Agricultural land prices to defy COVID-19 economic downturn

Australian agricultural land prices are expected to hold firm through 2020, defying the effects of a severe COVID-19-led global recession, according to a new report from agribusiness specialist Rabobank.

In the just-released report, Port in a Storm – Australian ag land prices will remain afloat in rough COVID-19 swell, the bank says while much of the global and local economy is being severely buffeted, Australian agricultural land is expected to remain “largely unscathed” – due primarily to overall farm profitability, a tight sales market and support from low interest rates and a weak Australian dollar.

However, the report cautions, the outlook for Australian agricultural property is not without risk in the current especially-uncertain environment – most particularly the threat of a deeper-than-expected global recession, a significant interruption to Australia’s access to major agricultural export markets or a credit crisis.

Farm profitability
Report author, Rabobank agricultural analyst, Wes Lefroy, said positive production prospects, off the back of improved seasonal conditions – along with commodity prices supported by a weaker Australian dollar – should underpin a profitable season for most Australian farmers in 2020/21. And this augurs well for agricultural land prices.

“Farmer operating profit, in our view, is the primary driver of Australian land prices. In particular, sustained periods of profitability provide farmers with the financial capacity to buy more land,” he said. “And despite the drought that has gripped much of the east coast over the past three years, reported three-year average farm operating profits are at their highest point since at least 1990 in Western Australia, South Australia, Tasmania and Victoria. Further, they are above the 10-year average in all states, except New South Wales.

“For farmers with expansion intentions, many will have the capacity to buy land.”

Low supply
Lefroy said an historically-low supply of available properties for purchase will also be a key factor supporting agricultural land prices.

“We see the number of properties on the market staying at, or near, historical lows in 2020 for a number of reasons,” he said. “We expect there will only be a very small number of sales which are due to financial circumstances, with improved production supporting cash-flow generation in drought-affected regions. On top of this, record-low borrowing costs have increased farmers’ capacity to service existing debt and interest rates are set to
remain historically low for at least the next three years.”

Added to this, Lefroy said COVID-19-related restrictions have been a challenge for
property inspections and auctions.

“Sellers who have flexible time frames may hold back on listing properties, which will also keep the market tight,” he said.

Supportive fundamentals
The report says while many economic fundamentals had been “severely negatively” impacted by COVID-19, in some instances this would provide support for investment in
agricultural land.

“Relatively low returns for other asset classes – such as equities, commercial property and
bonds – will increase the attractiveness of agricultural land for both local and foreign
investors,” Lefroy said.

“Secondly, a weak and depreciating Australian dollar will support demand from foreign
investors. So far this year, the Australian dollar has depreciated against the US dollar and
the euro, effectively decreasing the price of Australian farmland for investors in those
currencies.

“In addition, the purchasing power of local farmers will be maintained in the medium-term
by historically-low borrowing costs.

“And overall, the volatility and impact that COVID-19 has caused in other asset classes
has also highlighted the stable and countercyclical nature of agricultural land, reinforcing
its attractiveness as an investment.”

Risks
While Australian agricultural land is in a strong position to withstand the economic impacts
of COVID-19, there are risks to this outlook, the report said.”

“A deeper and longer-than-expected recession would both reduce investment appetite and
impact demand for Australia’s agricultural products offshore, impacting farmgate prices
and farm profitability,” Lefroy said.

“In the event of a credit crisis, this would essentially put a pause of debt-funded property
purchases. And loss of access to a key market for Australian agriculture would also
significantly impact farmer profits, and therefore, capacity to purchase land.”

Long-term view key to $100 billion agriculture target

Reaching the target of $100 billion in agricultural output will require industry to take a long term view, and continue to take hard choices that lift farm productivity and keep Australian exports competitive against rivals, ABARES executive director Dr Steve Hatfield-Dodds told the 2020 ABARES Outlook Conference in Canberra recently.

