Agricultural commodities

Department of Agriculture and Water Resources

Agricultural commodities Research by the Australian Bureau of Agricultural and Resource Economics and Sciences

SEPTEMBER QUARTER 2016

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Contents Economic overview

4

Crops Wheat 31 Coarse grains 39 Oilseeds 47 Sugar 57 Cotton 65 Livestock Beef and veal 77 Sheep meat and wool 83 Chicken meat 96 Pig meat 100 Dairy 104 Boxes Understanding ABARES agricultural forecasts Climate influences and growing conditions Chinese cotton policy: direct payments to domestic growers Middle East: the impact of lower oil prices on demand for sheep meat

21 23 69 92

Articles The EU almond industry EU sugar industry Investment in Australian farms

112 119 138

Statistical tables

155

Report extracts

197

ABARES contacts

201

ABARES Agricultural commodities – vol. 6 no. 3 • September quarter 2016

1

Department of Agriculture and Water Resources

2016

Regional Outlook conferences 2016

Join ABARES at a Regional Outlook conference in your area The ABARES Regional Outlook conferences are an essential part of our delivery of commodity forecasts and research results directly to regional communities. Each conference is tailored to your region, and ABARES works with local organisations to develop the conference programs. At each Regional Outlook conference, senior ABARES economists present the economic overview and forecasts for key agricultural commodities and farm �inancial performance. A range of regionally based speakers and producers cover topics such as industry opportunities and challenges, natural resource management, labour and water issues, and case studies from regional business people who are taking innovative approaches. Conference delegates can hear commodity forecasts, discuss industry trends, access information and make new contacts in their community that can encourage new approaches to traditional issues. Delegates include farmers and other producers, bankers, consultants and other service providers, rural counsellors, local business owners, state and local government staff, regional development groups and many others with an interest in their region.

For program inquiries contact Peter Collins Phone +61 2 6272 2017 To register your interest in upcoming conferences contact ABARES Events team at [email protected]

agriculture.gov.au/abares/regional

The Regional Outlook conferences follow from the national Outlook 2016 conference in Canberra in March with its theme of Investing in agriculture – growing our future.

2016 locations and dates Tasmania South Australia Northern Territory Queensland Western Australia Victoria New South Wales

Hobart Port Lincoln Darwin Townsville Bunbury Traralgon Griffith

27 April 18 May 6 July 27 July 17 August 5 October 26 October

Economic overview

Economic overview Natasha Frawley and Matthew Howden

• World economic growth is assumed to fall from an estimated 3.1 per cent in 2015

to 2.8 per cent in 2016, before recovering to 3.3 per cent in 2017.

• Uncertainty stemming from the United Kingdom’s vote to leave the European Union

has become a downside risk to global economic growth.

• An assumed relatively weak Australian dollar supports the forecast for

Australian farm exports of around $44 billion in 2016–17.

Global economic outlook in 2016 and 2017 World economic growth fell from 3.4 per cent in 2014 to 3.1 per cent in 2015, the lowest rate of growth since 2009. Growth is expected to continue to weaken in 2016. In preparing this set of agricultural commodity forecasts, world economic growth is assumed to average 2.8 per cent in 2016. In 2017 it is expected to strengthen to 3.3 per cent, supported by stronger growth in emerging countries.

World economic growth, 2001 to 2017 6 5 4 3 2 1 0 % 2001

2003

2005

2007

2009

2011

2013

2015

a ABARES assumption.

4


2017a

Economic overview

Falls in the prices of oil and other energy sources have had mixed effects on global economic growth. After falling to a 12-year low in January 2016, oil prices recovered somewhat between February and July 2016 but still remain generally lower than in 2015. Lower energy prices have helped support household disposable incomes and lowered business costs. However, lower prices have also reduced returns to energy exporters and weakened investment in the energy industry worldwide. Over the outlook period, oil prices are assumed to increase modestly as demand strengthens and global oil stocks begin to fall.

In aggregate, economic growth in OECD countries is assumed to weaken to 1.5 per cent in 2016 before rising to 1.6 per cent in 2017. In the United States, weaker US exports are expected to slow its economic growth in 2016. This is despite the relatively low unemployment rate and stronger consumption growth. Economic conditions in Japan remain fragile. In the eurozone, economic improvement has been slow.

Fuel (energy) index, January 2000 to August 2016 250 200 150 100 50 price index 2005=100 Aug 2000

Aug 2002

Aug 2004

Aug 2006

Aug 2008

Aug 2010

Aug 2012

Aug 2014

Aug 2016

Note: Includes crude oil (petroleum), natural gas and coal price indexes.

The long-term global economic impact of the United Kingdom’s vote to leave the European Union (Brexit) is unclear. The full terms of the new relationship between the European Union and the United Kingdom will not be known for several years at least. In the short run, the largest risk to economies from Brexit stems from uncertainty about the outcomes of future negotiations between the European Union and the United Kingdom. This uncertainty is expected to negatively affect private consumption, trade and investment in the United Kingdom and other European countries but could also extend globally.

Economic growth in many non-OECD countries is expected to weaken in 2016 before recovering in 2017. For non-OECD countries as a whole, economic growth is assumed to average 3.8 per cent in 2016 and strengthen to 4.5 per cent in 2017.


5

Economic overview

Growth in China was 6.9 per cent in 2015, the lowest annual rate in 25 years, and is assumed to continue to ease in the short term. Slower Chinese economic growth poses a considerable downside risk to global economic growth. Slower than expected growth in China could adversely affect business and consumer confidence inside and outside China, leading to weaker global economic activity than currently assumed. Economic growth in Latin America is expected to contract further during 2016 as a result of recessions in Argentina and Brazil. The fall in the price of exported commodities, including iron ore and crude oil, and the loss of consumer and investor confidence are expected to keep the Brazilian economy in recession through 2016 and 2017. However, economic growth in Argentina, Colombia and Peru is expected to recover in 2017 as a result of increased investment and policy reforms.

The economy of the Russian Federation contracted in 2015 and early 2016 as a result of falling oil prices, geopolitical tensions and extended trade sanctions. As the oil price recovers, the Russian economy is expected to slowly recover from 2017. Economic growth in India remained strong in 2015 and is expected to accelerate further in 2016 and 2017. Looser monetary policy and increased investment are expected to support continued strong economic growth.

Regional economic growth, 2015 to 2017 8

2015 2016a 2017a

6 4 2 0 % OECD Non-OECD Asia b

Latin America World Eastern Europe, Russian Federation and Ukraine

a ABARES assumption. b Includes China.

6


Economic overview

Key macroeconomic assumptions, Key macroeconomic assumptions, 2014 to 2017 2014 to 2017 World Economic growth OECD United States Japan Eurozone – Germany – France – Italy United Kingdom Korea, Rep. of New Zealand non-OECD – non-OECD Asia South-East Asia b China c Taiwan Singapore India – Latin America Russian Federation Ukraine Eastern Europe World d Inflation United States Interest rates US prime rate e

unit

2014

2015

2016 a

2017 a

% % % % % % % % % % % % % % % % % % % % % %

1.8 2.4 –0.0 0.9 1.6 0.2 –0.3 2.9 3.3 3.0 4.6 6.8 4.6 7.3 3.9 3.3 7.0 1.3 0.7 –6.6 2.8 3.4

1.9 2.6 0.5 1.6 1.5 1.1 0.8 2.2 2.6 3.4 4.0 6.6 4.8 6.9 0.7 2.0 7.2 –0.1 –3.7 –9.9 3.5 3.1

1.5 1.6 0.3 1.5 1.5 1.3 1.1 1.6 2.6 2.8 3.8 6.2 4.7 6.5 1.0 1.7 7.5 –0.5 –1.2 1.2 3.0 2.8

1.6 2.0 0.3 1.4 1.2 1.5 1.0 0.8 2.8 2.6 4.5 6.4 5.0 6.5 1.8 1.9 7.8 1.5 0.5 2.5 3.0 3.3

%

1.6

0.1

0.8

1.5

%

3.3

3.3

3.5

3.9

Australia Economic growth Inflation Interest rates g Australian exchange rates US$/A$ TWI for A$ h

unit % % %

2013–14 2.5 2.7 4.6 0.92

2014–15 2015–16 a 2016–17 a 2.3 2.9 2.7 1.7 1.4 1.7 4.3 4.1 3.9 0.84

0.73

0.73

71 67 62 62 a ABARES assumption. b Indonesia, Malaysia, the Philippines, Thailand and Vietnam. c Excludes Hong Kong. d Weighted using 2015 purchasing-power-parity valuation of country gross domestic product by the International Monetary Fund. e Commercial bank prime lending rates in the United States. g Large business weighted-average variable rate on credit outstanding. h Base: May 1970 = 100. Sources: ABARES; Australian Bureau of Statistics; International Monetary Fund; Organisation for Economic Co-operation and Development; Reserve Bank of Australia; US Bureau of Labor Statistics; US Federal Reserve


7

Economic overview

Economic prospects in Australia’s major export markets Chinese growth supported by stimulus measures, but downside risks persist In preparing this set of agricultural commodity forecasts, economic growth in China is assumed to slow to 6.5 per cent in 2016 and 2017. Real gross domestic product (GDP) in China in the first half of 2016 grew 6.7 per cent when compared with the corresponding six months in 2015. This is down from the average economic growth of 6.9 per cent for 2015 as a whole.

The Chinese economy is expected to grow at its slowest rate in 25 years over the remainder of 2016 and in 2017, supported by fiscal stimulus and accommodating monetary policy. The slower economic growth rate partly reflects structural adjustment as China moves away from a growth model based on strong investment and export growth towards one of greater reliance on domestic consumption. However, fiscal stimulus measures aimed at boosting investment and export growth in the short term are likely to delay the ongoing structural adjustment process.

Chinese GDP growth is increasingly driven by the services sector, which has contributed more than 50 per cent to GDP since the beginning of 2015. In the June quarter 2016 alone, the services sector grew by 7.5 per cent year on year. Growth in mining and the industrial sector continued to slow in the June quarter 2016. Investment growth in the first half of 2016 was strong in some manufacturing industries, including automobile manufacturing, but was weak in steel manufacturing. Investment in mining industries fell. Weaker demand for inputs to production resulted in a 10 per cent year-on-year fall in imports in the first half of 2016, after falling by 14 per cent in 2015 as a whole. The value of China’s exports fell by around 3 per cent in 2015 before contracting further by 8 per cent year on year in the first half of 2016.

The Chinese Government has implemented a number of fiscal measures since 2015 to stimulate the slowing economy, including policy changes to encourage lending for property and increased spending on infrastructure. These measures are expected to support the construction and manufacturing industries in the short term. The Chinese housing market rebounded in the first half of 2016 in response to stimulus measures. These measures included a lower requirement for minimum mortgage down payments, decreased lending rates and a reduction in property transaction taxes. Housing starts fell for eight consecutive quarters through 2014 and 2015. However, housing starts increased by 14.8 per cent year on year in the March quarter 2016 and by 13.5 per cent in the June quarter. Housing prices in large and medium cities also grew by 2 per cent year on year in the March quarter 2016 before accelerating to 5 per cent in the June quarter.

8


Economic overview

Selected housing market indicators, China, year-on-year change, March quarter 2012 to June quarter 2016 50

10

40

8

30

6

20

4

10

2

0

0

–10

–2

–20

–4

%

Housing starts Housing price (right axis)

% Jun 2012

Jun 2013

Jun 2014

Jun 2015

Jun 2016

Note: Simple average of the change in price indexes in 70 large and medium Chinese cities. Excludes public housing.

Loosening monetary conditions and fiscal stimulus measures in China have added to rising corporate, government and household debt. Slowing investment growth and rising corporate debt—the main driver of increasing national debt—pose significant risks to the Chinese economy. Slower than expected investment growth could contribute to a contraction in economic activity in China, particularly if firms have difficulty servicing debt and become insolvent.

Debt-to-GDP ratios, by borrowing sector, China, March quarter 2006 to December quarter 2015 300

Households Government Corporate

250 200 150 100 50 % Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Note: Data unavailable for households and corporations before 2006. December quarter 2015 data were latest available as at mid September 2016.


9

Economic overview

United States economy continues to expand but pace has slowed In preparing this set of agricultural commodity forecasts, economic growth in the United States is assumed to average around 1.6 per cent in 2016 and 2 per cent in 2017. The June quarter 2016 GDP growth was 1.2 per cent, down from 3 per cent year on year in the June quarter 2015. This compares with 2.6 per cent growth for 2015 as a whole. Private consumption remains the biggest driver of growth in the US economy. In the first half of 2016, private consumption was 2.6 per cent higher than in the first half of 2015. Spending on durable goods remained the largest contributor to growth, increasing by 4.8 per cent year on year in the June quarter 2016.

The strengthening labour market is expected to continue to support growth in private consumption and residential investment, the main drivers of growth in the United States. The US unemployment rate decreased to 4.9 per cent in the June quarter 2016, from 5.4 per cent in the June quarter 2015. This was mainly driven by the services sector, which recorded employment growth of 2 per cent year on year in the June quarter. Strong demand for business and professional services, and increased government spending on health care, supported employment growth in these industries. In the same period, employment fell by 17.3 per cent year on year in mining industries. Low world mineral resource prices contributed to the fall in mining employment.

Monthly unemployment rate, United States, August 2009 to August 2016 12 10 8 6 4 2 % Aug 2009

Aug 2010

Aug 2011

Aug 2012

Aug 2013

Aug 2014

Aug 2015

Aug 2016

An expected increase in the official interest rate is likely to support the value of the US dollar and subdue export growth over the outlook period. Despite the value of the US dollar decreasing by 2.5 per cent in the June quarter 2016 compared with the March quarter, it remained strong against other currencies. The real trade-weighted value of the US dollar increased by 3.8 per cent year on year in the June quarter.

10


Economic overview

Exports and manufacturing growth are expected to remain weak in the short term. The strong US dollar contributed to weaker demand for US exports, the value of which fell by 4.6 per cent year on year in the June quarter 2016. This weaker demand contributed to a 4.1 per cent year-on-year fall in manufacturing orders in the June quarter.

Trade-weighted exchange rate and manufacturing demand, United States, June quarter 2009 to June quarter 2016 110

Trade-weighted index (US$) March 1973 = 100 Value of manufacturers’ new orders for capital goods index December 2014 = 100

100 90 80 70 index Jun 2009

Jun 2010

Jun 2011

Jun 2012

Jun 2013

Jun 2014

Jun 2015

Jun 2016

Private investment fell by 3.4 per cent year on year in the June quarter 2016. This was largely the result of a 1 per cent fall in business investment over the same period, particularly in the mining industry. In 2017 growth in business investment is expected to recover somewhat in response to an assumed increase in world economic growth.

Inflation remains below the US Federal Reserve’s target of 2 per cent. The Federal Reserve’s preferred measure of inflation is the personal consumption expenditures (PCE) index, excluding food and energy prices. The PCE index increased by 1.6 per cent year on year in the June quarter 2016. Increases in the price of housing, health care and recreation services were partly offset by falls in the price of household appliances, furnishings and automotive vehicles. The Federal Reserve’s official interest rate has remained between 0.25 per cent and 0.5 per cent since December 2015. Low inflation, uncertainty in global markets and weak private investment contributed to the Federal Reserve maintaining its accommodating monetary policy in the first half of 2016. However, the Federal Reserve is expected to increase interest rates at least once before the end of 2017 as domestic and global economic conditions improve.

Low mortgage rates have kept housing demand strong. Despite an increase in the official interest rate in December 2015, mortgage rates in the June quarter 2016 were 3.6 per cent, the lowest since the March quarter 2013. Increased investment in mortgage-backed securities has put downward pressure on mortgage rates. As a result, sales of new homes in the June quarter 2016 were 15.8 per cent higher year on year.


11

Economic overview

Brexit causes uncertainty for European economies Economic growth in the eurozone is expected to be 1.5 per cent in 2016 and 1.4 per cent in 2017. The eurozone economy grew by 2.2 per cent year on year in the June quarter 2016, up from 1.6 per cent in the March quarter. Throughout the remainder of 2016 and in 2017, private consumption growth and looser monetary policy are expected to support modest economic growth in the eurozone. Low oil prices, accommodating monetary policy and ongoing job creation have continued to support growth in private consumption in the eurozone. Private consumption expenditure grew by 2.0 per cent year on year in the first half of 2016, up from an average of 1.8 per cent in 2015 and 0.8 per cent in 2014. Domestic demand has been the strongest driver of economic growth in the eurozone since 2014.

Although slow, recovering economic growth has reduced unemployment in the eurozone region. The unemployment rate fell to 10.1 per cent in the June quarter 2016, down from 11.0 per cent in the June quarter 2015. Youth unemployment has remained high since peaking at 24.6 per cent in January 2013. Countries most affected by the European debt crisis—including Greece and Spain—continued to have particularly high levels of youth unemployment in early 2016, averaging between 40 per cent and 50 per cent. Export growth in the eurozone slowed to 2.9 per cent year on year in the first half of 2016. The weaker global economy and a small increase in the value of the euro has dampened demand for European exports. Germany, France and Italy are some of the United Kingdom’s largest sources of imports. Since the Brexit vote, the value of the British pound has remained at a three-year low against the euro and is expected to continue to remain weak over the outlook period. The low value of the pound has made imports into the United Kingdom relatively expensive. This is expected to negatively affect eurozone export growth over the outlook period.

Import and export growth and euro effective exchange rate, eurozone, June quarter 2011 to June quarter 2016 12

100

8

95

Quarterly year-on-year export growth Quarterly year-on-year import growth

4

90

Real effective exchange rate index (€) Q1 1999 = 100 (right axis)

0

85

%

index Jun 2011

12

Jun 2012

Jun 2013

Jun 2014

Jun 2015


Jun 2016

Economic overview

The UK economy is expected to grow by 1.6 per cent in 2016 and 0.8 per cent in 2017. Economic growth in the United Kingdom was relatively strong in the first half of 2016 at 2.1 per cent year on year. However, uncertainty arising from the Brexit vote is expected to dampen growth in the second half of 2016 and in 2017. Uncertainty about the future relationship between the European Union and the United Kingdom following Brexit is expected to dampen confidence and result in slower private consumption and investment growth in the United Kingdom and other European countries.

Growth in Japan remains slow

In preparing this set of agricultural forecasts, the Japanese economy is expected to grow by 0.3 per cent in 2016 and in 2017. The Japanese economy grew by 0.8 per cent year on year in the June quarter 2016, driven primarily by private consumption growth. From 2013 to 2015 private consumption growth was weak as a result of declining real wages. In the March quarter 2016 year-on-year growth was –0.2 per cent, but in the June quarter 2016 it accelerated to 0.4 per cent year on year.

Inflation remains well below the Bank of Japan’s (BoJ) target rate of 2 per cent. The BoJ’s preferred measure of core inflation—which excludes fresh food and energy prices—increased by 0.7 per cent year on year in the June quarter 2016. Prices of clothing, education, entertainment and recreation increased. In contrast, the prices of transportation and communication decreased.

