Agricultural overview

The nominal gross value of agricultural production is forecast to fall by 15% to $80 billion in 2023– 24, or $86 billion including fisheries and forestry – still a strong result following a record year of production value in 2022–23 (Figure 1.1). Drier conditions, particularly in winter and early spring are expected to have reduced the winter crop by 32% to 46.7 million tonnes in 2023–24, which is on par with the 10-year average. The summer crop is forecast to remain well above its 10-year average, despite falling by 17% to 4.3 million tonnes. Higher than expected rainfall through late spring and summer improved production prospects for crops relative to forecasts earlier in the season. However, lower average prices are expected as global production increases. Overall, the nominal gross value of crop production is forecast to fall by 18% to $48 billion in 2023–24.

The 2023–24 year started with substantial challenges for livestock production. The expectation and onset of drier conditions in early spring, and diminishing pasture growth, prompted a sharp rise in the slaughter of cattle and sheep. The sudden increase in volume moving through stockyards saw prices drop rapidly, particularly for sheep. Prices have since recovered somewhat but were around 15% lower in February 2024 than 10-year average prices in real terms. Despite higher volumes of meat production, the nominal gross value of livestock production is expected to fall by 10% to $32 billion in 2023–24, driven by the low prices of cattle and sheep.

Figure 1.1 Real annual gross value of agricultural production

In 2024–25, the nominal gross value of agricultural production is forecast to rise by 6%, reaching $85 billion, $91 billion including fisheries and forestry. A slight easing of international prices for grains is expected through 2024–25, which will filter through to domestic prices. Despite lower expected prices, crop production volumes are forecast to rise, reflecting more favourable climatic conditions expected in 2024–25; the nominal value of crop production is forecast to rise by 2% to $49 billion.

• The combined value of wheat and barley production is forecast to increase by around $400 million as volumes increase with more favourable climatic conditions (see Wheat and Coarse Grains).
• The value of horticultural production is expected to increase by around $600 million to $17.8 billion, as fruit growing benefits from higher yields with more favourable conditions. However, the potential for flooding or waterlogging in a wet year represents a possible downside risk to this forecast (see Horticulture).
• Increased canola production volumes are forecast to contribute $4.1 billion to the value of agricultural production, rising by around $300 million in 2024–25 (see Oilseeds).

In contrast to expected lower prices for many crops, livestock prices are forecast to rebound in 2024– 25 and return close to real long term average levels. The rebound in saleyard prices is expected to drive much of the 12% increase the nominal gross value of livestock and livestock products to $36 billion in 2024–25.

• Cattle and calf production value is expected to increase by $3.0 billion to $14.6 billion. The average annual price is forecast to increase by 21% as high turn-off in 2023–24 is curtailed and the growth in supply to stockyards for slaughter eases. A small uptick in slaughters is expected (see Beef).
• Sheep and lamb production value is expected to increase by $758 million to $4.3 billion, as the average annual prices increase by 34% for sheep and 16% for lambs, returning to 2022–23 levels in nominal terms. A modest increase in lamb slaughters is also expected (see Sheep Meat).
• As predominantly domestic-focussed industries, pig and poultry meat, and egg production volumes broadly grow in line with population, and are forecast to increase by 2% in 2024–25. The rise in production volumes is expected to be only partially offset by marginal decreases in the prices of pork, poultry and eggs, reflecting expected lower input costs in 2024–25 production. The combined value of pork, poultry and egg production is forecast to increase by $120 million to $7.0 billion (see Pork and Poultry).
• The value of milk production is forecast fall by $420 million to $5.5 billion, as relatively low export prices for dairy products are expected to reduce the farmgate prices that processors can offer producers (see Dairy).
• The value of wool production is forecast to increase by around $130 million to $3 billion. The impact of higher prices due to strong international demand is forecast to outweigh a marginal fall in production volume as the size of the sheep flock falls slightly (see Natural Fibres).

Off the back of stronger expected crop yields, higher livestock prices and production volume, broadacre farm cash income is forecast to increase by 47% to average $192,000 per farm in 2024–25 (see Farm Performance). While forecast to be a substantial increase on 2023–24, average farm incomes in 2023–24 are forecast to be more than 50% below the record levels in 2020–21 to 2022– 23, in real terms. This is due to relatively elevated input costs, lower production volumes for crops and lower livestock prices.

The projected outlook over the 5-year medium-term, is for the real gross value of agricultural production to initially increase, before declining in 2026–27 and 2027–28 and increasing again by the end of the period to reach $84 billion in 2028–29. This is brought about mainly due to the assumed climatic conditions in each of the forward projection years driving the level of domestic production, with assumed wetter years likely to support higher crop production and pasture growth for grazing. For more details on the climate drivers, see the Seasonal Conditions note. The true pattern of change and ultimate production outcomes over the medium term will be determined by the realised conditions. However, the outlook is generally positive for sector outcomes.