“We have enjoyed a run of favourable output prices, particularly for livestock products.  These higher prices have accounted for about 90 per cent of the increase in output value over two decades,” Hatfield-Dodds said.

“While we all hope prices stay favourable, which ABARES considers likely for livestock over the next few years, getting to $100 billion will require hard work and tough choices.”

Hatfield-Dodds listed several steps that would be vital to meeting the National Farmer Federation’s goal of lifting the value of Australian agricultural production to $100 billion over the next decade, including maintaining the trend towards larger farms, as well as improvements in harnessing data and managing precious natural resources.

“Increased farm scale has accounted for more than two thirds of the growth in average broadacre farm income since 1990. Indeed, without this increase in scale is not clear that farming would be financially attractive to the next generation,” he said.

“Farm consolidation helps diffuse better management practices, and many technologies and capital equipment have economies of scale.”

While farmers were already adapting to drier conditions over the past two decades that were impacting on farm profits, Hatfield-Dodds said more challenges lay ahead.

Australia has one of the world’s most sophisticated water trading markets, designed to ensure water on the driest inhabited continent was put to best economic use.

“ABARES finds water trade delivers an average of $150 million in increased output value in the Murray Darling Basin each year – and four times that amount in a very dry year,” he said.

“Some communities are concerned about water trade moving water out of their region, and water recovery feels very here and now, while the benefits of a healthy working river feel distant – particularly in times of drought.

“We know that water markets are complex, and can be difficult to understand.  ABARES analysis finds a combination of factors are putting upward pressure on price of water allocations.

“The fundamental driver is that water markets have unlocked new opportunities.  People see these opportunities and are willing to bid for water to take advantage of them.

“Moving from old patterns of water use to new ones can be disruptive.  But it is also what puts food on the table, and keeps industry profitable.

“Recent perennial plantings, particularly of almonds, will help boost the value of Australian agriculture.  That is important.  These same almonds will also require more water as they come to maturity.

“This and other factors will see an ongoing trend towards higher average prices – benefiting entitlement holders, but adding to the pressures on some farms and sectors.”

In an increasingly connected and competitive world, Hatfield-Dodds said the producers and exporters of tomorrow must continue to focus on understanding consumers’ wants and needs, including being ready to substantiate claims around clean, healthy, and sustainable food.

Farmers in the future could also benefit from being paid to deliver conservation and ecosystem services alongside existing agricultural production, potentially boosting landholder incomes substantially.

“I think the stars might be aligning to make this practical at scale, delivering a new source of income for farmers and a range of public good benefits to the wider community,” Hatfield-Dodds said.

“The future will not be like the past.  We will need to anticipate, innovate and collaborate to stay ahead of the curve.”

Registrations for biennial event AUSPACK open

Registrations for AUSPACK 2019 are now open.

The globally recognised long-running biennial event, which is part of Packaging and Processing Week, is heading back to the Melbourne Convention and Exhibition Centre on March 26-29, 2019.

Australian Packaging and Processing Machinery Association (APPMA) chairman, Mark Dingley, said AUSPACK 2019 will showcase a host of global trends in the food, beverage and pharmaceutical processing and packaging industries.

“With a record Sydney show in 2017, our 2019 event returning to Melbourne is looking exciting, with the largest display of exhibitors yet.

READ: AUSPACK will showcase hundreds of exhibitors in Melbourne

“It will be the perfect place for those across the packaging and processing sectors to find solutions to increase efficiencies across their business,” said Dingley.

AUSPACK event director, Albert Kruger, said more than 350 suppliers representing 1,200 global brands will be part of the bigger and better display in 2019.

“The show floor has been designed to provide solutions that address a range of industry trends and themes,” said Kruger.