At the BoJ’s July 2016 meeting, interest rates were left unchanged at –0.1 per cent. The BoJ also maintained its 80 trillion yen a year asset purchase programme and reaffirmed its commitment to working with the government to increase inflation. In July, the Japanese Government announced a 13.5 trillion yen fiscal stimulus package to finance infrastructure projects and expand welfare support. Of the 13.5 trillion yen announced, 4.6 trillion yen is budgeted for the 2016–17 financial year (1 April to 31 March). Spending initiatives include increased childcare subsidies and welfare payments to pensioners and a one-off cash payment to citizens on low incomes. The government expects these measures to stimulate economic activity and gradually put upward pressure on core inflation.

The yen continued to appreciate against other major currencies in the June quarter 2016. The trade-weighted value of the yen increased by more than 14 per cent year on year, making Japanese exports more expensive. The value of the yen is being driven up by investors seeking a safe investment in Japanese Government bonds. Even with very low yields, Japanese bonds are an attractive investment because of their safety in a time of weak global growth and economic uncertainty. The value of Japanese exports fell by more than 9 per cent year on year in the June quarter 2016. Decreased export demand has negatively affected Japanese industrial production, which declined by 1.8 per cent year on year in the same period. For the remainder of 2016, export and manufacturing growth is expected to remain weak as the yen remains relatively strong.


13

Economic overview

As global economic conditions improve in 2017, international investors are expected to move investment away from low-yielding Japanese Government bonds to investments with higher potential returns in other markets. This is expected to result in a currency depreciation and provide a small boost to exports. Low levels of inflation remain a risk to the outlook because efforts to stimulate higher inflation through monetary and fiscal policy have not met the target rate set by the BoJ.

Trade-weighted exchange rate and real value of exports, Japan, March quarter 2015 to June quarter 2016 7.0

80

6.5

75

6.0

70

5.5

65

trillion yen

Exports Trade-weighted index (¥) May 2010 = 100 (right axis)

index Mar 2015

Jun 2015

Sep 2015

Dec 2015

Mar 2016

Jun 2016

Other non-OECD Asian economies to strengthen Economic growth in many non-OECD Asian economies strengthened in early 2016 following relatively weaker growth in 2015. China is the largest trading partner for most non-OECD Asian economies. Therefore, slower than expected economic growth in China would pose a downside risk to economies in the region.

Economic growth, other non-OECD Asian countries, 2015 to 2017 8

2015 2016a 2017a

7 6 5 4 3 2 1 % India

Malaysia Singapore Thailand Indonesia Philippines Taiwan Vietnam

a ABARES assumption.

14


Economic overview

South-East Asia Economic growth in South-East Asia is assumed to be around 4.7 per cent in 2016 and to increase to 5.0 per cent in 2017, supported by an assumed recovery in global economic growth.

South-East Asian economies are estimated to have grown by an average of 4.8 per cent year on year in the first half of 2016, unchanged from the 2015 annual average. The region’s largest economy is Indonesia. Economic growth in Indonesia strengthened in early 2016 as a result of strong private consumption growth and increased government spending. However, exports of goods and services contracted compared with the first half of 2015.

India

India’s economy is assumed to continue to grow strongly at 7.5 per cent in 2016 and 7.8 per cent in 2017. The Indian economy performed strongly in the first half of 2016, with growth of 7.5 per cent year on year. Prospects for the rest of 2016 are subject to summer monsoon rainfall. A favourable monsoon boosts agricultural output and incomes in India. It also puts downward pressure on food prices, which subdues inflation.

The Reserve Bank of India (RBI) cut interest rates four times in 2015 and lowered them again in April 2016 to a five-year low of 6.5 per cent. Inflation was 5.6 per cent year on year in the June quarter, slightly above the RBI’s medium-term inflation target of 5 per cent.

Australian economic growth

Australia’s economic growth was 2.9 per cent in 2015–16, up from 2.3 per cent in 2014–15. Real GDP grew at a year-on-year rate of 2.9 per cent in the March quarter and 3.3 per cent in the June quarter 2016. For the Australian economy as a whole, growth in 2016–17 is assumed to be slower than 2015–16 at around 2.7 per cent. The Reserve Bank of Australia (RBA) reduced the cash rate to the historic low of 1.5 per cent in August 2016. Low interest rates are expected to support consumer spending and business investment in the short term.


15

Economic overview

Economic indicators, Australia, 2014–15 to 2016–17 5

Economic growth Inflation rate Interest rate b

4 3 2 1 % 2014–15

2015–16

2016–17a

a ABARES assumption. b Large business weighted-average variable rate on credit outstanding.

The mining sector remains weak as a result of reduced investment following weaker demand for Australia’s mineral and energy exports. However, non-mining business investment is assumed to pick up gradually in 2016–17 in response to low domestic interest rates and the assumed low value of the Australian dollar. Growth in private consumption is expected to remain firm.

Inflation

Inflation was lower than expected in the June quarter 2016. The consumer price index increased by 1.0 per cent year on year in the June quarter 2016, following an increase of 1.3 per cent in the March quarter. Inflation has remained below the RBA’s target band of 2 per cent to 3 per cent since the December quarter 2014. The most significant quarter-on-quarter price rises in June were in medical and hospital services (up 4.2 per cent), automotive fuel (up 5.9 per cent), tobacco (up 2.1 per cent) and new dwelling purchases by owner-occupiers (up 0.9 per cent). Partly offsetting these rises were falls in the prices of domestic holiday travel and accommodation (down 3.7 per cent), motor vehicles (down 1.3 per cent) and telecommunication equipment (down 1.5 per cent). The inflation rate in Australia is assumed to slowly increase to 2 per cent by the June quarter 2017. In 2016–17 inflation is assumed to average 1.7 per cent, compared with 1.4 per cent in 2015–16.

Australian dollar

In preparing this set of agricultural commodity projections, the Australian dollar is assumed to remain relatively weak in the short term. The Australian dollar averaged US73 cents in 2015–16, 13 per cent lower than its 2014–15 average of US84 cents. In 2016–17 the Australian dollar is assumed to average US73 cents and have a trade-weighted index value of 62. The dollar was trading at around US75 cents in mid September 2016.

16


Economic overview

Terms of trade and exchange rates, Australia, June quarter 2004 to June quarter 2016 140

140

120

120

100

100

80

80

60

60

index

Terms of trade index 2013–14 = 100 Exchange rate, USc/A$ (right axis) Trade-weighted index (A$) May 1970 = 100

USc/A$ Jun 2004

Jun 2006

Jun 2008

Jun 2010

Jun 2012

Jun 2014

Jun 2016

Australia’s terms of trade—the ratio of export prices to import prices—is an indicator of the fundamental value of the Australian dollar. The terms of trade declined by 33 per cent between the June quarter 2011 and the June quarter 2016, mainly reflecting the continued weakening of prices for mineral resources on world markets. Over the same period, the Australian dollar declined by 30 per cent against the US dollar and by 19 per cent on a trade-weighted basis. Differentials between interest rates in Australia and in major world economies also influence demand for the Australian dollar. Despite record low official interest rates in Australia, commercial rates remain significantly higher than those in Europe and Japan. This encourages international investors to seek higher returns in Australia and sustains demand for the Australian dollar. Ongoing asset purchasing programmes in Japan and the eurozone are expected to help keep interest rates low in those economies over the outlook period, which could lend support to the value of the Australian dollar. Interest rate differentials between Australia and the United States narrowed in December 2015, when the US Federal Reserve increased official interest rates. They narrowed further in May and August 2016, when the RBA decreased the cash rate to the historic low of 1.5 per cent. Over the outlook period, the Federal Reserve is expected to increase interest rates while the RBA is expected to lower interest rates. This would narrow the differential further and put downward pressure on the value of the Australian dollar relative to the US dollar. Movements in the Australian dollar are also influenced by changes in financial market sentiment towards the Australian economy and the outlook for major world economies. Weak global demand for mineral resources in response to slowing economic growth in China could also put downward pressure on the Australian dollar.


17

Economic overview

Outlook for Australian agricultural and fisheries exports Total volume of farm production is forecast to rise by 2.8 per cent in 2016–17, following an estimated 2.3 per cent decrease in 2015–16. The forecast rise in 2016–17 reflects increased crop production.

The index of unit returns for Australian farm exports is forecast to decrease by 2.7 per cent in 2016–17, following an estimated 5.3 per cent increase in 2015–16. Declines in export prices in Australian dollar terms are forecast in 2016–17 for wheat, barley, dairy products and chickpeas. These will more than offset the expected increases in export prices for wool, sugar, wine, cotton, lamb, canola, live feeder/ slaughter cattle and mutton. Earnings from farm exports in 2016–17 are forecast to fall to $44.0 billion, following an estimated 1.3 per cent increase in 2015–16 to $44.5 billion.

Crops

Export earnings for crops are forecast to rise to around $22.9 billion in 2016–17, from an estimated $22.6 billion in 2015–16. Strong rises in export earnings in 2016–17 are forecast for sugar (up 21 per cent), cotton (up 40 per cent) and canola (up 43 per cent). These increases are expected to be partially offset by decreased export earnings for chickpeas (down 32 per cent). However, export earnings for wheat and coarse grains are expected to remain largely unchanged.

Livestock

Export earnings for livestock and livestock products are forecast to fall to $21.0 billion in 2016–17, from an estimated $21.9 billion in 2015–16. This forecast fall is mostly driven by expected lower Australian supplies of beef and weaker beef import demand from some markets.

Export earnings in 2016–17 are forecast to fall for beef and veal (down 12 per cent), dairy (down 1 per cent), live feeder/slaughter cattle (down 4 per cent) and mutton (down 17 per cent). These decreases are partially offset by forecast increases in export earnings for wool (up 6 per cent) and lamb (up 3 per cent).

Fisheries

Export earnings for fisheries products are forecast to rise to $1.7 billion in 2016–17, from an estimated $1.5 billion in 2015–16. Export earnings in 2016–17 are forecast to rise for rock lobster (up 15 per cent) as a result of strengthening demand from China. Export earnings for salmonids are forecast to rise by 10 per cent as prices respond to reduced world supplies. Export earnings for tuna are forecast to fall in 2016–17 (down 3 per cent) as a result of weaker demand from Japan.

18


Economic overview

Major Australian agricultural commodity exports 2016–17f

2016–17

2015–16s

Volume Price a Value

Value

$7.25b $8.28b

Beef and veal

$5.11b $5.12b

Wheat

$3.47b $3.28b

Wool

$2.30b $1.89b

Sugar

$2.20b $2.18b

Wine

$1.92b $1.79b

Barley

$1.75b $1.26b

Cotton

$1.69b $1.64b

Lamb

$1.56b $1.10b

Canola

–12%

9%

–12%

17%

–15%

0%

–1%

4%

6%

3%

19%

21%

0%

1%

1%

26%

–12%

7%

30%

7%

40%

–1%

12%

3%

39%

2%

43%

$1.25b $1.30b

Live feeder/ slaughter cattle –12%

9%

–4%

$0.84b $0.86b

Cheese

3%

–2%

–3%

$0.79b $0.69b

Rock lobster

5%

9%

15%

$0.69b $1.01b

Chickpeas

$0.55b $0.66b

Mutton

$b

2

4

6

8

–5%

–28% –32%

–18%

14%

–17%

10

a Wheat, sugar, barley, cotton, canola and cheese are world indicator prices in US$. Beef and veal, lamb and mutton are saleyard prices in A$. All other commodities are export unit returns in A$. f ABARES forecast. s ABARES estimate.


19

Economic overview

Major indicators of Australia’s agriculture and natural resources based sector Major indicators of Australia's agriculture and natural resources based sectors Category Exchange rate Australian export unit returns a Farm Value of exports Farm – crops – livestock Fisheries products Gross value of production b Farm – crops – livestock Forestry and fisheries – forestry – fisheries Volume of farm production c – crops – livestock Production area and livestock numbers Crop area (grains and oilseeds) Sheep Cattle Farm costs Net cash income d Net value of farm production e Farmers’ terms of trade g Employment Agriculture, forestry and fishing Australia

US$/A$

2011–12 1.03

2012–13 1.03

2013–14 0.92

2014–15 0.84

2015–16 s 0.73

2016–17 f 0.73

% change 0.0

index

100.0

97.7

105.1

112.1

118.0

114.8

–2.7

A$m A$m A$m A$m

36 389 21 219 15 170 1 227

38 041 22 585 15 456 1 175

41 157 22 351 18 806 1 304

43 928 21 617 22 312 1 440

44 515 22 612 21 903 1 542

43 952 22 934 21 017 1 661

–1.3 1.4 –4.0 7.7

A$m A$m A$m A$m A$m A$m index index index

47 760 26 579 21 180 3 928 1 624 2 305 118.6 135.0 100.9

48 705 28 592 20 112 3 901 1 516 2 385 119.6 133.2 104.7

51 519 28 697 22 822 4 310 1 840 2 470 122.3 131.9 111.4

54 471 27 438 27 033 4 793 2 034 2 759 122.3 125.0 118.1

56 524 27 415 29 109 5 025 2 070 2 955 119.5 127.4 111.1

58 390 29 219 29 171 5 185 2 107 3 079 122.8 143.0 105.4

3.3 6.6 0.2 3.2 1.8 4.2 2.8 12.2 –5.1

’000 ha million million A$m A$m A$m index

24 275 74.7 28.4 37 249 15 580 10 510 93.3

23 856 75.5 29.3 37 173 16 729 11 532 95.3

22 583 72.6 29.1 37 950 18 914 13 569 98.2

22 934 70.9 27.4 38 455 21 471 16 017 103.9

23 317 68.4 26.1 38 905 23 172 17 619 109.3

23 963 71.5 26.8 39 686 24 369 18 704 109.5

2.8 4.5 2.7 2.0 5.2 6.2 0.2

’000 321 301 311 318 322 na na ’000 11 247 11 381 11 448 11 652 11 881 na na a Base: 2011–12 = 100. b For a definition of the gross value of farm production see Table 13. c Chain‐weighted basis using Fisher’s ideal index with a reference year of 1997–98 = 100. d Gross value of farm production less total cash costs. e Gross value of farm production less total farm costs. f ABARES forecast. g Ratio of index of prices received by farmers and index of prices paid by farmers; base: 1997–98 = 100. na Not available. s ABARES estimate. Sources: ABARES; Australian Bureau of Statistics; Reserve Bank of Australia

20


Economic overview

Understanding ABARES agricultural forecasts ABARES presents its forecasts of production, consumption, prices and exports of agricultural commodities as point forecasts. These forecasts are based on an economic assessment of data and information from various sources and supported by discussions with industry experts, use of quantitative analytical tools and professional judgement.

Price forecasts and actual outcomes of selected agricultural commodities in 2015–16

Commodity a

2015–16 Unit actual

September 2015 b

December 2015 b

March 2016 b

forecast error c

forecast error c

forecast error c

%

%

%

Wheat

US$/t

211

215

2

215

2

215

2

Barley

US$/t

173

198

14

190

10

180

4

Canola

US$/t

415

430

4

425

2

420

1

Soybean

US$/t

373

380

2

370

–1

362

–3

Beef

Ac/kg

505

500

–1

505

0

505

0

Lamb

Ac/kg

533

560

5

565

6

550

3

Wool

Ac/kg

1 253

1 200

–4

1 210

–3

1 240

–1

Cotton

USc/lb

70

70

0

71

1

70

0

Cheese

US$/t

3 200

3 500

9

3 400

6

3 400

6

Butter

US$/t

3 146

3 300

5

3 350

6

3 375

7

Sugar

USc/lb

16

10

–38

13

–19

14

–13

a Wheat, barley, canola, soybean, cotton, cheese, butter and sugar are world indicator prices in US$. All other commodities are domestic prices in A$. b Release time of ABARES forecasts. c Expressed as percentage of actual outcome.

Actual outcomes often differ from the forecasts ABARES makes. A key reason for this difference is that ABARES has to make assumptions about factors that can affect outcomes, because the information required when the forecasts are made is incomplete. As more information becomes available, ABARES uses it to revise forecasts. Differences between forecasts and actual outcomes also reflect the effects of unforeseen events. These may include policy changes, macroeconomic developments, climatic or unexpected seasonal conditions and demand and supply disruptions. When ABARES forecasts production of major crops in Australia, it uses the most up-to-date information available on the outlook for seasonal conditions released by the Australian Government Bureau of Meteorology. It also considers the most recent yield forecasts provided by the Queensland Alliance for Agriculture and Food Innovation. If actual seasonal conditions or yields differ from the information available at the time forecasts are made, the ABARES forecast of Australian crop production will differ from the actual outcome. continued ...


21

Economic overview

Understanding ABARES agricultural forecasts

continued

International seasonal conditions also affect forecast outcomes. For example, in 2015–16 the actual outcome of the world indicator price for raw sugar was affected by unexpected lower sugar production in major producing countries due to a combination of factors. In preparing the forecast for the 2015–16 sugar price in the September quarter 2015, ABARES assumed that seasonal conditions in all major sugar-producing countries would be relatively favourable and that the European Union’s support prices would encourage higher beet planting. Based on these assumptions, ABARES forecast the world indicator price of sugar to average US10 cents a pound in 2015–16. However, seasonal conditions in Brazil, India, the European Union, China and Thailand were drier than expected in 2015–16 and production of sugar fell. In addition, a larger than expected share of the cane crush was allocated to ethanol production in Brazil. EU beet growers also reduced plantings to their lowest in 47 years in response to low prices during the planting season. These factors led to a significant decline in sugar production and upward pressure on world sugar prices throughout the year. ABARES subsequently revised its forecast of sugar prices to average US13 cents a pound for the December 2015 quarter, before making a further upward revision to US14 cents a pound for the March 2016 quarter. For 2015–16 as a whole the actual outcome was US16 cents a pound. Exchange rate movements can significantly affect agricultural prices and export earnings. Most agricultural prices are denominated in US dollars on world markets. Consequently, a significant change in the value of the US dollar against other floating international currencies can influence movements in world agricultural prices (Penm et al. 2002). Movement in the Australian dollar against the US dollar is also important. A significant depreciation of the Australian dollar against the US dollar can markedly increase earnings for exporters and producers. ABARES cannot predict extreme seasonal conditions, supply disruptions or sharp exchange rate fluctuations and incorporate them into agricultural forecasts. ABARES attempts to balance upside and downside risks, but some judgements will inevitably cause forecasts to be different from actual outcomes. Information about risks to the forecasts is useful for decision-makers. For this reason, ABARES discusses risk factors in Agricultural commodities notes and encourages decision-makers to read these to understand ABARES forecasts.

References Penm, J, Maurer, A, Fairhead, L & Tran, QT 2002, ‘US dollar—impacts of a depreciation of the US$ on Australian commodities’, Australian commodities, Australian Bureau of Agricultural and Resource Economics, Canberra, vol. 9, no. 3, pp. 485–94.

