals and businesses can be devastating, but when compared to aggregate state or national production these costs tend to be overtaken by the effects of other factors. These can include the beneficial effects of higher rainfall in other areas fortunate enough to avoid flooding. For instance, the last time ABARES prepared detailed estimates on a widespread flooding event in 2011−12, the loss of agricultural production was estimated at $500−$600 million. This would account for just over 1% of the national value of production that year, which also saw a new record set for winter crop production due to favourable conditions in New South Wales and Western Australia.

The global energy price shock is continuing to contribute to widespread high inflation. Inflation has accelerated in Australia's major agricultural trading partners, eroding spending power and reducing consumer capacity for discretionary purchases (see the Economic overview for more analysis).

Australian food prices rose at the fastest annual pace in the September 2022 quarter since 2006. There have been many contributors to this price increase beyond the effects of flooding and heavy rain on the east coast and rising energy prices. The ABS noted the contributions of state-government funded restaurant voucher programs ending, labour shortages in hospitality, and higher transport costs. The 2006 price rise occurred after Cyclone Larry destroyed a large percentage of the Queensland banana crop. Food price pressure is likely to reduce over time as these disruptions ease and more labour becomes available.

Rising prices have not been limited to consumer goods. Farm businesses are also paying more for inputs. The prices of imported agricultural inputs have been rising sharply since mid-2021 (Figure 1.4). Prices for fertiliser, fuel, lubricants and chemicals have increased by 30% for chemicals to more than 100% for fertilisers. In contrast, over the two years to 2022−23, the wholesale prices of agricultural production are forecast to increase 11%, and the price of agricultural exports by 20%.

Figure 1.4 Import price indexes for fertilisers, chemicals, fuels and lubricants, March 2015 to September 2022