The current cycle of seasonal conditions presents the possibility for an upside risk over the medium term related to relatively wetter than drier conditions. However, there is also the chance for less favourable global economic conditions that could weigh down economic growth and consumer incomes. Should such a situation arise, the impact of weaker demand on most commodity prices could mostly be offset by poorer production prospects in key agricultural exporting countries outside Australia. The net cumulative result over the projected period would be for a higher real value of agricultural production as the generally more favourable production conditions have greater impact than the sluggish economic conditions. Agricultural value is assumed to increase to $91 billion in 2026–27, before falling in 2027–28 and rising slightly to reach $81 billion in 2028–29. Box 1.1 has more detail on this below.

The nominal value of agricultural exports is forecast to fall by 14% to $67 billion in 2023–24. Including fisheries and forestry, the figure is around $72 billion (Figure 1.2). This fall is largely driven by declining domestic crop production and softer international prices for most crop commodities. Supply chain disruptions that have been a substantial issue over the past few years are expected to be less prevalent and the price volatility caused by the war in Ukraine is also easing, as there is less uncertainty about the Black Sea corridor and Russia and Ukraine’s ability to export grain. Global wheat production is expected to be higher than average in 2023–24, putting downward pressure on prices, which are forecast to fall 14%. The lower prices and lower production volumes are forecast to see Australia’s wheat exports fall by $7 billion in 2023–24. As has often been the case in a drier year, horticulture exports are bucking the trend, with exports expected to rise 4% on the back of increasing fruit exports, despite falling value of nut exports. Overall, the nominal value of crop exports is expected to fall by 20% to $40 billion.

On the livestock side, the nominal value of livestock exports is expected to fall by 4% to $27 billion. despite an increase in the volume of meat exports brought about by increased turn-off in 2023–24. Higher global beef and sheep meat production is forecast to soften export prices, despite strong demand from China, the United States, the Middle East and the Republic of Korea for red meat. Wool export value is also forecast to fall by around $400 million as lower prices outweigh a small increase in volumes. Meanwhile dairy exporting regions such as the United States and the European Union are expected to shift some of their production away from milk powders to more profitable cheese manufacturing. Along with lower demand from China, cheese and other dairy export prices are forecast to fall, weighing on the nominal value of dairy exports, which is forecast to fall by around $200 million.

In 2024–25, the nominal value of agricultural exports is forecast to fall by a further 5% to 64 billion, or $68 billion including fisheries and forestry exports. Prices for major crops are forecast to continue easing, as soyabean from South America, corn from the United States and record export volumes of wheat from the Russian Federation are expected to increase global supply. The nominal value of crop exports is forecast to fall by 10% to $36 billion. Conversely, the nominal value of livestock exports is forecast to increase by 3% to $28 billion, driven largely by increasing red meat export value, as demand increases in major markets, such as the United States, Asia and the Middle East.

• Despite forecast increased domestic production, export volumes of wheat, canola and barley are expected to fall, as stocks are rebuilt following a drawdown of exportable grains in 2023–24, and to meet domestic demand for feed grain. The impact is forecast to decrease exports for these three major crops by $1.7 billion to a combined nominal value of $14.9 billion in 2024–25.
• Lower plantings in the previous year are forecast to reduce cotton export volumes in 2024–25, lowering value by a further $699 million, to around 3.8 billion.
• Horticulture exports are expected to increase by $383 million driven by higher international prices and recovering production of almonds; adverse weather and restrictions in honeybee movements due to varroa mite outbreaks led to a poor almond harvest in the first half of 2023.
• Wine exports are forecast to fall by $52 million to $1.8 billion as the long trend of declining global consumption continues, while excess supply of many major regions persists, particularly for red varietals (see Wine).
• Meat exports, overwhelmingly red meat exports, are forecast to rise by $1.5 billion in 2024–25, as increasing global demand increases prices and domestic production volumes increase.

In the medium-term outlook, the real value of crop exports is projected to decline over the period to 2027–28 as prices continue to ease and assumed production conditions become less favourable domestically. Strong assumed production conditions in 2028–29 are projected to increase real production value of crops to $37 billion. Over the same period, real value of livestock exports is projected to decline gradually to $26 billion, mainly as increasing global production puts downward pressure on prices.

Under an alternative scenario, poorer production prospects in key agricultural exporting countries outside Australia would increase most commodity prices, and assumed wetter conditions would increase domestic production. The combination of assumed macroeconomic and climate conditions would create greater volatility and despite higher inflation, real value of agricultural exports would generally be higher over the period, with a higher cumulative value than under the baseline scenario.

