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Australian agriculture “moving confidently into 2024”

A newly released Rabobank annual outlook has found Australia’s agricultural sector is “moving confidently into 2024”.

Rabobank’s recent agricultural outlook says a combination of better-than-expected seasonal conditions and lower input costs has helped set up the sector for a strong year.

And, while agri commodity prices are “well down on the highs seen over the previous two years”, the bank’s price forecasts point to “continued positive farm margins in key agricultural sectors in 2024”.

Global economic headwinds, however, are set to continue, the bank cautions in its flagship Australian Agribusiness Outlook 2024, with ongoing concerns particularly around China’s economy and import volumes, as well as the impact of geopolitical issues on freight.

While locally, a tight labour market will continue to present challenges for Australia’s farm sector and agribusiness industries.

Report lead author, RaboResearch general manager Australia and New Zealand Stefan Vogel said the “major agri sectors” were moving into 2024 with a confident outlook, after

“El Nino didn’t turn out as bad as feared, with recent significant rainfall received across most farming areas except Western Australia,” said Vogel.

“Grain farmers are set to plan more optimistically for the purchase of farm inputs and the upcoming planting period for winter crops like wheat, barley and canola.

“Especially in the growing areas outside Western Australia, which was the only region that hasn’t received much rain.

“For beef and sheep producers, the outlook for farm-grown feed in the first half of 2024 overall looks more promising, allowing them to hold on to more of their livestock and go to market with heavier weight lambs for example.”

Price outlook

While agricultural commodity prices remain well down from the highs reached in 2022, the outlook is overall more positive for 2024, with the bank’s Rabobank Rural Commodity Price Index pointing to prices tracking at improved levels in the year ahead and near the five-year average. “

“Price developments will vary per sector,” said Vogel.

“Grain prices are likely to remain under pressure, as markets globally and locally battle with a supply outlook for 2024 that is more plentiful than in past years. For a significant 2024 price upside for grain, the world would need to see weather-related supply shortages arise.”

“The beef and sheep price outlook are more optimistic and above the
2023 lows.”

“Prices in late 2023 moved up from the lows, but the animal protein sector will continue to work through large Australian production volumes that need to move into quite congested global markets, and the economic headwinds that are expected to continue in 2024 won’t help to much improve global demand.

“Still, we expect 2024, especially the first half of the year, to see higher beef and sheep prices compared with the second half of 2023.”

Global dairy commodity prices, meanwhile, are expected to “have bottomed”, the bank said and will likely improve in 2024.

“Locally in Australia, while there will likely be some downward price pressure on some parts of the southern dairy region for new season milk from July 1, domestic markets will provide ongoing support for farmgate prices, and the margin outlook for dairy farmers remains positive.”

Improved input costs

Farm input costs are also set to be lower this year, Mr Vogel said.

“Farm input prices globally – for fertilisers and plant protection products – are forecast to be below last season,” he said.

“As Australia imports most of those products and continues to work through local inventories, we remain confident that costs on farm will look better than last year.

“A good part of farm inputs available in Australia last season were still reflecting the cost of Covid and Black Sea war price shocks, but now lower global prices should make their way through to be reflected in Australian inventory.”

The bank expects to see local nitrogen fertiliser costs decline by 10 to 20 per cent and phosphate by 10 to 15 per cent this year compared with 2023 prices.

“Potash has an even higher potential to ease farming budgets, with prices expected to trend down even more than the other fertilisers,” the report said.

Agro chemical prices are also forecast to decline in 2024 – primarily driven by a “massive increase” in Chinese production capacity in the past three years which is seeing the beginnings of a supply glut in 2024.

However, these price reductions may take some time to be felt at Australian farm gates, as older stock makes its way through the system.

Geopolitical risk

While geopolitics and the escalation of international conflicts could result in a big upward swing in energy prices – which would have a knock-on increase in the cost of farm inputs – for now, crude oil prices have remained “surprisingly subdued” despite heightened Middle East tensions, the bank says.

Local economic drivers

Locally, there is more positive news on the economic front, the report says, with interest rates forecast to plateau for most of the next six months before rate cuts are expected to come in towards the last quarter of the year. The Australian dollar – which since the end of December has seen a reversing of strong gains recorded in the last quarter of 2023 – is expected to strengthen modestly again towards late 2024.

Sustainability

Sustainability – and especially emissions reductions – will remain a key theme for the year ahead and into the long-term future, the report says, as Australia and the world continues to work on reducing greenhouse gas emissions.

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