22


Economic overview

Climate influences and growing conditions Nicholas Perndt, Matthew Miller and Dean Mansfield A very wet winter across most of Australia has benefited crop and pasture growth, refilled on-farm water supplies and improved prospects for winter crops. Water storages in the Murray–Darling Basin are at their highest in close to 33 months. The winter rainfall provided plenty of moisture for the growth and development of crops and pasture, but the unseasonably wet conditions have led to waterlogging in some parts of southern Australia. This may restrict crop and pasture growth in affected areas. Current climate influences Winter 2016 was wetter than average across much of Australia, largely influenced by the strongest negative Indian Ocean Dipole (IOD) event recorded in 50 years. A negative IOD event is characterised by warmer than normal eastern Indian Ocean waters and cooler than normal western Indian Ocean waters. The resulting changes in sea surface temperature intensify westerly winds and can provide more moisture for frontal systems and low pressure systems that move across Australia. During a negative IOD event, winter–spring rainfall typically increases over southern Australia. In early September 2016, indicators showed a renewed strengthening of the negative IOD event. Climate models continued to predict the negative IOD will decline during spring and conditions will return to neutral by December 2016. This means its influence on Australian rainfall is likely to lessen over the coming months. At the start of September 2016, the Bureau of Meteorology reported that El Niño– Southern Oscillation (ENSO) indicators in the tropical Pacific Ocean were at neutral levels. Model outlooks for the next six months were mixed between neutral and La Niña scenarios. Three of the eight international climate models indicated a lateforming La Niña was likely to develop during late spring or summer, with the other five models indicating ENSO neutral conditions were more likely. Climate models suggest that a La Niña would not be as strong as the most recent one, of 2010–2012—which was one of the strongest on record. However, conditions similar to those of La Niña can occur even if thresholds are not met. During La Niña events, spring rainfall is typically above average in eastern Australia and the first rains of the tropical wet season often arrive earlier than normal in northern Australia. Rainfall wrap-up and outlook Autumn 2016 had variable rainfall but was Australia’s warmest on record. Winter 2016 was Australia’s second-wettest winter on record. Rainfall was well above average over most of Australia and extremely high across large areas of central and eastern Australia (Map 1). The main exception was in the south-west region of Western Australia, where winter rainfall was below average. According to the Bureau of Meteorology, this is consistent with a long-term decline in winter rainfall in the region since the 1970s. continued ...


23

Economic overview

Climate influences and growing conditions

continued

MAP 1 Rainfall percentiles, winter 2016 (1 June to 31 August) Rainfall percentiles 0–5 Severe deficiency 5–10 Extremely low 10–20 Well below average 20–30 Below average 30–70 Average 70–80 Above average 80–90 Well above average 90–100 Extremely high Wheat–sheep zone

Northern Territory Queensland Western Australia South Australia New South Wales

Victoria

Australian Capital Territory

Tasmania

Note: Spatial rainfall percentile analyses are based on historical monthly rainfall data provided by the Bureau of Meteorology. The rainfall percentile map shows how rainfall recorded during June to August 2016 compared with the rainfall recorded for that same period during the entire historical record (1900 to the present). To calculate percentiles, the ranked rainfall data are divided into 100 equal parts. Fifth-percentile rainfall for June to August 2016 indicates that total rainfall recorded during this period was at or below the lowest 5 per cent of the total of all June to August rainfall during the entire historical record. Source: Bureau of Meteorology

Major climate drivers are either weakening or neutral, so the latest rainfall outlook shows roughly equal chances of a wetter or drier spring for much of Australia (September to November 2016) (Map 2). However, in parts of northern Australia the chance of exceeding the median rainfall during this three-month period is moderate to high—largely driven by warmer than normal seas around northern and eastern Australia. An average to wetter than average spring is likely, which will benefit pasture production across northern and eastern Australia. Large areas of eastern Australia would now have sufficient soil moisture reserves to support crops through to harvest, and the favourable rainfall outlook improves chances of increased inflows to key water storages. This would benefit summer crop planting. continued ...

24


Economic overview


continued

MAP 2 Australian rainfall outlook, September to November 2016 Chance of exceeding the median rainfall (%) 80% 75%

Northern Territory

70%

Queensland

65% 60%

Western Australia

55% 50%

South Australia New South Wales

45% 40% 35%

Australian Capital Victoria Territory Tasmania

30% 25% 20%

Wheat–sheep zone

Note: The map shows the likelihood of rainfall exceeding the 1981 to 2010 median. Median rainfall is defined as the 50th percentile calculated from the 1981 to 2010 reference period. Historical outlook accuracy for September to November is moderate to high over most of Australia. Source: Bureau of Meteorology

Soil moisture Map 3 and Map 4 show relative levels of modelled soil moisture in the upper layer (surface to 0.1 metres) and lower layer (0.1 to 1 metre) in Australia for August 2016. Upper layer soil moisture is critical for successful plant germination and establishment. It closely tracks precipitation and can reflect rainfall events of the same month. The upper layer soil moisture level is therefore an appropriate indicator of surface moisture availability. In contrast, lower layer soil moisture exhibits lower temporal variability and reflects extreme precipitation events or the accumulation of events over longer periods. Crops and pastures once established can access the lower layer soil moisture to support production during the growing season. Relative upper layer soil moisture for August 2016 was well above average to extremely high across much of Queensland and the Northern Territory, western and northern New South Wales, northern and central South Australia and parts of southern and northern Western Australia. In contrast, upper layer soil moisture levels were below average in parts of south-eastern New South Wales, eastern Victoria, eastern Tasmania and isolated parts of South Australia and Western Australia (Map 3). continued ...


25

Economic overview


continued

MAP 3 Modelled upper layer soil moisture, August 2016

Northern Territory Queensland Western Australia South Australia

Relative soil moisture percentiles 90–100 Extremely high 80–90 Well above average Above average 70–80 Average 30–70 Below average 20–30 Well below average 10–20 0–10 Extremely low Wheat–sheep zone

New South Wales

Victoria


Tasmania Note: Soil moisture estimates are relative to the long-term record and ranked in percentiles. Estimates are used to compare the upper layer soil moisture for August 2016 and ranked by percentiles for each August in the 1911 to 2015 historical reference period. The extremely high band indicates where the estimated soil moisture level in August 2016 was in the wettest 10 per cent of estimated soil moisture levels for August during the 1911 to 2015 reference period. The extremely low band indicates where the estimated soil moisture level in August 2016 was in the driest 10 per cent of estimated soil moisture levels for August during the 1911 to 2015 reference period. Source: Bureau of Meteorology (Australian Water Resources Assessment Landscape model)

Relative lower layer soil moisture in August 2016 was generally well above average in eastern and central Australia and extremely high across large areas of New South Wales, Queensland and Western Australia. In contrast, lower layer soil moisture was below average in south-western Western Australia, western South Australia and parts of the top end (Map 4). In most of Australia’s cropping regions, lower layer soil moisture was generally above average but varied regionally. Lower layer soil moisture was generally well below average in WA cropping regions, with some parts recording extremely low levels. Crop flowering and grain fill in these areas will require timely in-crop rainfall to support current yield prospects through to harvest. Those areas with above average lower layer soil moisture will be less reliant on in-crop rainfall during spring. continued ...

26


Economic overview


continued

MAP 4 Modelled lower layer soil moisture, August 2016

Northern Territory Queensland Western Australia South Australia

Relative soil moisture percentiles 90–100 Extremely high 80–90 Well above average Above average 70–80 Average 30–70 Below average 20–30 Well below average 10–20 0–10 Extremely low Wheat–sheep zone

New South Wales

Victoria


Tasmania Note: Soil moisture estimates are relative to the long-term record and ranked in percentiles. Estimates are used to compare the lower layer soil moisture from August 2016 and ranked by percentiles for each August in the 1911 to 2015 historical reference period. The extremely high band indicates where the estimated soil moisture level in August 2016 was in the wettest 10 per cent of estimated soil moisture levels for August during the 1911 to 2015 reference period. The extremely low band indicates where the estimated soil moisture level in August 2016 was in the driest 10 per cent of estimated soil moisture levels for August during the 1911 to 2015 reference period. Source: Bureau of Meteorology (Australian Water Resources Assessment Landscape model)

Remote sensing Australian farmers, industry groups and research agencies use remote sensing to improve land management and decision-making. However, its use at the farm level remains low by international standards. Remote sensing involves measuring light or other forms of reflected or emitted radiation from the earth’s surface. Remote sensing data are typically collected by instruments on aircraft, satellites or drones. These data are then processed by computer programs to generate maps of the variables of interest. Resource managers interpret and analyse these maps and then validate them with on-ground data. Remote sensing can benefit management at the individual farm level and inform crop yield forecasts at the national and regional level. Remote sensing data provided in the normalised difference vegetation index (NDVI) are useful inputs into ABARES crop production forecasting at certain times of the year. NDVI maps are derived from satellite data and provide a measure of the amount and condition of green vegetation (Map 5). NDVI anomaly maps indicate whether the vegetation greenness at a location is typical or more or less green for a particular time of year. ABARES uses these maps in conjunction with rainfall, temperature and soil moisture data to assess the impacts of seasonal conditions on pasture production and to inform its national crop continued ...


27

Economic overview


continued

production forecasts. Detailed calibration and validation against observations in the field or on the ground are also critical to making accurate forecasts supported by remote sensing. In August 2016 vegetation greenness was well above average to extremely high in western New South Wales, central and southern Queensland and northern Victoria. This indicates that rainfall and temperature conditions have encouraged above average vegetation growth and vigour for this time of year. In contrast, vegetation greenness across large areas of far western Queensland, inland South Australia, inland Western Australia and much of the Northern Territory was extremely low to well below average. This indicates that the generally above average winter 2016 rainfall was not sufficient to allow for any substantial vegetation response. Most of these regions are seasonally dry at this time of year. The average rainfall in many of these locations is between 0 millimetres and 25 millimetres for June to August, and even a small amount of rain could be considered above average. Vegetation greenness was generally close to average for cropping regions in Queensland, South Australia and Western Australia. In NSW and Victorian cropping regions, vegetation greenness was generally above average. This indicates above average vegetation growth and vigour for this time of year.

MAP 5 Vegetation greenness anomalies, August 2016 Greenness anomalies Extremely high Above average Average Below average Extremely low No data

Northern Territory Queensland Western Australia South Australia New South Wales

Victoria


Tasmania Note: The normalised difference vegetation index (NDVI) standardised anomaly is the departure of NDVI from the long-period average, normalised by the long-period variability. Monthly anomalies are calculated as the difference between the greenness for the month and the average for the month, calculated over the reference period (1992 to 2008). Below average anomalies generally indicate unfavourable plant growing conditions and above average anomalies generally indicate favourable plant growing conditions. Plant growing conditions are strongly influenced by rainfall and temperature and these three factors often show a strong correlation. Source: Bureau of Meteorology

28


Agriculture Crops

CROPS

15%

to US$180/t in 2016–17

a

11%

to US$150/tb in 2016–17

6%

to US$395/t in 2016–17

c

Wheat The world wheat indicator price is forecast to average the lowest in 15 years in real terms, reflecting ample world wheat supplies.

Coarse grains The world coarse grain indicator price is forecast to fall, reflecting high world production and large carry-over stocks.

Oilseeds The world oilseed indicator price is forecast to average higher as a result of an expected decrease in world stocks.

19%

Sugar

7%

Cotton

to USc 19/lb d in 2016–17

to USc 75/lb e in 2016–17

The world indicator price for raw sugar is forecast to rise, mainly reflecting a significant decline in world sugar stocks.

The world indicator price for cotton is forecast to increase, reflecting the effect of world cotton consumption exceeding production for the second consecutive year.

a US no. 2 hard red winter, fob Gulf. b US no. 2 yellow corn, fob Gulf. c US no. 2 soybean, fob Gulf. d Intercontinental Exchange, nearby futures, no. 11 contract (October to September). e Cotlook ‘A’ index (August to July).

30


Wheat Sarah Smith

• The world wheat indicator price is forecast to average US$180 a tonne in 2016−17,

compared with US$211 a tonne in 2015−16.

• World wheat production is forecast to increase by 1 per cent to 743 million tonnes

in 2016−17 as record average yields are expected to more than offset the reduction in planted area.

• Australian wheat production and export volumes are forecast to rise in 2016−17,

but the value of exports is forecast to remain largely unchanged because of lower export prices.

World indicator price to fall in 2016−17

The world wheat indicator price (US no. 2 hard red winter, fob Gulf) is forecast to average US$180 a tonne in 2016−17, down from US$211 a tonne in 2015−16. This 15 per cent decline follows a 21 per cent decline between 2014−15 and 2015−16.

World wheat indicator price, July 2014 to August 2016 330

US no. 2 hard red winter, fob Gulf

310 290 270 250 230 210 190 170 US$/t Aug 2014

Dec 2014

Apr 2015

Aug 2015

Dec 2015

Apr 2016

Aug 2016


31

Wheat

The world indicator price continues to face downward pressure from high carry-over stocks and increasing production as a result of favourable seasonal conditions across much of the world. Falling international wheat prices are expected to lead to increased wheat consumption, particularly for feed use. However, the extent of the increase in feed wheat use as a result of lower wheat prices will likely be constrained by falling prices for other major feed grains.

World production forecast to increase slightly in 2016−17 on the 2015−16 record

World wheat production is forecast to rise by 1 per cent to 743 million tonnes in 2016−17. Record average yields are expected to more than offset a reduction in the world area planted to wheat.

Largely favourable to exceptional seasonal conditions in the northern hemisphere have aided wheat production. US production is forecast to exceed 63 million tonnes in 2016−17, driven by favourable growing conditions pushing yields to record levels. If realised, production will reach its highest level since 2008−09. Production in the Black Sea region—Kazakhstan, the Russian Federation and Ukraine—is forecast to reach almost 110 million tonnes in 2016−17, up 7 per cent. Seasonal conditions in the region have been largely favourable, with above average to record yields anticipated.

Heavy rainfall over parts of Western Europe is expected to reduce production prospects in that region. France, the largest EU exporter, had particularly high rainfall early in the northern hemisphere summer during grain filling. As a result, potential quality and yields are expected to have been adversely affected. Similarly, in China wet weather hindered the harvest and quality of winter wheat. In the southern hemisphere, wet conditions in Argentina disrupted sowing, but the planted area is still expected to be 25 per cent higher than in 2015−16. Growing conditions in Australia have also been favourable to August 2016.

Forecast change in wheat production, 2016−17 8 6 4 2 0 –2 –4 –6 –8 –10

32 24 16 8 0 –8 –16 –24 –32 –40

Mt

% European Union

Canada China

32

Australia Argentina

United States

Black Sea region


Volume change Percentage change (right axis)

Wheat

Feed wheat consumption to rise in 2016−17 World wheat consumption is forecast to increase by 1 per cent to 729 million tonnes in 2016−17. This reflects expected growth in human and feed consumption. Human consumption is expected to increase by 1 per cent in line with population growth. However, long-term consumption patterns have been changing. Large population growth rates, increasing incomes and a substitution of wheat for traditional grains have contributed to rising wheat consumption in the developing regions of Asia and Africa. In contrast, most industrialised countries are trending towards steady or declining wheat consumption per person.

Low wheat prices relative to other feed grains and an abundance of lower quality wheat are forecast to drive a 2 per cent increase in feed wheat consumption to 149 million tonnes in 2016−17. If realised, it will be the second-largest year on record after 2011−12. In 2011−12 abundant supplies and a fall in the wheat-to-corn price ratio drove substitution from corn to wheat for feed use. The wheat-to-corn price ratio is not expected to be as low in 2016−17 as it was in 2011−12 because world corn prices are also forecast to fall.

US feed wheat consumption is forecast to more than double in 2016−17 compared with the previous year. This is because the price of feed wheat is expected to reduce as a result of an abundance of lower protein wheat from the 2016 harvest adding to already large opening stocks. Competitive prices for low wheat grades are also likely to further drive feed wheat demand from Asian markets such as the Republic of Korea and Thailand.

World feed wheat consumption, 2002−03 to 2016−17 180

1.8

150

1.5

120

1.2

90

0.9

60

0.6

30

0.3

Mt

Rest of world United States China Black Sea European Union Wheat-to-corn price ratio, US soft red winter, fob Gulf to US no.2 corn, fob Gulf (right axis)

ratio 2002 –03

2004 –05

2006 –07

2008 –09

2010 –11

2012 –13

2014 –15

2016 –17f

f ABARES forecast.


33

Wheat

Record closing stocks in 2016−17 World wheat stocks are forecast to reach a record 231 million tonnes in 2016−17, 7 per cent higher than closing stocks in 2015−16. Despite rising global consumption, increased production is expected to result in closing stocks continuing to rise.

In 2015−16 China was estimated to hold more than a third of the world’s stocks. Stocks in China are forecast to grow by 15 per cent in 2016−17 to more than 90 million tonnes. This would be the largest volume of stocks held by China since 1999−2000. US closing stocks have been growing since 2013−14 and are expected to reach 30 million tonnes in 2016−17, the highest in almost 30 years. The rate at which global stocks are increasing is expected to outstrip the growth of global consumption, leading to a forecast rise of 1.7 percentage points in the stocks-to-use ratio in 2016−17. The ratio grew for the four years to 2016−17 because of burgeoning global stocks, particularly in China.

The stocks-to-disappearance ratio for major exporters is forecast to rise by 1.8 percentage points in 2016−17. This is the ratio of stocks held by the main exporters to the disappearance of wheat through domestic use and exports. Between 2012−13 and 2015−16, strong import demand increased disappearance and slowed the growth in stocks held by the major exporting countries, causing the stocks-to-use and stocks-to-disappearance ratios to diverge. In 2016−17 the gap between the two ratios is anticipated to narrow because wheat supply is expected to exceed domestic and import demand and add to closing stocks held by major exporting countries. A growing stocks-to-disappearance ratio for major exporters indicates ample exportable supply. Major exporting countries would be more likely to respond to an upward movement in international prices by putting stocks onto the global market. In contrast, countries that are not major exporters would be more likely to use stocks domestically.

World wheat closing stocks, 2006−07 to 2016−17 250

50

200

40

150

30

100

20

50

10

Mt

Rest of world China Major exporters a Stocks-to-use ratio (right axis) Stocks-to-disappearance ratio for major exporters b (right axis)

% 2006 –07

2008 –09

2010 –11

2012 –13

2014 –15

2016 –17f

a Argentina, Australia, Canada, the European Union, Kazakhstan, the Russian Federation, Ukraine and the United States. b Disappearance is defined as domestic consumption plus exports. f ABARES forecast.

34


Wheat

World wheat trade to fall in 2016−17 World trade in wheat is forecast to fall by 2 per cent from record trade in 2015−16 to 164 million tonnes in 2016−17. The major exporting countries have ample exportable supplies and import demand largely reflects country-specific needs for certain types of wheat. Large local supplies from carry-over stocks and favourable growing conditions across much of the world are expected to drive the weaker import demand. Imports into the European Union are forecast to fall by 17 per cent in 2016−17. Abundant local supplies of feed quality wheat following a wet harvest in some countries are expected to largely meet domestic feed demand. Imports by Sub-Saharan Africa are forecast to fall year on year but to remain above the five-year average. A significant fall in Ethiopian imports is expected because of large domestic supply.

In contrast, significant import demand from Morocco, Egypt and Algeria reflects those countries’ need to supplement drought-affected domestic harvests. Despite import duties, Indian wheat imports are anticipated to double. This reflects domestic production being lower than the five-year average and a run-down in stocks. Milling grade imports into Turkey are anticipated to increase in 2016−17 because of the low quality of domestic wheat. Turkey is expected to have strong demand for high-quality wheat used for manufacturing products like flour and pasta, which are primarily exported to Asia. Imports of wheat into China are forecast to grow moderately by 2 per cent in 2016−17. An abundance of lower-quality domestic wheat will constrain feed wheat imports into China, but this is expected to be offset by higher imports of milling wheat for human consumption.