Figure 1.2 Real annual agricultural export values

Box 1.1 ABARES’ scenario projections over the outlook period

This edition of the Agricultural Commodities Report uses two scenarios to produce the five-year forecasts discussed in each chapter, a baseline and alternative scenario.

Forecasts for Australia’s agricultural production and exports are highly reliant on seasonal conditions and global factors such as demand and supply. Accordingly, the two scenarios cover different possible outcomes for both the global economy and seasonal conditions – the baseline scenario which represents ABARES’ central expectations, and the alternative scenario – covering downside risks to the global economy, wetter seasonal conditions in Australia and higher global prices for most agricultural commodities.

Expectations for climate and macroeconomic conditions for the year ahead (2024–25) are based on available information and are used to inform ABARES’ forecast and the expected impact on agricultural production, prices and exports. Beyond 2024–25, assumed global economic and seasonal conditions do not represent ‘most likely’ or expected developments – instead they provide a plausible foundation for agricultural production projections over the medium term. A range of factors affect the projections, and the development of the two scenarios is intended to illustrate how changing assumptions and underlying conditions impact projections over the outlook period.

The 'baseline' scenario

ABARES’ baseline scenario assumes global growth is relatively stable over the outlook period, at 3.1% in 2024, falling to 3.0% by 2029 (Figure 1.3). Growth is expected to be higher in developing economies, in line with International Monetary Fund expectations. Global inflation is assumed to remain elevated in the near term, falling over the outlook period as sustained high interest rates in recent years affect demand. Elevated domestic inflation is also assumed in the near term, falling over the outlook period to within the Reserve Bank's target band of 2-3% by 2025–26, (see Economic Overview). Overall, these factors are expected to support demand for Australian agricultural commodities over the medium term.

Seasonal conditions are assumed to support average to above average production outcomes in Australia over the medium term. Climate conditions are expected to oscillate over the outlook period reflecting climate variability over the last 20 years: Neutral conditions are expected in 2024–25 before moving to assumed La Niña and/or negative Indian Ocean Dipole (IOD) conditions in 2025–26. A move to El Niño, Neutral and then La Niña conditions is assumed over the remaining three years to 2028–29 (see Seasonal Conditions). For crops, average to above average production and increasing global supply are expected to result in lower real prices over most of the outlook period; conversely improving seasonal conditions relative to recent years are expected to increase restocker demand and support relatively elevated real livestock prices rise over the outlook period.

Figure 1.3 Macroeconomic and seasonal conditions assumptions, medium-term outlook

The ‘alternate’ scenario

ABARES’ alternate scenario demonstrates the possibility of downside risks to the outlook: persistent global inflation is assumed to keep interest rates higher for longer, reducing consumer spending and lowering global aggregate demand. In 2026, global GDP growth is forecast to fall to 2%, rising back to 3% by 2029. In addition, it assumes greater global uncertainty over the period (see Economic Overview).

Wetter seasonal conditions are assumed in the alternative scenario in Australia, supporting above average Australian production over the medium term (Figure 1.5). Neutral conditions are expected in 2024–25, before moving to two consecutive La Niña years in 2025–26 and 2026–27. A move to El Niño and then then La Niña conditions is assumed over the remaining two years (see Seasonal Conditions). With these assumed climate drivers, this scenario also assumes below average crop conditions in many key exporting countries, particularly in the Northern Hemisphere. Tighter global supply for most crop commodities and higher inflation relative to ABARES’ baseline scenario are expected to drive higher prices over the outlook period. For livestock the assumed wetter outlook is expected to further support herd and flock rebuilding in the alternative scenario, resulting in higher livestock prices than in the baseline scenario.

Over the past two years, inflation across the globe increased rapidly on the back of several years of fiscal stimulus and expansionary monetary policies in response to the COVID pandemic. Supply chain disruptions, adverse growing conditions in many countries and the war in Ukraine pushed up the cost of food and energy, adding to inflation pressure. Central banks responded by raising interest rates, which have already dampened demand and lowered inflation in many economies, such as in the United States, the United Kingdom, and Australia. Food price increases in Australia were exacerbated by numerous flooding and other extreme weather events in the eastern states which caused acute supply shocks for some fruit and vegetables. The short-term impacts of these events have resolved, however inflation still remains high in Australia, sitting at 4.1% in the year to December 2023. Inflation is expected to revert to the long-run average (and be within the RBA's inflation target range of 2-3%) in 2025–26.

One of the results of the inflationary cycle is that the real gross value of production is essentially inflated in historical years because the value of current dollars has less spending capacity. Using current dollars would require more money to purchase previous years’ output. The further back that inflation adjustments are applied, the higher the real number of dollars required, as inflation is cumulative through time. Conversely, future expenditure is discounted to recognise that a dollar today is able to buy proportionately more than it will in the future. See Box 1.2 for further details.

