Agricultural overview: September quarter 2022

The gross value of agricultural production is forecast to be $81.8 billion in 2022–23, down 4% from the record $85.3 billion of 2021–22 (Figure 1.1). Another near-record Australian crop harvest is forecast with good soil moisture stores and a wetter than average outlook for spring. Global supply of cereals continues to be tight, so high prices are forecast to persist. The value of livestock production is forecast to be little changed with domestic restocking demand easing, contributing to lower prices at saleyards for cattle and sheep. Herd and flock numbers are forecast to recover to pre-drought levels by the end of 2022–23. Global food and fertiliser prices have fallen from peaks earlier in 2022 but remain very high.

A third straight La Niña event forecast for late 2022 is now the climate model consensus – roughly a once-every-30-years event (see the Seasonal conditions overview). While good for national production prospects, this could result in significant localised impacts such as flooding, livestock losses, and quality downgrades for crops like those seen in 2021–22.

Figure 0.1 Gross value of agricultural production and value of exports, 2000–01 to 2022–23

The value of agricultural exports is forecast to reach a record $70.3 billion in 2022–23, driven by crop exports. Grain shipments are running at record pace after successive large winter crops, but not fast enough to ship crops within a single financial year. Australia's cereal grain exports averaged 3.5 million tonnes per month in the first half of 2022, with shipments going to 63 countries. The 2021–22 harvest will still make major contributions to export value in 2022–23. This is most apparent in the case of cotton exports, where harvesting delays mean most of the bumper 2021–22 crop will be exported during 2022–23. The value of cotton exports is forecast to reach a record $7.0 billion in 2022–23 and be the third most valuable export commodity after wheat and beef – the highest ranking for cotton on record (since 1988). The value of livestock exports is forecast to fall due to lower prices for red meat and wool.

Global growth expectations have been lowered due to widespread inflation and a sluggish Chinese economy (see the Economic overview). The cost of food and fertiliser remains very high worldwide, despite falling a little in recent months (Figure 1.2). The World Bank now expects that global food prices will remain at very high levels through the end of 2024, worsening food security and reversing years of development gains. Many countries have continued their restrictions on trade in agricultural products, although the level of restrictions has fallen from peaks.

Figure 0.2 Real world food and fertiliser prices, January 1970 to July 2022

Urea (a nitrogen fertiliser) imports to Australia have not slowed despite prices being around 3 times higher than average (Figure 1.3). This indicates that fertiliser supplies will be sufficient over the 2022–23 season, although higher costs will erode farm margins. As flagged in ABARES 2021–22 farm survey results, higher input costs did affect farm incomes, and the full effect of higher fertiliser costs is likely to be felt in farm returns for 2022–23. Average farm incomes in 2021–22 are projected to be the highest on record at an average $278,000 per farm.

Figure 0.3 Volume and price of urea imports to Australia, Jan 2015 to June 2022

The presence of foot-and-mouth disease and Lumpy Skin Disease in Indonesia has put Australia on heightened alert for the risk of an incursion into Australia. Australia is free of both diseases, and since their appearance, Indonesia is making good progress on getting them under control. However, if an outbreak of either were to occur in Australia, the economic consequences for livestock production and exports could be severe. An outbreak would jeopardise the export of many (if not all) livestock and livestock products, at least in the short-term. Australia's biosecurity system continues to keep out both diseases, and is actively monitoring the situation in Indonesia. These risks and their consequences highlight the importance of Australia’s biosecurity system, as well as compliance with good biosecurity practices, in protecting agricultural industries from damaging pests and diseases. See the foot-and-mouth disease note for more detail on the potential impacts of an incursion.

The Australian Bureau of Statistics (ABS) issues most of the official figures for the value of agricultural production. These figures are adopted by ABARES once released. The gross value of production figures for 2020–21 were released on the 26th of June 2022. This allows for comparisons between ABARES estimates and the official figures. ABARES uses internal estimates for a small number of industries, including wine grapes, cotton and honey, where more reliable sources are available or where the ABS no longer publishes figures.

ABARES last estimate for the 2020–21 gross value of agricultural production, issued in June 2022, was $68.6 billion. The official figure is now $72.9 billion, meaning ABARES underestimated by $4.3 billion or 6.3%. This is around the average size for a forecast error over the previous 20 years according to ABARES Historical agricultural forecast database - the average relative error for gross value forecasts being 6% between 2000–01 and 2018–19. The largest contributor was a $1.8 billion underestimate of the value of horticultural production, followed by a $645 million underestimate of the value of 'other crops not elsewhere indicated' - a broad category mostly composed of fodder crops such as hay and lucerne.