EU exports are forecast to fall by 21 per cent in 2016−17, reflecting the poor harvest in France, the largest EU exporter. Ample exportable supplies are forecast for the other major wheat exporters. Although Black Sea region exports in 2016−17 are forecast to remain broadly unchanged from 2015–16, they are expected to remain a third higher than the five-year average. Record production in the Russian Federation and competitive pricing are anticipated to underpin increased export volumes. The United States Department of Agriculture forecasts US wheat exports to increase by 23 per cent in 2016−17 but to remain below the average for the 15 years to 2016−17. Between June and August of the 2016−17 marketing year, US exports were 28 per cent higher than for the same period in 2015−16.

US wheat exports by class, June to May marketing year, 2002−03 to 2016−17 40

Other Soft red winter Hard red spring Hard red winter

35 30 25 20 15 10 5 Mt 2002 –03

2004 –05

2006 –07

2008 –09

2010 –11

2012 –13

2014 –15

2016 –17

Source: United States Department of Agriculture Economic Research Service ABARES Agricultural commodities – vol. 6 no. 3 • September quarter 2016

35

Wheat

Australian wheat production expected to increase Seasonal conditions in most wheat-producing regions during winter were favourable and crops were generally in good condition at the beginning of spring. In the eastern states, including South Australia, winter rainfall was average to above average. In Western Australia, winter rainfall was more variable but timely and the season opening was mostly positive. In some regions, particularly in parts of New South Wales and far southern Western Australia, crops were waterlogged by high winter rainfall. This is expected to constrain yields in these regions.

In its latest three-month rainfall outlook (September to November 2016), the Bureau of Meteorology forecasts average spring rainfall in most wheat-producing regions in Australia. As a result, wheat production is forecast to increase by 16 per cent in 2016−17 to 28.1 million tonnes. If realised, this will be the second-highest production on record after 2011−12. In 2016−17 average wheat yields are expected to rise in all major producing states for the first time since 2003−04.

Australian wheat yields, by state, 2014−15 to 2016−17 2.5

2016–17f 2015–16 2014–15

2.0 1.5 1.0 0.5 t/ha New South Queensland Wales

South Australia

Victoria

Western Australia

f ABARES forecast.

This forecast production will only be achieved if spring rainfall is sufficient and timely, especially in regions of Western Australia that had average to below average winter rainfall. Production may also be affected by the condition of crops in some regions of Australia, which have developed relatively shallow root systems that will not readily access stores of lower layer soil moisture. Shallow root systems may reach stores of upper layer soil moisture, but these can disappear quickly in hot and dry conditions.

Volume of Australian exports forecast to increase but value to remain unchanged

The volume of Australian wheat exports is forecast to rise by 17 per cent to 18.4 million tonnes in 2016−17. The expected bumper production and relatively large carry-over stocks indicate a plentiful exportable supply. Import demand for milling quality wheat is likely to support higher export volumes from Australia, a traditionally high-protein wheat producer.

36


Wheat

Australian wheat exports, by destination, 2012−13 to 2016−17 25

Rest of world Middle East and North Africa North Asia South-East Asia

20 15 10 5 Mt 2012 –13

2013 –14

2014 –15

2015 –16

2016 –17f

f ABARES forecast.

In 2015–16 Australian exports to Indonesia declined by 17 per cent to 3.6 million tonnes. Indonesia remained Australia’s largest market, but Australia’s share of the Indonesian wheat market fell to 38 per cent in 2015−16, down from 60 per cent in 2014−15. This loss of market share was driven by increased imports of cheaper feed wheat from other countries to supplement reduced domestic supplies of corn. Indonesia’s supply of feed corn in 2015−16 was restricted because adverse seasonal conditions caused by the El Niño lowered domestic production and domestic regulations capped corn imports. Feed mills substituted corn with imported feed wheat, causing Australia’s share of the Indonesian wheat import market to fall. However, Australia remained an important source of milling quality wheat. The share of Australia’s total wheat exports to Indonesia remained above the five-year average at 23 per cent in 2015−16. Total Indonesian wheat imports are forecast to fall in 2016−17 because of improved corn production prospects. However, this is unlikely to affect Australian milling quality wheat exports to Indonesia in 2016−17 and Australia is expected to regain market share.

Australian wheat exports to Indonesia, 2006−07 to 2015−16 5 000

100

4 000

80

3 000

60

2 000

40

1 000

20

kt

Volume Share of Indonesian imports (right axis) Share of Australian exports (right axis)

% 2007 –08

2009 –10

2011 –12

2013 –14

2015 –16


37

Wheat

China, Japan and the Republic of Korea are also large export markets for Australian wheat. The volume of Australian exports to North Asia grew by 18 per cent in 2015−16. China in particular is expected to continue importing milling quality wheat from Australia in 2016−17 to supplement its domestic harvest of lower protein wheat.

The value of Australian wheat exports is forecast to remain largely unchanged in 2016−17 at $5.1 billion. The forecast increase in export volumes is expected to offset the fall in international wheat prices. The margins between milling and feed wheat prices are expected to be larger than usual, with an abundance of lower quality wheat increasing export competition internationally.

Outlook for wheat Outlook for wheat Category World Production – Black Sea region a – China – European Union – India – United States Consumption – human – feed Closing stocks Stocks-to-use ratio Trade Exports b – Argentina – Australia c – Black Sea region a – Kazakhstan – Russian Federation – Ukraine – Canada – European Union – United States Price d Australia Area Production Exports c – value APW pool return

unit

2014–15

2015–16 s

2016–17 f

% change 1.0

Mt

730

736

743

Mt

96.8

102.1

109.5

7.2

Mt

126

130

127

–2.3 –6.9

Mt

156

160

149

Mt

95.9

86.5

89.5

3.5

Mt

55.1

55.8

63.2

13.3

Mt

717

722

729

1.0

Mt

481

484

490

1.2

Mt

143

146

149

2.1

Mt

201

217

231

6.5

%

28.0

30.0

31.7

–

Mt

153

167

164

–1.8

Mt

5.4

8.7

8.6

–1.1

Mt

16.6

15.8

18.4

16.5

Mt

39.3

50.0

50.2

0.4

Mt

5.9

7.5

7.5

0.0

Mt

22.2

25.3

29.3

15.8

Mt

11.2

17.2

13.5

–21.5

Mt

23.9

21.8

20.7

–5.0

Mt

36.2

35.4

28.0

–20.9

Mt

23.2

21.1

25.9

22.7

US$/t

266

211

180

–14.7

’000 ha

12 384

12 793

12 918

1.0

kt

23 743

24 193

28 079

16.1

kt

16 571

15 779

18 403

16.6

A$m

5 547

5 120

5 115

–0.1

A$/t 326 303 260 –14.2 a Russian Federation, Ukraine and Kazakhstan. b Local marketing years. c July–June years. d US no. 2 hard red winter wheat, fob Gulf, July–June. f ABARES forecast. s ABARES estimate. Sources: ABARES; Australian Bureau of Statistics; International Grains Council; United States Department of Agriculture

38


Coarse grains Kyann Zhang and David Mobsby

• World coarse grain indicator prices are forecast to fall in 2016–17, reflecting strong

growth in world production and large carry-over stocks.

• World trade in coarse grains is forecast to rise in 2016–17, reflecting a significant

increase in corn exports.

• Australian coarse grain production is forecast to increase in 2016–17, reflecting

higher barley and oats production.

World coarse grain prices continue to fall in 2016–17 The world coarse grain indicator price (US no. 2 yellow corn, fob Gulf) is forecast to average 11 per cent lower in 2016–17 at US$150 a tonne. The world indicator price for barley (France feed barley, fob Rouen) is forecast to average 12 per cent lower at US$152 a tonne. Demand for coarse grains is forecast to increase in 2016–17, but the large volume of carry-over stocks and continued strong production are expected to result in lower world prices.

World coarse grain indicator prices, 2000–01 to 2016–17 400

France feed barley, fob Rouen US no. 2 yellow corn, fob US Gulf

300 200 100 2016–17 US$/t 2000 2002 2004 2006 2008 –01 –03 –05 –07 –09

2010 –11

2012 –13

2014 –15

2016 –17f

f ABARES forecast.


39

Coarse grains

Towards the end of March 2016, a steep rise in the soybean indicator price following flooding in Argentina and concerns that future availability of feed grains may be adversely affected led to higher corn prices over the June quarter. However, since July 2016 favourable weather conditions in major corn-producing regions of the United States and the European Union have alleviated these concerns and the corn indicator price has quickly fallen back to pre-March prices.

Coarse grain production to rebound in 2016–17

Following a fall in world coarse grain production in 2015–16, production in 2016–17 is forecast to rebound as a result of expected favourable weather conditions and improved yields for major producers. World production of coarse grains is forecast to increase by 5 per cent in 2016–17 to 1 305 million tonnes, with expected strong growth in corn and sorghum production to more than offset slightly lower production of barley.

Corn

World corn production is forecast to grow by 5 per cent in 2016–17 to 1 011 million tonnes. Following a fall in 2015–16, production is expected to return to levels similar to 2014–15. Forecast production increases in most major growing regions are expected to more than offset a forecast fall in production in China.

Major world corn producers, 2014–15 to 2016–17 400

2014–15 2015–16 2016–17f

300 200 100 Mt United States

China

Brazil

European Union

Argentina

f ABARES forecast.

In the United States, corn production is forecast to increase by around 7 per cent in 2016–17 to 371 million tonnes, compared with 345 million tonnes in 2015–16. This is the result of a 7 per cent increase in harvested area, with yields steady at around 10.6 tonnes a hectare. If realised, this would be the highest US corn production on record. Corn production in China is forecast to fall by almost 10 million tonnes in 2016–17 to 215 million tonnes. This would be the result of a significant contraction—the first since 2003–04—in planted area following Chinese Government measures to reduce corn stocks. In March 2016 the Chinese Government announced that it would remove the domestic reserve price for corn, which had been in place since 2008. Its removal allows market conditions to determine corn prices. 40


Coarse grains

Production of corn in South America is forecast to increase by around 16 per cent in 2016–17. Brazilian production is expected to rise to 80 million tonnes from 70 million tonnes in 2015–16, when poor weather conditions reduced yields from Brazil’s second corn crop. Production in Argentina is also expected to be significantly higher with a forecast 20 per cent increase in planted area, as export policy reforms implemented in late 2015 encourage domestic farmers to expand corn production.

Barley

World barley production is forecast to fall by 2 per cent in 2016–17 to 145 million tonnes. Despite the expected fall, forecast production will still be 5 per cent above the 10-year average. Harvested area is expected to be around 2 per cent lower, reflecting reduced plantings in Argentina, Australia and several other minor barley-producing countries. Barley production in the European Union is forecast to decline by 2 per cent in 2016–17 to around 60 million tonnes. Very wet conditions in France and Germany, the largest EU producers, are expected to result in the average EU barley yield falling by around 4 per cent. The wet conditions in France (one of the world’s largest exporters of malting barley) are expected to significantly reduce French malting barley production. Since late June 2016, the premium for French malting barley prices over French feed barley has expanded to its highest for several years. Production of barley in Australia is forecast to increase by 11 per cent in 2016–17 to 9.5 million tonnes. Expected higher relative returns from alternative crops, including canola and pulses, in 2016–17 led to a fall in area planted to barley. However, forecast favourable crop conditions are expected to lead to a significant improvement in average yields—which is expected to more than offset the fall in area. In Argentina, barley production is expected to fall by almost 40 per cent as producers allocate more land towards growing corn. Barley production in the Middle East and North Africa is also forecast to fall as a result of an expected decline in yields following adverse weather conditions at the start of the planting period.

Coarse grain consumption to increase in 2016–17

World coarse grain consumption is forecast to increase by 2.5 per cent in 2016–17 to 1 294 million tonnes, largely resulting from growth in consumption of corn. Consumption of feed grains is expected to increase following the fall in coarse grain prices over 2015–16, but the increase in coarse grain consumption will be constrained by competition from abundant availability of low-priced feed wheat.

Corn

World consumption of corn is forecast to increase by 3 per cent in 2016–17 to 1 002 million tonnes, with most of the growth expected in animal feed use.

Corn consumption in China is expected to increase by 5 per cent in 2016–17 to around 228 million tonnes, the highest on record. As a result of the Chinese Government’s announcement that it would remove the domestic price programme for corn, the average price of domestically produced corn has fallen to around 1 600 yuan (around US$420), almost a third lower than at the same time last year. This has significantly improved its competiveness against imported feed grains such as barley and grain sorghum.


41

Coarse grains

In the United States, corn consumption is forecast to increase by around 6 per cent in 2016–17, mainly as a result of the rise in feed consumption as livestock production is expected to grow. Corn consumption in industrial uses such as ethanol production is forecast to be relatively flat as world oil prices remain low.

Barley

World barley consumption is forecast to remain largely unchanged in 2016–17 at 146 million tonnes, with lower consumption in China offset by consumption increases in Australia and the Middle East.

Barley consumption in China is expected to fall by around 11 per cent to 8 million tonnes in 2016–17, as domestic corn prices become more competitive against prices of imported barley. Demand for malting barley is expected to grow by 5 per cent as a result of increasing beer consumption in China, but this is far outweighed by the fall in demand for feed barley.

In 2016–17 barley consumption in Australia is forecast to increase because lower export demand from China and subsequent lower prices are expected to increase use of barley in Australia’s domestic livestock sector. Demand for barley in the Middle East is forecast to increase as Saudi Arabia is expected to increase its reliance on barley as a major livestock feed grain.

World trade in coarse grains to increase

World trade in coarse grains is forecast to rise by 6 per cent in 2016–17 to 172 million tonnes, reflecting strong increases in corn exports from Argentina and the United States.

In 2016–17 exports of corn from Argentina are forecast to grow by almost 21 per cent to 23 million tonnes following the removal of export taxes on corn in December 2015. Exports from Brazil are expected to remain largely unchanged at 23 million tonnes, with a poor second harvest in 2015–16 limiting the supply available for export in 2016–17. In the United States, corn exports are forecast to grow by 8 per cent in 2016–17 to 52 million tonnes. Corn exports from the European Union are forecast to more than double in 2016–17 to 2.5 million tonnes, as supplies recover from poor production in 2015–16.

World trade in barley is forecast to fall by 7 per cent in 2016–17 to 28 million tonnes. This reflects a significant fall in import demand from China as livestock producers switch to domestic corn for feed use. The fall would be partially offset by an expected increase in demand from Saudi Arabia for imported barley. Saudi Arabia continues to rely on imported feed grains following a sharp fall in domestic wheat production in 2014–15, when area planted to wheat was significantly cut to conserve water supply.

42


Coarse grains

World coarse grain closing stocks, 2010–11 to 2016–17 300

Other Grain sorghum Barley Corn

250 200 150 100 50 Mt

2010 –11

2011 –12

2012 –13

2013 –14

2014 –15

2015 –16s

2016 –17f

f ABARES forecast. s ABARES estimate.

World closing stocks to resume growth World coarse grain closing stocks are forecast to increase by 4 per cent in 2016–17 to 253 million tonnes, as the increase in world coarse grain production is expected to exceed the increase in consumption. Increases in closing stocks of corn and grain sorghum are expected to more than offset a fall in closing stocks of barley. World closing stocks of corn are forecast to increase by 4 per cent in 2016–17 to 215 million tonnes, with significant increases expected in Argentina, Ukraine and the United States. Closing stocks in China are forecast to fall for the first time since 2010–11, reflecting the expected fall in production and increased consumption.

World closing stocks of barley are forecast to fall by 3 per cent to 24 million tonnes. Stocks are expected to fall in North Africa, Saudi Arabia and the United States. Closing stocks are forecast to rise in Australia. However, this would not be enough to offset falls in other parts of the world.

Increased Australian coarse grain production in 2016–17

Australian coarse grain production is forecast to increase by 9 per cent in 2016–17 to 13.7 million tonnes. This reflects forecast higher barley and oats production more than offsetting lower forecast grain sorghum production.

Barley production is forecast to increase by 11 per cent in 2016‒17 to 9.5 million tonnes, with an increase in yields more than offsetting a slight fall in planted area. The average barley yield is forecast to rise by 13 per cent to 2.4 tonnes a hectare following very favourable seasonal conditions in most cropping regions during winter. Sufficient and timely rainfall is required over spring to realise improved crop prospects, especially in parts of Western Australia where below average winter rainfall has affected stores of soil moisture. Area planted to barley is estimated to have fallen by 3 per cent in 2016‒17, in response to higher expected returns from other crops, including canola and pulses.


43

Coarse grains

Coarse grain production, Australia, 2001–02 to 2016–17 20

Other Oats Grain sorghum Barley

15 10 5 Mt 2002 –03

2004 –05

2006 –07

2008 –09

2010 –11

2012 –13

2014 –15

2016 –17f

f ABARES forecast.

Higher returns are expected from producing cotton, compared with grain sorghum. Grain sorghum production is forecast to fall by 5 per cent in 2016–17 to 1.9 million tonnes. Area planted to grain sorghum is forecast to fall by 7 per cent in 2016–17 to 631 000 hectares. Some of the area planted to grain sorghum in 2015–16 is expected to be planted to dryland cotton in 2016–17. Grain sorghum prices were around 30 per cent lower in August 2016, compared with August 2015. Production of oats is forecast to rise by 25 per cent in 2016–17 to an 11-year high of 1.6 million tonnes. The area planted to oats in 2016–17 increased by 9 per cent. This was in response to favourable milling oat prices at the time of planting, which resulted from a relatively small milling oat crop in eastern Australia in 2015–16 and strong import demand from China. Australian coarse grain exports are forecast to rise by 20 per cent in 2016–17 to 8.2 million tonnes because of forecast higher barley and oats production. The value of coarse grain exports is forecast to be largely unchanged at $2.3 billion, reflecting lower world prices offsetting increased shipments of Australian coarse grains.

Barley exports are forecast to rise by 26 per cent in 2016–17 to 6.9 million tonnes, supported by above average production estimated for 2015–16 and forecast for 2016–17. Forecast exports are expected to be partially offset by higher domestic feed grain use and recent policy changes in China favouring the consumption of domestic corn over imported barley and grain sorghum.

44


Coarse grains

Exports of malting barley are forecast to increase strongly in 2016–17. This assumes an average proportion of the barley crop will make malting grade in 2016–17, following a poor year for malting barley crops in 2015–16. Demand for Australian malting barley exports is expected to be higher in 2016–17, after falling by 28 per cent in 2015–16. Wet seasonal conditions in France (one of the world’s largest exporters of malting barley) are expected to significantly reduce 2016–17 French malting barley production. The value of Australian barley exports is forecast to rise by 7 per cent in 2016–17 to $1.9 billion. This forecast rise reflects increased shipments of Australian barley more than offsetting lower world prices.

Grain sorghum exports are forecast to fall markedly in 2016–17 from the very high volumes shipped during recent years. This largely reflects lower import demand for grain sorghum from China. The value of Australian grain sorghum exports is forecast to almost halve to $186 million.