Three consecutive years of strong production and returns for farmers have put them in a strong position now that prices received for agricultural production are forecast to fall by 7% in 2023–24. At the same time, prices paid for farm inputs are forecast to remain steady and only fall by 2% in 2024– 25 (Figure 1.4). Fertilisers and chemicals prices have declined from record highs in 2021–22 and 2022–23 to now sit just above long-term averages. However, prices for fuel, freight, labour and contracting services are forecast to remain elevated in 2023–24 and moderate slightly in 2024–25.

Coupled with higher interest rates and increased costs to service loans, the cost of operating a farm business has been rising. Since 2020–21, the ratio of prices received to prices paid has fallen, leading to a decline in farmers’ terms of trade. Past periods of declining terms of trade have been addressed largely through strong productivity growth, however, in recent years sector productivity growth has slowed. The changes in terms of trade have started to influence farm performance. For more detail on farm profitability, see the Farm Performance note, which breaks down farm receipts and costs for 2023–24 and 2024–25.

Figure 1.4 Prices paid, prices received and farmers’ terms of trade, Australia

Box 1.2 Measuring the value of agricultural production over time

The gross value of production (GVP) is currently the primary measurement for the value over time of agricultural commodities produced in Australia. GVP is the value placed on recorded farmgate production at the wholesale prices realised in the marketplace. The ABS publishes historical annual estimates for the GVP of select agricultural commodities and for ‘total agriculture’. ABARES forecasts the GVP for agricultural commodities for the next fiscal year and in the March Agricultural Commodities report produces forecasts and projections over the medium term to 2028–29.

When comparing GVP estimates over time, it is useful to know whether the changes in value are being driven by volume growth or by broader price inflation. To help do this, ABARES publishes a forecast for ‘real’ GVP which deflates ‘nominal’ GVP by the ABS Consumer Price Index (CPI). This keeps the value of money (Australian dollars) the same over time. To deflate forecast nominal GVP, ABARES uses CPI forecasts from the RBA and ABARES inflation projections over the medium term.

This report uses 2023–24 Australian dollars as the base year, with real agricultural GVP in 2000–01 roughly twice the value of nominal GVP in that year (Figure 1.5). Similarly, real GVP in 2028–29 in the baseline scenario is forecast to be roughly 12% lower than nominal GVP in that year.

While CPI deflation is an easily understood measure of ‘real’ GVP, it does not account for different growth rates between agricultural prices and broader CPI: Agricultural prices have grown more quickly than CPI over the last 30 years and have also been more volatile. To account for this, ABARES publishes implicit price deflators for selected commodities and commodity groups which are used to compute GVP in chain volume measures.

When using chain volume measures, the ‘real value’ of agricultural production has remained relatively steady over the past 30 years, with annual fluctuations mostly caused by changes in seasonal conditions (Figure 1.6). This demonstrates that price growth has driven most of the increase in nominal GVP over this period, in part reflecting high demand for Australian agricultural commodities.

The gross value of agriculture, fisheries and forestry production is estimated to have exceeded $100 billion in nominal terms in 2022–23, and in real terms (2023–24 dollars) in both 2021–22 and 2022–23 (Figure 1.6). This was due to the rare combination of both very high prices received and a record volume of production. While in nominal terms the value of agriculture, fisheries and forestry production is expected to exceed $100 billion again in 2028–29, in real terms this figure is not reached over the outlook period.

Figure 1.5 Annual nominal and real gross value of agriculture, fish and forestry production

Figure 1.6 Annual gross value of agricultural production expressed in chain volumes measures

As part of the March 2024 Agricultural Commodities Report, an alternative scenario was constructed to demonstrate the variability of agricultural production in response to changing climatic conditions. While there are many possible scenarios that might play out over the period to 2028–29, the alternative scenario shows a plausible alternative to the baseline projections. Specifically, it demonstrates the sensitivity of the projections to different climate – and macroeconomic – conditions (see Box 1.1 for further details).

Statistical analysis indicates increased climate variability over the past 20 years (see Seasonal Conditions), leading to increased agricultural production volatility in Australia and globally. This volatility is exacerbated by the increased likelihood of extreme events. Farm financial performance is highly dependent on weather and price forecasts, and as such the changing climate will require careful planning and management to manage increasing uncertainty. The effect of uncertainty over future weather conditions is illustrated in 2024–25 by a forecast range for farm cash income. While the average farm cash income for broadacre farms is forecast to increase to $192,000 per farm under the mean climate forecast, it could be as high as $244,000 per farm (upper estimate) or fall to $90,000 per farm (lower estimate).