These trends and themes include:

  • digital printing for packaging
  • the explosion in e-commerce
  • Industry 4.0 and the Industrial Internet of Things
  • production-line-flexible machinery to meet the growing variety of packaged-good SKUs
  • machinery to produce accessible and convenient packaging formats
  • track-and-trace solutions to deal with the rise in counterfeiting, and growing concerns over food security and safety globally
  • processing, packaging and labelling equipment designed for the proliferation of craft and artisan food and beverage brands
  • sustainable packaging solutions
  • smart packaging
  • robotics
  • smart factories of the future

With the APPMA Awards of Excellence returning to be part of AUSPACK 2019, even more new initiatives will be announced as part of Packaging and Processing Week in the next few weeks.

These will give attendees excellent opportunities to learn, engage and network with the wider industry and their peers.

“AUSPACK 2019 will allow attendees to see first hand, products that offer even greater safety, security, automation and cost-saving benefits. The depth and breadth of exhibitors and attendees to AUSPACK bring fantastic networking opportunities with key players across the food, beverage and pharmaceutical markets,” said Kruger.

Registration to AUSPACK is free.

Australian wine exports to Germany grow by $10 million in one year

Australian wine exports to Germany have grown solidly from 37 million litres valued at $49 million in 2016–17 to 40 million litres valued at $59 million in 2017–18, a wine report indicates.

According to the Global Trade Atlas, in 2017–18, Italy was the biggest imported wine category by volume with a 35 per cent share, followed by Spain at 26 per cent, France at 15 per cent, South Africa  at 6 per cent, and Australia at 3 per cent.

Australia overtook Chile in 2017–18.

Germany is the world’s biggest imported wine market and fourth biggest wine market overall.

READ: Artificial Intelligence helps accurately map Australia’s 65 wine regions

It is Australia’s fifth largest export destination by volume and eighth by value.

The lower value ranking is principally due to the way in which wine is shipped from Australia to Germany – 85 per cent is shipped in bulk containers to be packaged in-market.

There were 20 bulk wine exporters and 105 bottled wine exporters to Germany in 2017–18.

The growth in the last 12 months has come through increased bulk shipments, up 11 per cent to 34 million litres, while bottled exports declined by 9 per cent to 6 million litres.

Driving the growth in bottled exports at $5 or more was Riesling and Chardonnay, which more than offset declines in Shiraz/Cabernet Sauvignon and Shiraz.

While Germany is a stable and mature market, new opportunities are being created in the German wine market by increasing involvement and greater consumer openness to experiment with new and different styles of wine.

The adult population in Germany in 2017 totalled 66.2 million people.

According to Wine Intelligence, of these, 44.2m drink wine at least once a year, 27.5m drink at least once a month and 19.5m drink wine weekly.

The International Wine and Spirit Record (IWSR), reported that in 2017 there were 276 million cases of wine sold in Germany, of which 51 per cent were imported wines.

The German market is price conscious with 71 per cent of still wine sales at the low-end of the market at less than $5 per bottle.

Premium to prestige wine sales, at $12 per bottle and above, represent 2.5 per cent of the still wine sales.

In 2017, there were declines at the bottom and top-end of the market.

Sales below $5 per bottle declined by 0.3 per cent, while sales above $24 per bottle fell by 1.9 per cent.

There was growth at the mid-range and premium price segments. Sales between about $5 and about $24 per bottle increased by 0.5 per cent.

The price profile of the German market reflects where Germans buy their wines.

Wine Intelligence reports that 58 per cent of regular wine drinkers purchased wine in a supermarket such as Rewe or Edeka, 45 per cent in a discounter such as Aldi or Lidl, and 43 per cent in a hyper-market such as Kaufland and Marktkauf.

In comparison, 32 per cent purchased wine from a specialist wine store.

Still red wine is the biggest category in the German market just ahead of still white wine.

However, while red wine sales declined by 1 per cent, white wine sales increased by 1 per cent.

Champagne is the fastest growing category with sales up 2.7 per cent, but it has only a 0.4 per cent share of the market.

But, other sparkling wine is the third biggest category in the German market, with a large proportion taken up by the locally made Sekt.