Coarse grain exports, Australia, 2001–02 to 2016–17 10

Other Grain sorghum Barley

8 6 4 2 Mt 2002 –03

2004 –05

2006 –07

2008 –09

2010 –11

2012 –13

2014 –15

2016 –17f

f ABARES forecast.


45

Coarse grains

Outlook coarse Outlook forfor coarse grainsgrains Category World Production – barley – corn Consumption Trade Closing stocks Stocks-to-use ratio Corn price a (fob Gulf) Barley price b (fob Rouen) Australia Area – barley – grain sorghum Production – barley – grain sorghum Exports – value Feed barley price c Malting barley price d

% change

unit

2014–15

2015–16 s

2016–17 f

Mt

1 305

1 248

1 305

4.6

Mt

142

148

145

–2.0

Mt

1 014

960

1 011

5.3

Mt

1 255

1 263

1 294

2.5

Mt

186

162

172

6.2

Mt

245

243

253

4.1

%

20

19

20

–

US$/t

174

168

150

–10.7

US$/t

204

173

152

–12.1

’000 ha

5 806

5 802

5 715

–1.5

’000 ha

4 078

4 105

4 000

–2.6

’000 ha

732

681

631

–7.3

kt

12 691

12 571

13 724

9.2

kt

8 646

8 593

9 496

10.5

kt

2 209

2 037

1 932

–5.2

kt

7 756

6 845

8 222

20.1

A$m

2 697

2 280

2 272

–0.4

A$/t

252

237

188

–20.7

A$/t 282 274 237 –13.5 a US no. 2 yellow corn, fob Gulf, July–June. b France feed barley, fob Rouen, July–June. c Feed 1, delivered Geelong. d Gairdner Malt 1, delivered Geelong. f ABARES forecast. s ABARES estimate. Sources: ABARES; Australian Bureau of Statistics; United Nations Commodity Trade Statistics Database (UN Comtrade); United States Department of Agriculture

46


Oilseeds David Mobsby

• World oilseed and canola indicator prices are forecast to average higher in 2016–17

as a result of an expected decrease in world stocks.

• World oilseed production is forecast to rise but to be around 4 million tonnes

lower than consumption.

• World oilseed closing stocks are forecast to fall to 79 million tonnes in 2016–17,

with canola stocks forecast to fall to their lowest in nine years.

World oilseed prices to average higher during 2016–17 The world oilseed indicator price (US no. 2 soybean, fob Gulf) is forecast to rise by 6 per cent in 2016–17 to average US$395 tonne. This outlook reflects a second year of lower world closing stocks. Despite a forecast increase in total world oilseed production, consumption is expected to exceed production by around 4 million tonnes. As a result, world closing stocks are forecast to fall to a three-year low of 79 million tonnes. Declining 2015–16 carry-over stocks in major South American exporting countries and growing world oilseed import demand are likely to support higher oilseed prices.

The world canola indicator price (Europe Rapeseed, fob Hamburg) is forecast to rise by 2 per cent in 2016–17 to average US$424 a tonne, largely because of forecast lower world supply. Higher import demand from the European Union is expected to be a significant factor in supporting higher average prices during 2016–17. However, this will be partially offset by lower import demand from China.


47

Oilseeds

World oilseed indicator prices, 2001–02 to 2016–17 800

Europe Rapeseed, fob Hamburg US no.2 soybeans, fob Gulf

700 600 500 400 300 200 100 2016–17 US$/t

2002 –03

2004 –05

2006 –07

2008 –09

2010 –11

2012 –13

2014 –15

2016 –17f

f ABARES forecast.

Total world oilseed production to rise, but rapeseed production to fall World oilseed production is forecast to rise by 4 per cent to a record high of 538 million tonnes in 2016–17. Production of all major oilseeds except rapeseed (including canola) is expected to rise. World soybean and sunflower seed production are forecast to reach record highs in 2016–17, while peanut and cottonseed production are forecast to be the highest in several years. In contrast, world production of rapeseed (including canola) is forecast to fall to a four-year low.

World oilseed production, 2001–02 to 2016–17 600

Other Sunflower seed Rapeseed (including canola) Soybean

500 400 300 200 100 Mt 2002 –03

2004 –05

2006 –07

2008 –09

2010 –11

2012 –13

2014 –15

f ABARES forecast.

48


2016 –17f

Oilseeds

World soybean production is forecast to increase by 4 per cent in 2016–17 to 325 million tonnes. US production is forecast to reach a record 111 million tonnes. Generally favourable conditions in major growing regions during July are expected to result in a record yield of 3.3 tonnes per hectare. Soybean production in Argentina is expected to rise marginally despite a reduction in planted area, because of assumed lower rates of crop abandonment from the flood-damaged crop of 2015–16. In Brazil, expansion of soybean plantings (set to begin in September 2016) is expected to be relatively low in 2016–17 because of competition for land from corn. Despite this, production in Brazil is forecast to rise by 7 per cent to a record 102 million tonnes, assuming average yields. World rapeseed (including canola) production is forecast to fall by 2 per cent in 2016–17 to 67 million tonnes. EU rapeseed production is estimated to fall by 5 per cent in 2016–17 to around 21 million tonnes. Excessive rainfall late in the season in several key producing countries is expected to have reduced yields from the above average yields of 2015–16. Rapeseed production in China is estimated to be lower because of reduced plantings following the removal of price support in 2015. In contrast, Indian production is forecast to rise assuming improved planting conditions following two drier than average seasons.

Total rapeseed (including canola) production in the major exporters is expected to remain largely unchanged in 2016–17. Harvest is complete in Ukraine and rapeseed production is estimated to have fallen by 27 per cent to 1.3 million tonnes. Drier than average conditions during planting are estimated to have significantly reduced winter rapeseed plantings. In Canada, crops benefited from generally favourable growing conditions during July. Harvesting in major producing provinces began in August and early reports suggest that the yield is expected to be above average. Nevertheless, total Canadian canola production is forecast to fall by 1 per cent to 17 million tonnes because of a forecast lower planted area. Australian canola production is forecast to rise by 23 per cent to 3.6 million tonnes in 2016–17, reflecting generally favourable growing conditions during winter (see Australia section).

Rapeseed (including canola) production, major exporters, 2001–02 to 2016–17 25

Ukraine Australia Canada

20 15 10 5 Mt 2002 –03

2004 –05

2006 –07

2008 –09

2010 –11

2012 –13

2014 –15

2016 –17f

f ABARES forecast.


49

Oilseeds

World oilseed consumption to rise World oilseed consumption (mainly crush) is forecast to rise by 3 per cent in 2016–17 to 542 million tonnes, reflecting higher demand for protein meals (largely for livestock feed) and vegetable oil (largely for human consumption and biodiesel production). World soybean consumption is forecast to rise by 4 per cent to 329 million tonnes. In contrast, world rapeseed consumption is forecast to fall by 4 per cent to 68 million tonnes, reflecting reduced availability in major consuming countries and substitution towards relatively favourably priced substitutes such as soybean.

World oilseed consumption, 2001–02 to 2016–17 600

Other Sunflower seed Rapeseed (including canola) Soybean

500 400 300 200 100 Mt 2002 –03

2004 –05

2006 –07

2008 –09

2010 –11

2012 –13

2014 –15

2016 –17f

f ABARES forecast.

US and Brazil soybean exports to support world oilseed trade World oilseed exports are forecast to increase by just 3 per cent in 2016–17, compared with the average 8 per cent growth a year for the five years to 2014–15. The forecast slower growth rate is the result of lower world rapeseed (including canola) exports partially offsetting a 3 per cent rise in world soybean exports (to 137 million tonnes). Brazilian soybean exports are forecast to rise by 4 per cent in 2016–17 to 58 million tonnes because of forecast higher production. US soybean exports are forecast to rise by 3 per cent to reach a record 53 million tonnes. Exports from the United States are expected to be supported by forecast large US soybean production and strong demand for US exports in the lead-up to South American harvest in early 2017. In Argentina, export taxes encouraging export of soybean products over soybean are expected to limit soybean export growth from that country but result in higher soybean meal and soybean oil exports.

50


Oilseeds

World rapeseed (including canola) exports are forecast to contract by 12 per cent in 2016–17 to 13 million tonnes because of reduced supply in the major exporting countries of Canada and Ukraine. Exports from Canada are expected to fall to a four-year low of 8.8 million tonnes, reflecting steady domestic crush and lower forecast carry-over stocks from 2015–16. Reduced rapeseed production in Ukraine is expected to lower exports by 37 per cent to 900 000 tonnes. Exports from Australia are expected to increase by 39 per cent (June to July basis), reflecting higher production and assumed relatively stable domestic consumption.

Weaker import demand from China is expected to be partially offset by stronger import demand from the European Union. Rapeseed imports into the European Union are expected to reach 3.5 million tonnes (the highest since 2013–14) because of estimated lower domestic production. Australia is expected to be the leading supplier of canola into this market, reflecting limited supplies from Ukraine.

Chinese oilseed import growth to slow

Chinese soybean imports are expected to increase by 4 per cent to reach a record 86 million tonnes in 2016–17. The forecast import growth rate is lower than in recent years and partly reflects an expected run-down of government-held soybean stocks and forecast higher domestic production. Despite a forecast decline in Chinese rapeseed production in 2016–17, rapeseed (including canola) imports into China are expected to fall by 13 per cent to 3.7 million tonnes. The additional supply of rapeseed oil into the domestic market from a run-down in government-held stocks is expected to result in higher imports of canola meal. Increased exports of canola meal from Canada are expected to meet this demand.

World soybean imports, 2001–02 to 2016–17 100

Other China

80 60 40 20 Mt 2002 –03

2004 –05

2006 –07

2008 –09

2010 –11

2012 –13

2014 –15

2016 –17f

f ABARES forecast.


51

Oilseeds

World oilseed stocks to decline for second year in a row World closing stocks of oilseeds are forecast to decline by 6 per cent in 2016–17 to 79 million tonnes. Movements in world closing stocks of oilseeds are largely the result of forecast changes in soybean and rapeseed (including canola) stocks.

World oilseed closing stocks, 2001–02 to 2016–17 100

Other Rapeseed (including canola) Soybean

80 60 40 20 Mt 2002 –03

2004 –05

2006 –07

2008 –09

2010 –11

2012 –13

2014 –15

2016 –17f

f ABARES forecast.

World soybean stocks are forecast to fall because of lower closing stocks in China and Argentina more than offsetting forecast higher stocks in Brazil and the United States. Stocks in China are forecast to decline, as a result of increased sales from government-held stocks. Stocks in Argentina are expected to be reduced because lower export taxes and a depreciated currency are encouraging exports. Closing stocks are expected to rise in Brazil and the United States following forecast record production.

World rapeseed (including canola) closing stocks are forecast to decline to around 4 million tonnes in 2016–17. Closing stocks are expected to further contract in Canada following a 60 per cent decline in 2015–16. This is the result of forecast domestic consumption and exports exceeding production. Stocks in the European Union are expected to decline to around 1.7 million tonnes as stocks are released to meet domestic consumption needs.

52


Oilseeds

Australian oilseed production to rise Australian oilseed production is forecast to be 29 per cent higher in 2016–17 at around 5 million tonnes. Higher total production is largely the result of forecast higher canola and cottonseed production.

Canola production is forecast to rise by 23 per cent in 2016–17 to around 3.6 million tonnes. If realised, this level of production would be the third-highest on record. Higher than average rainfall during winter generally improved canola crop prospects. Despite waterlogging of crops constraining yields in some regions, the average yield for Australia as a whole is forecast to rise by 19 per cent to 1.5 tonnes a hectare. Sufficient and timely rainfall is required over spring to realise improved crop prospects, especially in parts of Western Australia where below average winter rainfall has affected stores of soil moisture.

The area planted to canola is estimated to have increased by 4 per cent in 2016–17 to around 2.5 million hectares, reflecting favourable expected returns compared with wheat and barley.

Oilseed production, Australia, 2001–02 to 2016–17 6

Other Cottonseed Canola

5 4 3 2 1 Mt 2002 –03

2004 –05

2006 –07

2008 –09

2010 –11

2012 –13

2014 –15

2016 –17f

f ABARES forecast.

Australian cottonseed production is forecast to rise by 51 per cent to 1.2 million tonnes in 2016–17. The area planted to cotton is forecast to rise by 76 per cent in 2016–17 to 475 000 hectares. This will be partly offset by lower yields because of a forecast increase in area planted to dryland cotton, which has a substantially lower average yield than irrigated cotton. Increased cotton plantings are in response to higher world cotton prices, increased irrigation water availability and favourable soil moisture in regions suitable for growing dryland cotton (see Cotton note).


53

Oilseeds

Australian canola exports to rise in 2016–17 Australian canola exports are forecast to rise by 39 per cent in 2016–17 to 2.7 million tonnes. Increased exportable supplies will allow exporters to meet expected stronger import demand from the European Union, Australia’s main export destination for canola. Below average crop production in Ukraine (Australia’s main competitor in the EU market) and forecast reduced exportable supplies in Canada underpin expected higher EU demand for Australian canola exports.

Volume of canola exports by destination, Australia, 2001–02 to 2016–17 3.5

Other China European Union

3.0 2.5 2.0 1.5 1.0 0.5 Mt 2002 –03

2004 –05

2006 –07

2008 –09

2010 –11

2012 –13

2014 –15

2016 –17f

f ABARES forecast.

The value of canola exports is forecast to rise by 43 per cent in 2016–17 to $1.6 billion, largely because of expected higher export volumes. Export unit values are forecast to rise, supported by expected stronger EU import demand and limited growth in canola supplies in major exporting countries. However, relatively abundant and cheaper substitutes (such as soybean) are anticipated to place downward pressure on export values.

Australian canola exports fell by 20 per cent in 2015–16 to 1.9 million tonnes, following an estimated 17 per cent decline in canola production. Exports to the European Union totalled 1.8 million tonnes, two-thirds more than in the previous year. Increased exports to the European Union have been supported by higher import demand in 2015–16 and lower exportable supplies of rapeseed from Ukraine.

54


Oilseeds

Canola exports by destination, Australia, 2014–15 and 2015–16 2015–16 2014–15

European Union China Japan Other Mt

0.5

1.0

1.5

2.0

Australia did not record any canola exports to China in 2015–16, compared with 533 000 tonnes in the previous year. This reflects declining import demand from China, abundant supplies of canola from Canada (the major supplier of canola to China) and strong EU import demand for Australian canola. Australian canola exports to China in 2016–17 are forecast to remain below the volume shipped in 2014–15. EU import demand is expected to limit the volume of Australian canola shipped to other destinations, including China.


55

Oilseeds

Outlook for oilseeds Outlook for oilseeds Category World Production Consumption – oilseed meal – vegetable oil Exports Closing stocks Stocks-to-use ratio Soybean indicator price a Canola indicator price b Australia Total production – winter – summer Canola Production Exports c – value

unit

2014–15

2015–16 s

2016–17 f

% change

Mt

537

519

538

3.7

Mt

517

528

542

2.7

Mt

294

306

318

3.9

Mt

172

179

186

3.9

Mt

147

153

157

2.6

Mt

93

84

79

–6.0

%

18

16

15

–

US$/t

418

373

395

5.9

US$/t

424

415

424

2.2

kt

4 376

3 852

4 985

29.4

kt

3 546

2 949

3 640

23.4

kt

830

903

1 345

48.9

kt

3 540

2 944

3 632

23.4

kt

2 445

1 946

2 697

38.6

A$m

1 349

1 097

1 565

42.7

Price c (delivered Melbourne)

A$/t 482 542 555 2.4 a US no. 2 soybeans, fob Gulf. b Europe Rapeseed, fob Hamburg, July–June. c July–June years. f ABARES forecast. s ABARES estimate. Sources: ABARES; Australian Bureau of Statistics; United States Department of Agriculture

56


Sugar Benjamin K Agbenyegah

• The world indicator price for raw sugar is forecast to rise by 19 per cent to average

US19 cents a pound in 2016–17.

• World sugar consumption in 2016–17 is forecast to exceed production for the

second year in a row, reducing world stocks to their lowest levels since 2011–12.

• The return on sugar cane to Australian growers is forecast to increase by

19 per cent in 2016–17 to around $50 a tonne.

Higher demand to support world sugar prices in 2016–17 The world indicator price for raw sugar (Intercontinental Exchange, nearby futures, no. 11 contract) in 2016–17 (October to September) is forecast to increase by 19 per cent to average US19 cents a pound. This forecast price increase mainly reflects a significant decline in world sugar stocks. World sugar consumption growth is expected to be faster than production growth for the second year in a row. This is expected to further reduce world sugar stocks to their lowest since 2011–12. The world stocks-to-use ratio for sugar is expected to decline by 5 percentage points in 2016–17 to 36 per cent.

World sugar stocks, 2007–08 to 2016–17 a 100

50

80

40

60

30

40

20

20

10

Mt

Stocks Stocks-to-use ratio (right axis)

% 2008 –09

2010 –11

2012 –13

2014 –15

2016 –17f

a Stocks are raw value equivalent and years are from October to September. f ABARES forecast.


57

Sugar

In 2015–16 the world indicator price of raw sugar is estimated to average US16 cents a pound, compared with US13.4 cents a pound in 2014–15. The increase in world sugar prices in 2015–16 reflects an estimated 8 per cent fall in world stocks because of reduced production in all major producing countries except Australia.

World sugar indicators, 2009–10 to 2016–17 a 200

30

190

25

180

20

170

15

160

10

150

5

Production Consumption Real price (right axis)

2016–17 USc/lb

Mt 2009 –10

2010 –11

2011 –12

2012 –13

2013 –14

2014 –15

2015 –16f

2016 –17f

a Production and consumption are raw value equivalent and years are from October to September. f ABARES forecast.

World sugar production to rise in 2016–17 World sugar production is forecast to increase to around 177 million tonnes in 2016–17, from an estimated 174 million tonnes in 2015–16. Area harvested for both cane and beet is expected to increase in response to relatively high sugar prices. Increased yields are also expected, assuming a return to average seasonal conditions following adverse seasonal conditions in some major producing countries in 2015–16. Forecast higher sugar production in Brazil, Europe, China and Australia is expected to more than offset forecast declines in India, Thailand and the United States. In 2015–16 world sugar production fell by 4 per cent to an estimated 174.2 million tonnes. This was the lowest since 2010–11, when around 166 million tonnes of sugar was produced. Reduced beet planting in the European Union because of relatively low sugar prices at the time of planting and adverse seasonal conditions in India, China and Thailand largely contributed to lower production in 2015–16.

58


Sugar

Forecast changes in world sugar production, by country, 2015–16 and 2016–17 a 4

2015–16f 2016–17f

2 0 –2 –4 –6 –8 Mt Australia Brazil

China

Eastern Europe

European Union

Thailand India

United States

Mexico

World Other

a Production in raw value equivalent. f ABARES forecast.

Brazil to increase cane allocation for sugar production In 2016–17 (April to March) sugarcane crush in Brazil is forecast to increase by 3 per cent to 687 million tonnes, reflecting an expected increase in area harvested and assumed higher cane yields. Harvested area is expected to increase by 2 per cent in 2016–17 to around 11.1 million hectares because of a large carryover of uncut cane from the 2015–16 season. Cane harvest in 2015–16 ended earlier than expected because cutting was disrupted by heavy rains towards the end of the season. Cane yields are assumed to be 1 per cent higher because dry weather during harvesting in 2016–17 is expected to improve yield potential.

Brazilian sugar production is forecast to be 39.6 million tonnes in 2016–17, up from 38.1 million tonnes in 2015–16. This forecast increase is based on higher cane production and increased cane allocation to sugar production encouraged by an expected increase in the relative price of sugar to ethanol. As at 1 August 2016, sugar mills in Brazil’s south-central region (which produces around 90 per cent of the country’s sugar cane) allocated around 45 per cent of the already crushed cane in 2016–17 to sugar production, compared with 41 per cent by the same date in 2015. In 2013 the Brazilian Government raised the mandatory blending ratio of anhydrous ethanol with gasoline from 20 per cent to 25 per cent in response to a request from the ethanol industry. This request followed two years of continuous decline in domestic ethanol consumption and relatively low ethanol prices. Amid falling world crude oil prices, the government raised the blend ratio by a further 2 per cent to 27 per cent in 2015 to encourage the consumption of ethanol. Sugar mills in Brazil responded to these increases by raising the share of cane allocated to ethanol production from 50 per cent in 2012–13 to 59 per cent in 2015–16.


59

Sugar

Cane and sugar production and allocation, Brazil, 2004–05 to 2016–17 700

70

600

60

500

50

400

40

300

30

200

20

100

10

Cane production Sugar production Sugar share of cane (right axis)

%

Mt 2004 –05

2006 –07

2008 –09

2010 –11

2012 –13

2014 –15

2016 –17f

f ABARES forecast.

Production to increase in China and Europe in response to higher prices Chinese sugar production is forecast to rise by 11 per cent in 2016–17 (June to May) to 10.5 million tonnes. Cane production is forecast to be 87 million tonnes, up from 82 million tonnes in 2015–16. This reflects an estimated 2 per cent increase in cane and beet area to around 1.44 million hectares. Increased plantings were in response to higher sugar prices. In 2015–16 the purchase price for cane was set at 440 yuan a tonne, up from 400 yuan a tonne in 2014–15. Average cane yields are assumed to be 4 per cent higher in 2016–17 as a result of a shift by growers to planting genetically modified crops that have higher cane yields.

EU sugar production is forecast to increase by 13 per cent in 2016–17 to 17 million tonnes, driven mainly by an expected 9 per cent rise in beet production to around 103 million tonnes. The expected increase in beet production is based largely on an estimated 8 per cent rise in area to 1.4 million hectares and an assumed 1 per cent increase in average beet yields. In 2015–16 beet planting declined by 15 per cent to around 1.3 million hectares in response to relatively low prices at the beginning of the season.

Sugar production in Eastern Europe is forecast to reach a record 12 million tonnes in 2016–17, up from 10.5 million tonnes in 2015–16. This forecast reflects an increase in beet planting and an assumed rise in average beet yield, following dry weather in 2015–16. In the Russian Federation, sugar production is forecast to rise by 7 per cent in 2016–17 to a record 6 million tonnes, driven mainly by an estimated 3 per cent increase in beet planting. Average beet yields are assumed to be lower after record yields were achieved in 2015–16. Sugar production in Ukraine is forecast to increase by 32 per cent in 2016–17 to 2.1 million tonnes. Sugarbeet plantings are estimated to increase by 20 per cent and the average beet yield is assumed to recover by 6 per cent in 2016–17.

60


Sugar

Decreased production expected in Thailand, India and the United States In Thailand, sugarcane crush is forecast to be 90.3 million tonnes in 2016–17, down from 94 million tonnes in 2015–16. Cane area harvested is expected to remain largely unchanged at 1.77 million hectares. However, average cane yield is assumed to be slightly lower. Based on lower cane production, Thai sugar production is forecast to fall by 3 per cent in 2016–17 to 9.8 million tonnes. In 2016–17 sugar production in India is forecast to fall by 8 per cent to around 25.1 million tonnes, reflecting an expected 5 per cent fall in cane production. Cane crush in India is forecast to be 328 million tonnes in 2016–17, down from around 346 million tonnes in 2015–16. This is the result of an estimated 4 per cent decline in the expected area harvested and a 1 per cent decline in assumed average cane yield. Reduced monsoon rains in 2015 negatively affected yield potential in the 2015–16 season.

Sugar production in the United States is forecast to decline by 2 per cent in 2016–17 to around 8 million tonnes. Area planted to cane and beet is estimated to remain largely unchanged at 830 000 hectares. Beet sugar production is forecast to increase slightly to a record 4.6 million tonnes, but cane sugar production is forecast to fall by 6 per cent to 3.3 million tonnes, based on assumed lower cane yields.

World sugar consumption to grow in 2016–17

World sugar consumption is forecast to increase by 2 per cent in 2016–17 to around 184 million tonnes, reflecting world income and population growth. Rising demand from food processing industries in countries such as India, China and Indonesia is expected to support sugar consumption growth in 2016–17. Higher consumption is forecast for all the world’s major sugar-consuming countries except for Brazil.

Forecast changes in world sugar consumption, by country, 2015–16 and 2016–17 a 4

2015–16f 2016–17f

3 2 1 0 Mt India

European Union China

Russian Federation

United States

Pakistan

Indonesia

Brazil

Other World

a Consumption in raw value equivalent. f ABARES forecast.


61

Sugar

World sugar exports to rise in 2016–17 World sugar exports are forecast to be 60 million tonnes in 2016–17, up from around 58 million tonnes in 2015–16. This is largely based on an expected increase in sugar production in Brazil and on Thailand’s carry-over stocks increasing exportable supplies. Strong import demand from the United States and Indonesia is expected to support higher exports from the major exporting countries. Brazilian sugar exports are forecast to increase by 9 per cent in 2016–17 to reach 30.5 million tonnes, reflecting an expected increase in Brazil’s sugar production and strong import demand from Indonesia.

Sugar exports from Thailand are forecast to reach a record of around 9 million tonnes in 2016–17, up from 8.6 million tonnes in 2015–16. This forecast is based on increased exportable supplies and higher import demand from the United States and Indonesia. Although domestic production is forecast to decline, carry-over stocks from 2015–16 are expected to increase supply available for export. EU sugar exports are forecast to remain at around 1.4 million tonnes in 2016–17, the maximum permitted under its World Trade Organization obligations. Sugar imports into the European Union are forecast to fall by 2 per cent to 3 million tonnes because of higher domestic production. Sugar exports from India are forecast to almost halve in 2016–17 to 1.5 million tonnes, reflecting the forecast decline in domestic production and expected increase in domestic consumption. Sugar imports into China are forecast to decline by 6 per cent in 2016–17 to 6.3 million tonnes, reflecting forecast higher domestic production.

Sugar imports into Indonesia are forecast to increase by 10 per cent in 2016–17 to 4.3 million tonnes as domestic sugar consumption increases faster than production.

Forecast changes in world sugar exports, by country, 2015–16 and 2016–17 a 5

2015–16f 2016–17f

4 3 2 1 0 –1 –2 –3 Mt Brazil

Thailand Australia

India

Mexico

Other

World

a Exports are raw value equivalent. f ABARES forecast.

62


Sugar

World sugar stocks to decline in 2016–17 World closing stocks of sugar are forecast to fall by 10 per cent in 2016–17 to 67 million tonnes, reflecting forecast world consumption exceeding production for the second consecutive year. If realised, forecast world stocks will be the lowest since 2011–12, when stocks were 64.4 million tonnes. The world stocks-to-use-ratio is expected to be 36 per cent in 2016–17, down from 41 per cent in 2015–16.

World sugar stocks changes, 2004–05 to 2016–17 a 15

60

10

50

5

40

0

30

–5

20

–10

10

Stocks Stocks-to-use ratio (right axis)

%

Mt 2004 –05

2006 –07

2008 –09

2010 –11

2012 –13

2014 –15

2016 –17f

a Stocks changes are raw value equivalent and years are from October to September. f ABARES forecast.

Returns to Australian sugar growers to increase in 2016–17 Australian sugar production is forecast to increase by 4 per cent in 2016–17 to 5.1 million tonnes. This forecast is largely based on an expected 2 per cent rise in cane production to around 36 million tonnes. Area planted to cane is estimated to increase by 3 per cent to 393 000 hectares, driven by favourable sugar prices. Average cane yields are assumed to be 1 per cent lower, with hot and dry conditions from the El Niño weather pattern in 2015–16 negatively affecting yield potential. In 2016–17 Queensland Sugar Limited, a major marketer of Australia’s raw sugar exports, forecasts its gross harvest pool return to be $509 a tonne (International Polarity Scale), a 33 per cent increase from $383 a tonne in 2015–16. At this forecast value, the pool return is expected to be the highest since 2009–10, when Australian cane growers received $511 a tonne. Based on the current forecast price, the average mill-gate return to Australian cane growers is expected to increase by 19 per cent in 2016–17 to around $50 a tonne of cane cut for crushing. Reflecting higher production, Australian sugar exports are forecast to be around 4.1 million tonnes in 2016–17, 3 per cent higher than the volume shipped in 2015–16. Based on a forecast increase in world sugar prices and export volume, the value of Australian sugar exports is forecast to increase by 21 per cent in 2016–17 to $2.3 billion.


63

Sugar

Sugar production, exports and returns to cane growers, Australia, 2004–05 to 2016–17 a 6 000

60

5 000

50

4 000

40

3 000

30

2 000

20

1 000

10

Production Exports Return to cane growers (right axis)

2016–17 $/t

kt 2004 –05

2006 –07

2008 –09

2010 –11

2012 –13

2014 –15

2016 –17f

a Production and exports are raw value equivalent. f ABARES forecast.

Outlook for sugar a Outlook for sugar a Category World b Production – Brazil Consumption Exports Closing stocks Stocks-to-use ratio Price Australia c Area Production Exports – value Return to cane growers

unit

2014–15

2015–16 f

2016–17 f

% change

Mt

181.8

174.2

176.6

1.4

Mt

37.7

38.1

39.6

3.9

Mt

178.9

180.3

183.9

2.0

Mt

55.6

57.7

60.0

4.0

Mt

80.5

74.4

67.0

–9.9

%

45.0

41.3

36.4

–

USc/lb

13.4

16.0

19.0

18.8

’000 ha

378

381

393

3.2

kt

4 572

4 920

5 100

3.7

kt

3 675

3 946

4 051

2.7

A$m

1 643

1 893

2 299

21.4

A$/t 40 42 50 19.0 a Volumes are raw value equivalent. b October–September years. c July–June years. f ABARES forecast. Sources: ABARES; Australian Bureau of Statistics; F.O. Licht, International Sugar and Sweetener Report, World Sugar Balances, Ratzeburg, Germany; F.O. Licht, International Sugar and Sweetener Report, Ratzeburg, Germany; United States Department of Agriculture

64


Cotton Benjamin K Agbenyegah

• The world indicator price for cotton is forecast to increase by around 7 per cent to

average US75 cents a pound in 2016–17, supported by relatively tight world cotton supplies for the second consecutive year.

• Although world cotton production is forecast to increase in 2016–17, it is expected

to again be lower than world consumption, resulting in a further decline in stocks.

• The return to Australian cotton growers at the gin-gate is forecast to increase by

8 per cent in 2016–17 to average $554 a bale, mainly reflecting forecast higher world cotton prices.

• Australian cotton exports are forecast to rise by 30 per cent in 2016–17

to 691 000 tonnes, reflecting strong international demand and increased production in 2015–16 and 2016–17.

World cotton prices to rise in 2016–17

The world indicator price for cotton (Cotlook ‘A’ index) is forecast to increase by 7 per cent to average US75 cents a pound in 2016–17 (August to July marketing year), up from US70.4 cents a pound in 2015–16. This forecast higher price reflects the effect of world cotton consumption exceeding production for the second consecutive year, leading to a significant fall in the stocks-to-use ratio. World cotton closing stocks increased significantly from 11.2 million tonnes in 2010–11 to a record 24.5 million tonnes in 2014–15, before reducing to around 22 million tonnes at the close of 2015–16. This decline reflects a significant fall in world cotton production in 2015–16—particularly in India, China, the United States, Pakistan and Brazil—and higher than expected demand for cotton from China. These five countries accounted for around 78 per cent of world cotton production in the 10 years to 2014–15. With Chinese cotton production falling in 2015–16, the Chinese Government met domestic demand for cotton by releasing around 1.6 million tonnes of cotton from the state reserve. This resulted in a 12 per cent decline in Chinese stocks to 13 million tonnes by the end of 2015–16.


65

Cotton

World cotton supply, 2005–06 to 2016–17 50

100

40

80

30

60

20

40

10

20

Production Opening stocks Stocks-to-use ratio (right axis)

%

Mt 2006 –07

2008 –09

2010 –11

2012 –13

2014 –15

2016 –17f

f ABARES forecast.

World cotton indicators, 2005–06 to 2016–17 30

180

25

150

20

120

15

90

10

60

5

Production Consumption Closing stocks Price (right axis)

30 2016–17 USc/lb

0 Mt 2006 –07

2008 –09

2010 –11

2012 –13

2014 –15

2016 –17f

f ABARES forecast.

Higher yields to boost world cotton production in 2016–17 World cotton production is forecast to be 22.4 million tonnes in 2016–17, 6 per cent higher than in 2015–16. This forecast is based largely on an assumed 7 per cent increase in world average lint yields to 0.745 tonnes a hectare. This follows hot and dry seasonal conditions associated with the El Niño weather pattern and pest damage to crops, which reduced the estimated average yield to around 0.7 tonnes a hectare in 2015–16. The average lint yield in 2015–16 was the lowest since 2003–04, when 0.64 tonnes a hectare was recorded.

66


Cotton

World area planted to cotton and average lint yields, 2003–04 to 2016–17 39

0.85

37

0.80

35

0.75

33

0.70

31

0.65

29

0.60

27

0.55

Area planted Lint yield (right axis)

t/ha

Mha 2004 –05

2006 –07

2008 –09

2010 –11

2012 –13

2014 –15

2016 –17f

f ABARES forecast. Note: Lint yield relates to area planted.

In India, the world’s largest cotton producer, production is forecast to be around 6 million tonnes in 2016–17, 3 per cent higher than in 2015–16. Lint yields are assumed to increase by 7 per cent to average 0.522 tonnes a hectare in 2016–17. Improved yield is likely to result from monsoon rainfall that was 3 per cent above the long-term average (measured over the period from 1951 to 2000). However, favourable rainfall and the economic impact of severe whitefly damage to cotton crops in 2015–16 encouraged some farmers to switch to alternative crops such as sugar cane, peanut and pulses. As a result, area planted to cotton is expected to fall by 4 per cent to 12 million hectares.

Cotton production in the United States is forecast to increase by 23 per cent in 2016–17 to around 3.5 million tonnes. This reflects the combined effects of an estimated 17 per cent increase in cotton planting and an assumed 7 per cent rise in average lint yields. Area planted to cotton in 2016–17 rose to around 4.1 million hectares in response to favourable domestic prices and improved seasonal conditions during planting. Relatively low returns to cotton compared with alternative crops and dry seasonal conditions restricted planting in 2015–16. Cotton prices have risen from the levels recorded during planting in 2015. In contrast, prices for alternatives such as corn, soybean and grain sorghum have since declined. Lint yields are assumed to average 0.86 tonnes a hectare following dry weather in many cotton-growing regions in 2015–16.


67

Cotton

Cotton area and lint yield, United States, 2004–05 to 2016–17 10

1.0

8

0.8

6

0.6

4

0.4

2

0.2

Area planted Area harvested Lint yield (right axis)

t/ha

Mha 2004 –05

2006 –07

2008 –09

2010 –11

2012 –13

2014 –15

2016 –17f

f ABARES forecast. Note: Lint yield relates to area planted.

Cotton production in Pakistan is forecast to increase by 15 per cent in 2016–17 to around 1.8 million tonnes, mainly reflecting an assumed 29 per cent rise in average yield to 0.7 tonnes a hectare. Higher yields are expected, assuming a return to average seasonal conditions after adverse seasonal conditions and pink bollworm and whitefly damage to crops in 2015–16. Area planted to cotton in 2016–17 is estimated to have declined by 11 per cent to 2.5 million hectares because of relatively low domestic cotton prices during planting. In 2016–17 the Pakistan Government is expected to continue supporting the cotton industry by increasing the supply of certified seed by 15 per cent, encouraging the use of insecticides to control pests and providing fertilisers and water supplies for irrigation. These measures are expected to help improve yield potential in 2016–17. In Brazil, cotton production is forecast to be around 1.4 million tonnes in 2016–17, up by 4 per cent from 2015–16. This forecast is based mainly on an assumed 8 per cent increase in average lint yield to 1.52 tonnes a hectare after dry weather adversely affected yields in 2015–16. This increase in forecast yield is partially offset by an expected 4 per cent decline in cotton planting to around 925 000 hectares. Rising production costs are expected to reduce the return to cotton production, making its cultivation less favourable than for alternatives such as soybean, corn and rice. Cotton production in China is forecast to be around 4.6 million tonnes in 2016–17, down from 4.8 million tonnes in 2015–16 and the lowest since 2000–01. This decline is driven mainly by an estimated 10 per cent fall in area planted to cotton to 2.7 million hectares. Reduced planting was in response to lower returns from cotton production because of relatively high production costs and adverse weather during planting. Changes to target prices and direct payments to growers under the Chinese Government’s cotton income support policy are also creating some uncertainty, particularly for cotton growers outside the Xinjiang region (see box).

68


Cotton

The Xinjiang region produces most of China’s cotton. In 2016–17 the government lowered the target price for producers in the region to 18 600 yuan a tonne from 19 100 yuan a tonne in 2015–16. This represents a reduced subsidy of around 6 600 yuan a tonne based on current domestic prices. As a result, area planted to cotton in the Xinjiang region declined by 6 per cent to 2 million hectares. The government has not yet announced details of the fixed subsidy for the nine major cotton-producing provinces outside the Xinjiang region, which previously received 2 000 yuan a tonne. As a result, planting in these provinces has declined by 18 per cent. Partly offsetting the decline in planting is an assumed 7 per cent increase in average yields to 1.63 tonnes a hectare. Despite a reduction in planting, cotton production in the Xinjiang region is forecast to rise by 3 per cent to 3.7 million tonnes in 2016–17, reflecting the assumed higher average lint yield. Production outside the Xinjiang region is forecast to fall by 21 per cent to 900 000 tonnes.

Changes in cotton production, by country, 2015–16 and 2016–17 2

2015–16 2016–17f

1 0 –1 –2 –3 –4 Mt India

Australia Brazil

United States Pakistan

China Turkey

World Other

f ABARES forecast.