Wine Intelligence research indicates there has been a significant increase in regular wine drinkers in Germany who ‘enjoy trying new and different styles of wine’, particularly among younger consumers.

A growing number of German consumers think their choice of wine is an important decision, suggesting that they are becoming more involved with wine.

 

 

Red Meat Advisory Council reviews whether industry standards are fit for future

The Red Meat Advisory Council is undertaking an independent review of the rules of engagement in the red meat industry.

The review will look at the industry’s Memorandum of Understanding (MOU), and examine whether it properly represents all sectors of the industry and is fit for the future.

Jim Varghese will lead the review. He has a 30 year track record of delivering results, as both a CEO and as head of government agencies in Queensland and Victoria.

Minister for Agriculture, David Littleproud, said the red meat industry is big business and the industry needs to make sure it’s ready for new opportunities and challenges.

READ: Report shows Australia is the world leading exporter of lamb

“The MOU put in place 20 years ago carves out the funding and service delivery arrangements between peak councils, RDCs and the Commonwealth.

“What was put in place two decades ago might not be fit for today,” he said.

“The review is also in line with the recommendations of the senate inquiry into the effect of market consolidation on the red meat processing sector.

“It is an important opportunity to set the direction of the sector,” said Littleproud.

The beef cattle industry, including slaughter and live exports, is the largest contributor to Australian agriculture, with gross production at $13 billion.

Macadamia industry research finds consumers snack to manage mood

The Australian Macadamia industry has discovered that consumers are increasingly snacking as a way to manage their mood.

Participants in the research emphasised the importance of food manufacturers using clean and high quality ingredients in their snacks, which maximise nutritional benefits, and support improved moods and wellness.

Australian Macadamia Society market development manager Lynne Ziehlke said in recent years, the snacking category has been redefined with various trends that set the context for product innovation.

“One trend has remained consistent when it comes to snacking: most consumers want a snack that provides enough energy to sustain them and their frame of mind through their day,” said Ziehlke.

In August, the global macadamia industry launched a research project aimed at providing strong evidence to support the role of macadamias in a healthy diet.

Key macadamia-producing countries Australia, South Africa, Kenya, Brazil and Malawi have made a substantial financial investment into the research, and the project has been supported by the International Nut & Dried Fruit Council and INC World Forum.

The global macadamia health research project will be a large scale, long term randomised parallel intervention study delivered by researcher Professor Joan Sabate from Loma Linda University Medical Centre.

It is the first of its kind in the macadamia industry, and the first time that multiple origins have contributed to such a project.

It is considered critical to the industry’s ability to continue to market macadamias as a premium product.

Ziehlke said there is considerable research that shows eating tree nuts regularly can protect against coronary heart disease, decrease the risk of type 2 diabetes and help with weight management, as well as more than 200 research papers on the nutritional benefits of almonds and walnuts.

“Macadamias, like other tree nuts, have a potential cardio-protective role to play in a healthy, balanced diet and are a significant source of nutrients,” she said.

“To date, the macadamia industry has not undertaken any clinical research of this magnitude, so today’s announcement represents a significant milestone.

“As well as providing strong evidence to support the role of macadamias in a healthy diet, the research is expected to provide many new opportunities for the product and drive further new investment in research,” said Ziehlke.

The Southern African Macadamia Growers’ Association’s Barry Christie said that consumers are increasingly aware of the healthiness of nuts, which has helped to drive tree nut consumption by more than 75 per cent over the last ten years.

“We anticipate the outcomes of this research will help the global macadamia industry to capitalise even further on this trend, by guiding the development of more powerful messaging about the health benefits of macadamias to consumers, health professionals and regulators,” said Christie.

“It’s a very exciting development for our global industry, and we are delighted to be working together on a project that will benefit all macadamia producing regions,” he said.

The study will compare the effect of a diet enriched in macadamias versus a control diet on insulin resistance and insulin secretion in individuals with insulin resistance.