Chinese cotton policy: direct payments to domestic growers In the 2014–15 season, the Chinese Government replaced its strategic stockpiling policy with direct payments to domestic growers and significantly reduced imports. A subsidy equivalent to the difference between the market price and a set target price of 19 800 yuan a tonne (US$1.45 a pound) was paid to producers in the Xinjiang region. Xinjiang producers accounted for around 70 per cent of total Chinese cotton production in 2013–14. They received higher payments for each tonne of cotton than producers from the nine major cotton-producing provinces outside the Xinjiang region, who received a fixed subsidy of 2 000 yuan a tonne (around US15 cents a pound). The government reduced the target price for the Xinjiang region to 19 100 yuan a tonne (US$1.34 a pound) in 2015–16 and maintained the fixed subsidy of 2 000 yuan a tonne for major producers outside the Xinjiang region. The government’s income support policy and declining prices have led to a significant fall in returns to planting cotton compared with alternatives. As a result, Chinese production is estimated to be 4.8 million tonnes in 2015–16, down from 6.5 million tonnes in 2014–15. continued ...


69

Cotton

Chinese cotton policy: direct payments to domestic growers

continued

In the 2016–17 season, the government reduced the target price for producers in the Xinjiang region by 3 per cent to 18 600 yuan a tonne. Details of the fixed subsidy for the nine cotton-producing provinces outside the Xinjiang region remain unclear. Farmers in these provinces have responded by planting more profitable alternative crops. Consequently, Chinese cotton production is forecast to decline by a further 4 per cent to 4.6 million tonnes in 2016–17, the lowest since 2000–01. In the three years to 2013–14, the Chinese Government’s strategic stockpiling policy helped support domestic and international cotton prices and world cotton trade. Chinese domestic prices were kept well above world prices. Chinese cotton imports reached a record 5.3 million tonnes in 2011–12 and remained relatively high for the remaining two years. Stocks rose from 6.8 million tonnes in 2011–12 to 14.8 million tonnes in 2014–15. In 2014–15 China’s cotton consumption declined to 7.2 million tonnes—the lowest in 11 years—and its share of the world cotton market fell. The new policy of direct payments to domestic growers has resulted in a significant decline in Chinese domestic cotton prices, imports and stocks. Continued release of national reserve cotton for domestic mill use has reduced Chinese import demand significantly. Chinese imports declined from 3.1 million tonnes in 2013–14 to 980 000 tonnes in 2015–16 and world cotton trade reduced by 15 per cent to 7.6 million tonnes over the same period. Chinese cotton stocks fell from a record 14.8 million tonnes in 2014–15 to 13.0 million tonnes in 2015–16.

Cotton indicators, China, 2005–06 to 2016–17 15

Production Consumption Closing stocks Imports

12 9 6 3 Mt 2006 –07

2008 –09

2010 –11

2012 –13

2014 –15

f ABARES forecast.

70


2016 –17f

Cotton

World cotton consumption growth weak in 2016–17 World consumption of cotton is forecast to be 24.3 million tonnes in 2016–17, up from 24 million tonnes in 2015–16. The relatively weak growth in world cotton consumption reflects forecast higher world prices and expected strong competition from alternative fibres, particularly polyester. Prices for polyester have been relatively low over recent years because of lower world oil prices. Forecast higher cotton consumption in China, Bangladesh, Vietnam and the United States is expected to more than offset declines in India and Pakistan.

Cotton consumption in China is forecast to be 7.6 million tonnes in 2016–17, 3 per cent higher than in 2015–16. This forecast is based on an expectation that the Chinese Government will continue to release cotton from its state reserve, which is auctioned to domestic mills at relatively low prices. In 2015–16 the government auctioned around 1.6 million tonnes of cotton from its state reserve. This led to cotton consumption rising by 3 per cent to 7.4 million tonnes, the first annual increase in Chinese consumption in five years. Cotton consumption in Bangladesh is forecast to be 1.3 million tonnes in 2016–17, up by 5 per cent from 2015–16. Consumption in Vietnam is forecast to increase by 7 per cent to 1 million tonnes. These forecast increases reflect higher demand for cotton by the yarn-spinning industry in each country. Consumption in India and Pakistan is expected to be lower in 2016–17 as a result of relatively high domestic cotton prices.

World monthly apparel fibre and crude oil prices, August 2012 to July 2016 120

120

100

100

80

80

60

60

40

40

20

20

Cotlook ‘A’ index Chinese polyester staple World crude oil (right axis)

US$/barrel

USc/lb Jan 2013

Jul 2013

Jan 2014

Jul 2014

Jan 2015

Jul 2015

Jan 2016

Jul 2016

World cotton trade to decline in 2016–17 World cotton exports are forecast to fall by 1 per cent in 2016–17 to 7.5 million tonnes. This reflects mainly lower import demand from Pakistan and Turkey because of forecast higher domestic production. Lower cotton exports from India and Brazil are expected to more than offset increases from the United States and Australia. US cotton exports are forecast to increase by 25 per cent in 2016–17 to 2.5 million tonnes, mainly reflecting the forecast rise in US domestic production.


71

Cotton

Cotton exports from India, the world’s second-largest exporter, are forecast to fall by 28 per cent in 2016–17 to 915 000 tonnes. This decline is the result of forecast lower import demand from China, Pakistan and Turkey. While domestic Indian cotton production is forecast to rise, consumption is expected to decline, resulting in India’s stocks rising by 3 per cent to 2.5 million tonnes by the end of 2016–17. Cotton exports from Brazil are forecast to be 784 000 tonnes in 2016–17. This 17 per cent decline in exports is expected because of lower import demand from Pakistan, Indonesia and Turkey.

Imports of cotton into Bangladesh, the world’s largest importer, are forecast to increase by 4 per cent in 2016–17 to a record of around 1.3 million tonnes. This increase is mainly driven by strong demand for cotton from the expanding apparel, textiles and yarn-spinning industries. Imports into Vietnam are forecast to be around 1.1 million tonnes in 2016–17, 9 per cent higher than in 2015–16.

Chinese cotton imports are forecast to be largely unchanged at 980 000 tonnes in 2016–17. This assumes that the Chinese Government will continue to limit its 2017 cotton import quota to 894 000 tonnes (the minimum specified under its World Trade Organization obligations) and the ongoing release of state reserve cotton into the domestic market. In 2015–16 Bangladesh overtook China as the world’s largest importer of cotton.

World cotton stocks to remain high in 2015–16

World closing stocks of cotton are forecast to be around 20 million tonnes in 2016–17, down from around 22 million tonnes in 2015–16. This decline reflects forecast world cotton consumption exceeding world production for the second year in a row. Despite this decline, world stocks are expected to be the fifth largest on record. While stocks in China are forecast to decline by 17 per cent to around 11 million tonnes, stocks for the rest of the world are forecast to increase by 2 per cent to around 9 million tonnes. The world stocks-to-use ratio is forecast to be around 81 per cent in 2016–17, down from 90 per cent in 2015–16.

World cotton stocks, 2004–05 to 2016–17 25

100

20

80

15

60

10

40

5

20 %

Mt 2004 –05

2006 –07

2008 –09

2010 –11

2012 –13

2014 –15

f ABARES forecast.

72


2016 –17f

Other China World stocks-to-use ratio (right axis)

Cotton

Australian cotton production to grow in 2016–17 Australian cotton production is forecast to reach 875 000 tonnes in 2016–17, up from around 579 000 tonnes in 2015–16. This forecast is based mainly on an expected 76 per cent increase in cotton planting to 475 000 hectares in response to higher world cotton prices and greater availability of irrigation water. As at 10 September 2016, the average storage level of public irrigation dams serving Australia’s cotton-growing regions was around 60 per cent of capacity, compared with 38 per cent at the same time in 2015.

Storage levels, main irrigation dams serving Australia’s cotton-growing regions, as at 10 September 120

2015 2016

100 80 60 40 20 Other Queensland

Beardmore (St George)

Fairbairn (Emerald)

Leslie (Darling Downs)

Other New South Wales

Burrendong (Macquarie)

Pindari (Macintyre)

Keepit (Namoi)

Glenlyon (Macintyre)

Copeton (Gwydir)

%

Note: Storage levels are presented as a percentage of total operational capacity.

According to the Bureau of Meteorology, seasonal conditions are expected to be favourable in the three months to November 2016. Increased water levels in dams serving Australian cotton-growing regions and favourable soil moisture profiles are expected to lead to increased cotton plantings. Lint cotton yields (averaged across irrigation and dryland cotton) are assumed to be lower at 1.84 tonnes a hectare because of an expected increase in dryland cotton plantings, which generally yield around 70 per cent less lint than irrigated cotton. Improved soil moisture profiles are expected to result in dryland cotton plantings almost tripling to around 175 000 hectares in 2016–17.

In 2015–16 above average rainfall in November 2015 supported 210 000 hectares of irrigated cotton plantings and 60 000 hectares of dryland cotton. This enabled Australian cotton production to recover by 10 per cent from 528 000 tonnes produced in 2014–15.


73

Cotton

Returns to Australian cotton growers to increase in 2016–17 The return to Australian cotton growers at the gin-gate is forecast to increase by 8 per cent in 2016–17 to average $554 a bale (227 kilograms) of lint (including the value of cottonseed and net of ginning costs). This forecast increase mainly reflects an expected rise in world cotton prices.

Australian cotton exports higher in 2016–17

Australian cotton exports are forecast to rise by 30 per cent in 2016–17 to 691 000 tonnes. This forecast reflects strong international demand and increased production in 2015–16 and 2016–17. The Australian cotton harvest period typically runs from March to June, so cotton produced in one financial year is exported across two financial years.

Cotton production, exports and gin-gate returns, Australia, 2004–05 to 2016–17 1 400

700

1 200

600

1 000

500

800

400

600

300

400

200

200

Production Exports Gin-gate return a (right axis)

100 2016–17 $/bale

kt 2004 –05

2006 –07

2008 –09

2010 –11

2012 –13

2014 –15

2016 –17f

a Value of lint and cottonseed, less ginning costs. f ABARES forecast.

Outlook for cotton Outlook for cotton Category World a Production Consumption Exports Closing stocks Stocks-to-use ratio Cotlook ‘A’ index Australia b Area harvested Lint production Exports – value Gin-gate return c

unit

2014–15

2015–16 f

2016–17 f

% change

Mt

25.9

21.1

22.4

6.2

Mt

24.0

24.0

24.3

1.3

Mt

7.7

7.6

7.5

–1.3 –9.3

Mt

24.5

21.6

19.6

%

102.1

90.0

80.7

–

USc/lb

70.8

70.4

75.0

6.5

’000 ha

197.0

270.0

475.0

75.9

kt

527.8

578.9

875.0

51.1

kt

681.2

530.8

691.0

30.2

A$m

1 546.1

1 257.0

1 754.5

39.6

A$/bale 515.6 511.8 554.0 8.2 a August–July years. b July–June years. c Value of lint and cottonseed less ginning costs. f ABARES forecast. Sources: ABARES; Australian Bureau of Statistics; United States Department of Agriculture

74


Agriculture Livestock

LIVESTOCK

9%

to 550 Ac/kg in 2016–17

a

12%

to 595 Ac/kg b in 2016–17

4%

to 1 300 Ac/kg c in 2016–17

2%

t0 42 Ac/L d in 2016–17

Beef and veal Low cattle numbers and herd rebuilding are forecast to drive domestic cattle prices higher.

Sheep meat Lamb prices are forecast to increase, reflecting increased restocker demand as producers rebuild flocks.

Wool The Eastern Market Indicator is forecast to increase, reflecting lower world wool production and firming export demand.

Dairy The Australian farmgate price is forecast to fall, reflecting reductions in global dairy prices.

a Australian weighted average saleyard price of beef cattle. b Australian weighted average saleyard price of lamb. c Eastern Market Indicator price, clean equivalent. d Farmgate milk price.

76


Beef and veal Jack Mullumby

• The Australian weighted average saleyard price of beef cattle is forecast to rise

by 9 per cent to average 550 cents a kilogram (carcase weight) in 2016–17, largely reflecting strong restocker demand and limited cattle supplies.

• Reduced slaughter is forecast to result in Australian beef and veal production

falling by 9.5 per cent to 2.1 million tonnes (carcase weight).

• Increasing competition in major export markets is expected to place

downward pressure on the value of exports.

• Live cattle exports are forecast to fall by 12 per cent, reflecting limited

cattle supplies.

Saleyard prices supported by restocker demand In 2016–17 the weighted average saleyard price of beef cattle is forecast to rise by 9 per cent to average 550 cents a kilogram (dressed weight). Strong demand for young cattle is expected to drive the rise in average saleyard prices despite weaker export demand placing downward pressure on prices for cows and heavy steers. Demand for young cattle is expected to come primarily from producers looking to restock and rebuild herds, reflecting improving seasonal conditions. Cattle prices are also expected to be supported by strong competition throughout the year among buyers at saleyards. The number of cattle for sale is likely to be limited by low cattle numbers and producers’ intentions to rebuild herds. The 2016–17 opening national beef cattle inventory, at 23.3 million head, is estimated to be the smallest since 1995–96. Including dairy cattle, the national beef and dairy cattle herd numbered an estimated 26.1 million head at July 2016.


77

Beef and veal

Opening cattle inventories and the weighted average saleyard price, Australia, 1995–96 to 2016–17 30

600

25

500

20

400

15

300

10

200

5

100

Dairy cattle Beef cattle Price (right axis)

2016–17 c/kg

million head 1996 –97

2001 –02

2006 –07

2011 –12

2016 –17f

f ABARES forecast.

Production to fall as slaughter decreases Beef and veal production is forecast to fall by 9.5 per cent in 2016–17 to 2.1 million tonnes (carcase weight). This largely results from a forecast 15 per cent reduction in cattle and calf slaughter to 7.5 million head. Higher slaughter weights, driven by improved seasonal conditions, fewer female cattle in overall turn-off and high feedlot turn-off, are expected to partially offset the decline in slaughter.

Beef cattle herd to expand

Beef cattle numbers are forecast to rise in 2016–17 by 3.4 per cent to a national herd of 24.1 million head, reflecting the forecast sharp reduction in cattle slaughter. This will be the first increase in the national beef cattle herd in three years and follows a 5 per cent contraction in 2015–16. Improved seasonal conditions are expected to increase calf survival rates across Australia. However, the small breeding cow inventory as at 30 June 2016 will limit the number of calves born in 2016–17.

Australian exports face increasing competition

In 2016–17 beef and veal exports are forecast to fall by around 12 per cent to 1.03 million tonnes (shipped weight), reflecting lower beef production. Average export unit values are also expected to decline because increasing competition in major markets is expected to reduce demand for Australian exports. As a result, the value of Australian beef and veal exports is forecast to decline by 12.5 per cent to $7.3 billion.

78


Beef and veal

Beef and veal production and exports, Australia, 2007–08 to 2016–17 3.0

1.80

2.5

1.50

2.0

1.20

1.5

0.90

1.0

0.60

0.5

0.30

Mt (cw)

Production Exports (right axis)

Mt (sw) 2008 –09

2010 –11

2012 –13

2014 –15

2016 –17f

f ABARES forecast.

US cow slaughter to rise Australian beef and veal exports to the United States are forecast to fall by 31 per cent in 2016–17 to 230 000 tonnes. The forecast decline mainly reflects increased competition from US cow beef production, which rose in 2015–16 for the first time in three years. In the three years to 2014–15, US cow slaughter contracted by an average of 8 per cent a year. Increased competition for Australian beef in the US market is also expected from other exporting nations, including Brazil. In July 2016 the US Department of Agriculture announced the removal of disease-related import bans on Brazilian fresh, chilled and frozen beef. Trade is expected to resume in the first half of 2016–17. However, the volume exported from Brazil will be relatively small because of quota limitations. In 2016–17 Brazil will share a tariff-rate quota with five other countries that are eligible to export beef to the United States but do not have a country-specific quota. This shared quota provides a preferential duty rate of 4.4 cents a kilogram, while imports over the quota allocation of 64 508 tonnes are charged the full ad valorem tariff of 26.4 per cent. In 2015 only around 70 per cent of this quota was filled, with Nicaragua the largest supplier. In contrast, all other major suppliers of beef to the United States access the market either through the North American Free Trade Agreement or via country-specific tariff-free quotas. In 2016 the Australian tariff-rate quota is 418 214 tonnes, which includes a World Trade Organization quota of 378 214 tonnes plus an Australia–United States Free Trade Agreement quota of 40 000 tonnes.


79

Beef and veal

US beef imports by source and quota type, 2015–16 Country-specific tariff-rate quota North American Free Trade Agreement Other countries quota

Australia New Zealand Uruguay Canada Mexico Nicaragua Costa Rica Ireland kt (sw) 50

100

150

200

250

300

350

400

Declining Japanese production supports import demand Australian beef and veal exports to Japan in 2016–17 are forecast to rise by 2.6 per cent to 275 000 tonnes. Japanese demand for imported beef is expected to be supported by continued reductions in domestic production. However, any rise in demand for imported beef is expected to be tempered by some shift in consumption towards lower-priced chicken or pig meat. Increasing competition from the United States in the Japanese market is expected to place downward pressure on Australian export unit values. The value of Australian beef exports to Japan is forecast to rise to $2 billion.

Value of exports to the Republic of Korea to remain unchanged

In 2016–17 beef and veal exports to the Republic of Korea are forecast to rise by 4 per cent to 180 000 tonnes. Korean import demand continues to be strong because domestic production cannot keep pace with expanding consumption. Competition from US beef in the Korean market is also expected to increase, resulting in average Australian export unit values declining year on year. As a result, the value of Australian beef exports to Korea is forecast to remain largely unchanged in 2016–17 at around $1.2 billion.

In 2015–16 Korean beef imports from the United States increased by around a third to 131 000 tonnes. During this period, average export unit values for Australian beef to Korea, in US dollar terms, fell by 6 per cent to US$5.09 a kilogram. In Australian dollar terms, average export unit values rose by 8 per cent to average $6.99 a kilogram, reflecting a 13 per cent depreciation of the Australian dollar against the US dollar.

80


Beef and veal

Average unit value of Australian beef to the Republic of Korea, July 2014 to June 2016 8.00

In A$ terms In US$ terms

7.50 7.00 6.50 6.00 5.50 5.00 4.50 $/kg Sep 2014

Dec 2014

Mar 2015

Jun 2015

Sep 2015

Dec 2015

Mar 2016

Jun 2016

Australian market share in China to decline further Chinese beef imports grew by 80 per cent in 2015–16 to 585 702 tonnes, as consumption growth continued to outpace local production. Despite this, Chinese demand for Australian imports has weakened in recent years as a result of increased competition in that market, particularly from Brazil. The market share of Australian beef in China declined to 25 per cent in 2015–16, half that of 2013–14. In 2016–17 Australian beef and veal exports to China are forecast to fall by 22 per cent to 100 000 tonnes. The forecast decline reflects lower exportable beef supplies from Australia and continued competition in China from South American beef.

Cattle supply to limit live exports

In 2016–17 Australian feeder and slaughter cattle exports are forecast to decline by 12 per cent to around 1 million head. The forecast decline largely reflects assumed improvement in seasonal conditions. As producers retain cattle for finishing or to rebuild herds, the supply of cattle available for export, particularly feeder cattle, is expected to reduce.

Indonesia is forecast to be the largest market for Australian feeder cattle in 2016–17. Limited availability of local slaughter cattle in Indonesia and strong beef consumption growth are expected to support demand and therefore firm prices for Australian cattle. Feeder and slaughter cattle exports to Vietnam are forecast to remain largely unchanged in 2016–17, reflecting weaker import demand. In 2015–16 Australian breeder cattle exports increased by 62 per cent to 135 000 head. The trade was valued at $260 million, around 17 per cent of the total value of Australian live cattle exports. China was the largest market for breeder cattle in 2015–16, with around 100 000 head shipped, making breeder cattle to China the third-largest live cattle export market.