It will assess the effect of macadamia nut consumption on lipid profile (total cholesterol, LDL cholesterol, HDH cholesterol and triglycerides) and other emergent risk factors of cardiovascular disease as well as on central obesity and body composition.

 

Lamb skins exports reach $377 million last year with price increasing

The price of lamb skins has increased to 900ȼ per skin, with more than $377 million exported from Australia last year.

Prices increased in January after staying at about 700-750ȼ per skin since June 2017, according to the latest Meat and Livestock Australia (MLA) markets report.

Of more than $377 million exported raw sheep and lamb skins last year, 92 per cent went to China.

Australian Hide, Skin and Leather Exporters Association executive officer Dennis King said the skin trade can be influenced by social and political factors.

READ: Red meat exports have hit a high of $13.7 billion, superseding last year’s figures

“The fashion industry is particularly susceptible to influence from activist groups and, in recent years, we’ve seen big global brands move away from using leather products in favour of synthetic alternatives,” he said.

“While this has had an effect on demand for hide, the market for lamb skins remains strong,” said King.

The pending elimination of a 7 per cent tariff on sheep skins by 1 January 2019 under the China–Australia Free Trade Agreement is also not expected to have a significant impact, he said.

“Australia and New Zealand are the main producers of sheep skins, so the volume of product cannot be sourced from other countries.

“In terms of quality, Australia produces a superior product, so our market should remain secure,” said King.

Simon Matters, who manages Thomas Foods International’s skin, hide and wool division, said about 60 per cent of lambs processed by the company will make the cut for the premium skin market.

“The ideal lamb skin will have at least half an inch (1.2cm) of fine, dense wool – this is crucial for the premium market, as these skins will be used for high quality garments and underlays,” he said.

“Best practice management on-farm for fine wool tends to flow through to skin value as customers pay a premium for finer microns and unmarked hides,” said Matters.

Weather discolouration to the tip and staple of wool can have a detrimental effect on skin value, as this cannot be dyed out, and shearing cuts and branding fluid also reduce skin quality.

“Australia has a reputation for producing premium skins – our skins are highly sought after and it’s important we retain this status,” said Matters.

Sheep counting app counts and records farmers’ stock numbers

Central West farmer Marian McGann is helping farmers sleep better at night by developing an app that counts and records their stock numbers while they’re out in the paddock.

Jobs for NSW New England Agtech cluster champion, Chris Celovic, said McGann received a $25,000 Minimum Viable Product grant from Jobs for NSW to develop the ‘stock keeper’ app and a synchronised web portal to manage livestock counts.

“This is a fantastic example of how Jobs for NSW is helping regional technology startups become high-growth businesses of the future,” said Celovic.

“Jobs for NSW is dedicated to supporting regional startups and scaleups with 30 per cent of its $190 million fund earmarked for regional entrepreneurs,” he said.

READ: Australia’s sheepmeat exports to China saw the largest ever start to the year

McGann has a 2,000 hectare sheep farm with 7,000 fine wool ewes at Wyangala. She said she came up with the idea after an ordinary day in the sheep yard sparked a family discussion about the difficulties of getting an accurate sheep count.

“We had sheep stolen seven years ago and it nearly broke the farm. So I went home that night and decided to develop an app to solve the problem,” said McGann.

“Currently many farmers record livestock numbers in pocket notebooks, on pieces of paper, diaries or some other medium, and often when they need to review the history of stock numbers it is a very frustrating process,” she said.

“I designed an app that would keep records on livestock events and tallies and commissioned Appiwork at Bathurst to construct the app with a web portal. The app and synchronised web portal creates records on livestock activity – making it a powerful reporting and decision-making tool for the farmer,” said McGann.

“The app was launched in July and is quickly attracting users. It can work without mobile service – so it’s always ‘paddock friendly’ – and automatically synchronises with the web portal,” she said.

The Jobs for NSW and the NSW Government’s business connect service had been immensely helpful in getting the project off the ground, said McGann.

“The Jobs for NSW funding and support from business connect advisor Russell Meadley helped me turn an idea into something tangible.I am now in the process of marketing the app across NSW and Australia and I think it would have a huge application overseas. I would like to take it global,” she said.

Bumper harvest for rural jobs as agriculture sector ploughs ahead

Queensland’s agriculture sector is growing jobs as well as sugar cane, chickpeas and avocados.

Despite the drought affecting large parts of the state, there’s been a rich harvest of new employment opportunities in agriculture, forestry and fishing in the past 12 months.

Agriculture minister Mark Furner said the sector had created 10,500 new jobs between June 2017 and June 2018.

“The latest Labour Force data from the Australian Bureau of Statistics shows primary production in Queensland continues to do much more than put food on our plates,” said Furner.

READ: Sheep and cattle slaughter increases to reduce stock numbers during drought

“The new high growth crop for Queensland’s farms is jobs and that’s because our producers and food sector businesses are working hard to take advantage of new opportunities. It is also because the programs put in place by the Palaszczuk government are working,” he said.

Creating jobs for Queenslanders was the government’s highest priority.

“Our produce has a fantastic reputation for quality and reliability both at home and abroad. That is why it is in demand and our farmers are meeting that demand,” said Furner.

The agriculture industry continued to grow on the back of technological advances and the courting of expanding Asian export markets, he said.

“The Palaszczuk government has invested tens of millions of dollars to ensure the produce we send overseas is not only of the highest quality but is also tailored to specific regional tastes, whether that be in markets in Japan or supermarket shelves in Indonesia,” he said.

“We have also continued to support the Queensland Agriculture Workers Network (QAWN) and Rural Jobs and Skills Alliance to support and facilitate employment opportunities for people in rural and regional parts of the state.

“In this year’s budget more than $3 million was allocated to these programs to continue the good work being done in this area,” said Furner.

Carl Walker, president of Bowen Gumlu Growers Association and owner of Phantom Produce, said QAWN was playing an important role in helping producers to expand their workforces.

It assisted growers in the North Queensland region to connect with the available employment and training initiatives, he said.

“As farmers we are able to go about our core business of growing fruit and vegetables, QAWN provides us with an essential information resource to help us to attract and employ people with the right skills and attributes at all stages of the season,” said Walker.

Workshops across Australia aim to help growers with pest and disease management

A series of free workshops to be held across Australia in August and September will give growers help with pest and disease management.

They will have the opportunity to hear from leading entomologists on how they can use integrated pest and disease management to help maintain orchard health and viability.

The nine workshops will focus on pests and diseases affecting local orchards in each state, including control measures and chemical interactions.

The workshops form part of a pest, disease and weed management program for the Australian apple and pear industry, which is a levy-funded project delivered under the management of Agriculture Victoria entomologist, David Williams.

READ: Hybrid mega-pest threatening global food crops

Williams is recognised nationally and internationally for expertise in integrated pest and disease management development and adoption.

Williams will be the key speaker at the nine workshops being held around Australia in August and September.

He will be joined by Australian experts and fellow entomologist, Christopher Adams, from Michigan State University.

The free workshops start on the 21st of August in Tatura, Victoria and on the 22nd of August in Bundoora.

There will also be workshops in Tasmania, SA, WA, NSW and Queensland.

Orchardists will hear case studies of successful initiatives and be guided through a process of developing their individual integrated pest and disease management plans for the coming season.

Participants will also have an opportunity to identify a local pest or disease management issue for further study.

The workshops are part of a project funded by Hort Innovation using the Apple and Pear research and development levy and funds from the Australian Government.

The Victorian Department of Economic Development, Jobs, Transport and Resources is delivering the project in collaboration with Queensland Department of Agriculture and Fisheries, NSW Department of Primary Industries, Western Australia Primary Industries and Regional Development, Tasmania’s Institute of Agriculture; and Lenswood Cooperative.