81

Beef and veal

Live cattle exports by destination and type, Australia, 2015–16 Feeder Slaughter Breeder

Indonesia Vietnam China Israel Malaysia Russian Federation Philippines Turkey Egypt Japan Mexico Others ’000 head 100

200

Outlookforfor beef Outlook beef andand veal veal

Category Cattle numbers ab – beef cattle a Slaughterings Production c Exports (shipped weight) – to Japan – to United States – to China – to Korea, Rep. of – total – value Live feeder/slaughter cattle exports d – value Price – saleyard – US import e – Japan import g

300

400

500

600

unit

2014–15

2015–16 s

2016–17 f

% change

million

27.4

26.1

26.8

2.7

million

24.6

23.3

24.1

3.4

’000

10 103

8 796

7 500

–14.7

kt

2 662

2 344

2 122

–9.5

kt

304

268

275

2.6

kt

471

334

230

–31.1

kt

125

128

100

–21.9

kt

157

173

180

4.0

kt

1 349

1 167

1 025

–12.2

A$m

8 858

8 284

7 250

–12.5

’000

1 295

1 126

993

–11.8

A$m

1 163

1 299

1 245

–4.2

Ac/kg cw

364

505

550

8.9

USc/kg

551

451

425

–5.8

USc/kg 667 650 693 a At 30 June. b Includes dairy cattle. c Carcase weight. d Includes buffalo. e Cow 90CL US cif price. f ABARES forecast. g Chilled grassfed fullset Japan cif price. s ABARES estimate. Sources: ABARES; Australian Bureau of Statistics; Department of Agriculture and Water Resources, Canberra; Meat & Livestock Australia

82


6.6

Sheep meat and wool Peter Berry

• Lamb and sheep prices are forecast to average higher in 2016–17 as a result of

firm export demand for sheep meat and increased restocker demand as a result of improved seasonal conditions.

• The Australian Eastern Market Indicator price of wool is forecast to average higher

in 2016–17, supported by some improvement in consumer demand for woollen apparel and lower global wool supply.

• Improved seasonal conditions are expected to drive a sharp increase in

flock rebuilding activity, with the national flock forecast to grow to around 71.5 million head at the end of June 2017.

After dry conditions resulted in lower sheep numbers in 2015–16, above average rainfall was recorded across the major sheep-producing regions of southern and eastern Australia throughout the winter months of 2016. The much improved seasonal conditions leading into the 2016–17 season have raised the possibility of a strong increase in flock rebuilding after three years of declining sheep numbers.

The potential rise in the sheep flock is supported by a Bureau of Meteorology forecast of improved spring rainfall across the major sheep-producing regions around the country. If realised, this can be expected to result in excellent pasture conditions that will support an accelerated rate of flock rebuilding during the year.

Lamb and sheep prices projected to average higher in 2016–17

The Australian weighted average lamb saleyard price is forecast to average 595 cents a kilogram in 2016–17, up 12 per cent on the previous year.

A strong increase in flock rebuilding activity, supported by the assumed improvement in seasonal conditions, is behind the forecast higher prices. Flock rebuilding is expected to boost restocker demand and reduce turn-off as graziers retain more lambs for breeding. Increased processor demand for lambs, as a result of continued firm export demand for lamb in Australia’s major markets, is also expected to support prices.


83

Sheep meat and wool

Lamb saleyard price and slaughter, Australia, 2006–07 to 2016–17 25

750

Lamb slaughter

20

600

Lamb saleyard price (right axis)

15

450

10

300

5

150

million head

2016–17 c/kg 2006 –07

2008 –09

2010 –11

2012 –13

2014 –15

2016 –17f

f ABARES forecast.

In 2016–17 the combined effects of increased demand for breeding ewes and firm export demand for mutton are forecast to result in a 14 per cent increase in the saleyard price of sheep to 360 cents a kilogram.

Sheep saleyard price and slaughter, Australia, 2006–07 to 2016–17 15

500

12

400

9

300

6

200

3

100

million head

2016–17 c/kg 2006 –07

2008 –09

2010 –11

2012 –13

2014 –15

f ABARES forecast.

84


2016 –17f

Sheep slaughter Sheep saleyard price (right axis)

Sheep meat and wool

Wool prices to average higher The Eastern Market Indicator price of wool is forecast to increase by 4 per cent in 2016–17 to average around 1 300 cents a kilogram clean. Moderate economic growth in the major wool-consuming economies of the United States and China is expected to result in modest increases in consumer incomes and demand for woollen apparel. The improvement in global demand, set against forecast lower global wool production, is expected to support a moderate increase in world wool prices for the year.

Eastern Market Indicator price in Australian and US dollars, 1 July 2011 to 26 August 2016 1 600

EMI in USc/kg clean EMI in Ac/kg clean

1 500 1 400 1 300 1 200 1 100 1 000 900 800 26 Aug 2011

31 Aug 2012

30 Aug 2013

29 Aug 2014

28 Aug 2015

26 Aug 2016

Sheep flock to grow strongly in 2016–17 In 2015–16 extended dry conditions, particularly in western Victoria, parts of New South Wales and South Australia, Tasmania and Queensland, drove high rates of turn-off across much of the country. In addition, poor seasonal conditions around the two major periods of joining (autumn and spring 2015) are expected to have led to a reduced birth rate for the year. As a result, the national flock declined and closing sheep numbers at the end of June 2016 are estimated to have fallen by 4 per cent to 68.4 million head. Seasonal conditions improved markedly from late autumn and through the winter months of 2016, with widespread rainfall across the main sheep-producing regions of southern Australia. The Bureau of Meteorology forecast of at least average rainfall across much of southern Australia over spring is expected to improve joining and birth rates and result in good pasture growth into summer and autumn 2016–17. As a result of these influences, the national flock is forecast to grow by almost 5 per cent to around 71.5 million head by the end of June 2017.


85

Sheep meat and wool

Sheep flock, Australia, 2004–05 to 2016–17 120

Wethers and rams Lambs Ewes

100 80 60 40 20 million head 2004 –05

2006 –07

2008 –09

2010 –11

2012 –13

2014 –15

2016 –17f

f ABARES forecast.

Lamb production to remain high, mutton production to fall Lamb slaughter is forecast to fall by around 1 per cent to around 22.9 million head in 2016–17, reflecting increased lamb retention for flock rebuilding. As a result, lamb production is forecast to fall by 1 per cent to a still relatively high 511 000 tonnes. Sheep slaughter is forecast to fall by 20 per cent to 6.5 million head in 2016–17, reflecting greater retention of ewes for breeding. As a consequence, mutton production is forecast to fall by 20 per cent to 156 000 tonnes.

Sheep meat production, Australia, 2004–05 to 2016–17 800

Mutton Lamb

700 600 500 400 300 200 100 kt 2004 –05

2006 –07

2008 –09

2010 –11

2012 –13

2014 –15

f ABARES forecast.

86


2016 –17f

Sheep meat and wool

Wool production to remain unchanged in 2016–17 Australian shorn wool production is forecast to remain largely unchanged at around 325 000 tonnes greasy in 2016–17. This forecast reflects the combined effect of two countervailing influences. Importantly, lower opening sheep numbers are forecast to result in a 2 per cent fall in the number of sheep shorn to 72.2 million head. However, set against this is an assumed strong improvement in seasonal conditions that is forecast to drive an increase in average fleece weights to 4.5 kilograms a head for the year.

Shorn wool production and price, Australia, 2004–05 to 2016–17 500

1 500

400

1 200

300

900

200

600

100

300

kt greasy

Shorn wool production EMI (right axis)

2016–17 Ac/kg clean 2004 –05

2006 –07

2008 –09

2010 –11

2012 –13

2014 –15

2016 –17f

f ABARES forecast.

Lamb export volumes to fall, values to rise in 2016–17 In 2016–17 Australian lamb export volumes are forecast to fall by 1 per cent to 239 000 tonnes, reflecting lower lamb production. Growth in export volumes to the United States, China and the Middle East is expected to be more than offset by reduced exports to most of Australia’s minor markets.

Lamb exports to the United States are forecast to increase by 1 per cent to 54 000 tonnes in 2016–17, reflecting an assumed modest improvement in US economic growth and an assumed favourable exchange rate. Lamb exports to China are forecast to grow by around 1 per cent to around 36 500 tonnes, reflecting a firming of import demand.


87

Sheep meat and wool

Australian lamb exports to the Middle East are forecast to grow by around 1 per cent to around 68 000 tonnes in 2016–17. Assumed stronger economic growth in the Middle East, together with slowing growth in domestic production, is expected to result in a firming of export demand for sheep meat in the region. However, a continuation of low oil prices presents a risk to this forecast because some countries in the region may implement further budgetary measures that reduce consumer spending power and import demand (see box).

Firm export demand in Australia’s major markets, set against reduced export supplies and an assumed continuing weakness in the Australian dollar, is forecast to result in a 4 per cent increase in export unit values to average $7.08 a kilogram in 2016–17. This increase is expected to more than offset the effect of lower export volumes. As a result, the value of lamb exports is forecast to rise by 3 per cent to $1.69 billion.

Mutton exports to fall

Australian mutton exports are forecast to fall by 18 per cent to 121 000 tonnes in 2016–17 as a result of lower mutton production. Firm export demand is expected to support a slight increase in export unit values. Consequently, the total value of mutton exports is forecast to fall by 17 per cent in 2016–17 to around $549 million.

Reduced competition expected from NZ exports

New Zealand is the world’s largest exporter of sheep meat and Australia’s main competitor in key export markets in Asia and the Middle East. For 2015–16 (year ending September) Beef + Lamb New Zealand estimates that NZ lamb production fell by 8 per cent to 277 000 tonnes. This is largely a result of lower sheep numbers, estimated to be down by 3 per cent to 28.3 million head at 30 June 2016. In 2016–17 NZ sheep meat exports are forecast to fall because of lower supply. Forecast lower sheep meat production is expected to result from lower sheep numbers and an expected increase in the number of sheep and lambs retained for flock rebuilding.

Live exports to recover slowly in 2016–17

In 2016–17 Australia’s live sheep exports are forecast to increase by 2 per cent to around 1.9 million head. Growth in the Australian supply of sheep for export will be limited by competition between the sheep meat processing sector and graziers seeking to rebuild their flocks.

The Middle East is Australia’s key export market for live sheep, with countries in the region accounting for more than 95 per cent of Australia’s total exports. However, sharply lower oil revenues in 2015–16 led to some governments in the Middle East cutting consumer price support for food and other staples. As a result, Australian exports of live sheep to the region fell by 15 per cent compared with 2014–15. Exports to Bahrain and the United Arab Emirates were down by 69 per cent and 38 per cent, respectively (see box).

88


Sheep meat and wool

Australian live exports to Middle Eastern markets, 2014–15 and 2015–16 800

2014–15 2015–16

700 600 500 400 300 200 100 ’000 head

Kuwait Bahrain

United Arab Emirates

Jordan Qatar

Oman

In 2016–17 assumed stronger economic growth in the Middle East is expected to result in improved import demand for live sheep, particularly as consumers become accustomed to higher prices. However, a key risk to this forecast is a continuation of low oil prices, which could drive further economic reforms with the potential to reduce consumer demand in the region.

Wool exports to fall slightly

In 2016–17 Australian wool exports are forecast to fall by 1 per cent to 422 000 tonnes greasy. The fall in export volumes is expected to be more than offset by forecast higher wool prices, resulting in the value of Australian wool exports increasing by 6 per cent to around $3.47 billion.

China remains the key export market for Australian wool, accounting for around 76 per cent of wool exports by volume. In 2016–17 Australian wool exports to China are forecast to increase by 3 per cent year on year to 325 000 tonnes, reflecting a forecast modest improvement in processor demand in China, set against lower demand for raw wool in the European Union.


89

Sheep meat and wool

Wool exports by destination, Australia, 2006–07 to 2016–17 600

Other Republic of Korea Italy India Czech Republic China

500 400 300 200 100 kt greasy 2006 –07

2008 –09

2010 –11

2012 –13

2014 –15

2016 –17f

f ABARES forecast.

Low oil prices increase the price competitiveness of synthetic fibres Australian wool competes with a range of alternative fibres on their different physical attributes (particularly in the luxury market segment) and on cost (especially in the budget market segment). As a result, the relative prices of wool and competing fibres influence the demand for wool in global textiles manufacturing. Between July 2015 and May 2016, the ratio of the 21 micron wool price to the polyester staple fibre price increased by 20 per cent to 9.8 to 1, indicating that the price competitiveness of wool had declined. Over the same period, the ratio of the 21 micron wool price to the Cotlook ‘A’ price increased by 23 per cent to 10.2 to 1, indicating that the price competitiveness of wool against cotton had also declined.

Petroleum oil is a feedstock in the production of synthetic fibres, and as a result the price of synthetics is largely determined by the price of oil. Lower oil prices since 2014 have driven the price of synthetics lower relative to wool. This suggests that the use of wool in clothing and textiles manufacture is likely to decline in favour of synthetics. With global oil prices assumed to remain low in the short term, the price-competitiveness of wool in global textile manufacturing appears unlikely to improve significantly in the coming year.

90


Sheep meat and wool

Consumer demand for woollen apparel to grow slowly Spending on woollen apparel is discretionary and as a result consumer demand is strongly linked with economic growth and rising incomes. In 2016–17 assumed moderate economic growth in the United States and China is expected to support limited growth in consumption of woollen apparel and textiles.

China is the world’s largest producer and exporter of woollen clothing and textiles and also a major consumer of finished woollen goods. Recent data from the National Bureau of Statistics of China indicate that the value of China’s domestic sales of garments (of all fibres, not just wool) was up by 7 per cent in the 12 months to July 2016. In 2016–17 China’s domestic consumption of woollen goods is expected to grow more slowly, in line with an assumed slowing in economic growth for the year. The United States is the world’s largest importer of woollen apparel, largely from China and the European Union. Recent trade data released by the US Office of Textiles and Apparel indicate that US import volumes of wool products for the six months to June 2016 were down by 5 per cent year on year to 190 million square metre equivalents. Over the same period the value of imports fell by 4 per cent to US$3.27 billion. In 2016–17 US imports of woollen apparel are forecast to improve as a result of a forecast modest improvement in economic growth and an expected recovery in consumer confidence.


91

Sheep meat and wool

Middle East: the impact of lower oil prices on demand for sheep meat Sharp falls in world oil prices in 2014 and relatively low prices since then have reduced government revenues in the Middle East. This has resulted in economic reforms that have dampened import demand for some agricultural products, including sheep meat, in several countries in the region. Oil revenues have long supported growth in government spending in some Middle Eastern countries, particularly the major oil-producing Gulf Cooperation Council (GCC) member states of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. The governments of these countries used a significant proportion of their revenues to subsidise consumer prices for energy and food staples as a key element of social welfare programmes and as a means of addressing income disparities. Energy and food staples account for a large share of household expenditure, particularly in poorer households (Araar & Verme 2016; Lahn 2016; Sdralevich et al. 2014). Long-term reliance on income from oil exports has resulted in a relatively narrow revenue base for some countries in the Middle East, with oil exports accounting for up to 90 per cent of government revenues in GCC member states (ICAEW 2015). As a result, the budgetary impact of lower oil prices has been significant in GCC member states. This has created strong fiscal pressure for GCC countries to implement a range of economic reforms with an emphasis on cuts to government spending. In 2015 the governments of Bahrain, Kuwait and the United Arab Emirates began implementing economic reforms to increase taxation and cut food and energy price subsidies. In these countries, subsidies had long maintained domestic prices for consumer staples well below world prices. The removal of the subsidies led to sharp rises in domestic food and energy prices. As a result, consumer spending declined (Araar & Verme 2016; Lahn 2016). Sheep meat (along with goat meat) is a culturally important staple food in countries in the Middle East. Domestic production of sheep and goat meat, together with live trade between countries in the Middle East, accounts for around 80 per cent of the region’s consumption of these commodities (AHDB Beef & Lamb 2015). In 2015 subsidy cuts by some countries in the Middle East resulted in lower imports of higher priced sheep meat from outside the region. If oil prices remain low for a prolonged period, major oilexporting countries in the Middle East may face pressure to extend measures aimed at reducing budget imbalances. This could have further implications for import demand and therefore Australian exports to the region. continued ...

92


Sheep meat and wool

Middle East: the impact of lower oil prices on demand for sheep meat continued Implications for Australian sheep meat and live exports to the Middle East Over the past two decades the composition of Australian exports to the Middle East has changed. Exports of live sheep have fallen, while exports of higher-value sheep meat have grown steadily. This trend largely reflects the long-term decline in Australian flock numbers and the increasing demand for sheep meat over live animals, given growth in incomes and urbanisation in some parts of the Middle East (ACIL Tasman 2009; Deards et al. 2014). In 2015–16 Australian exports of lamb, mutton and live sheep to the Middle East were valued at $457 million, $226 million and $209 million, respectively. This region accounted for 28 per cent of Australia’s lamb exports, 33 per cent of mutton exports and 96 per cent of live sheep exports.

Australian sheep meat and live sheep exports to the Middle East, 1996–97 to 2015–16 80

8

70

7

60

6

50

5

40

4

30

3

20

2

10

1

kt (sw)

Lamb Mutton Live (right axis)

million head 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 –98 –2000 –02 –04 –06 –08 –10 –12 –14 –16

Source: ABS 2016

Recent low oil prices may have contributed to reduced demand for Australian sheep meat in the region. Some effect on trade was observed in 2015–16 as Australian exports of live sheep to the Middle East fell by 15 per cent year on year. Significantly, exports to Bahrain (historically one of Australia’s largest markets for live sheep) fell to zero after the removal of price subsidies in September 2015. Live exports to Bahrain had not resumed as at August 2016. Any continuation of low oil prices can be expected to hamper income growth in the Middle East and drive further economic reforms and government spending cuts. Cuts to energy and food subsidies (even if not focused on sheep meat) are likely to affect sheep meat imports by reducing the disposable incomes of consumers. This could be expected to reduce demand for Australian exports of sheep meat to the Middle East in the short term. continued ...


93

Sheep meat and wool

Middle East: the impact of lower oil prices on demand for sheep meat continued References ABS 2016, International trade in goods and services: Australia, June 2016, cat. no. 5368.0, Australian Bureau of Statistics, Canberra, available at abs.gov.au/ausstats/[email protected]/mf/5368.0, accessed 26 August 2016. ACIL Tasman 2009, Australian live sheep exports: economic analysis of Australian live sheep and sheep meat trade, ACIL Tasman Pty Ltd, Melbourne, September. AHDB Beef & Lamb 2015, ‘Higher sheep meat imports and stable production in Middle East and North Africa’, Agriculture and Horticulture Development Board, Warwickshire, 22 December, available at beefandlamb.ahdb.org.uk/market-intelligence-news/highersheep-meat-imports-and-stable-production-in-middle-east-and-north-africa/. Araar, A & Verme, P 2016, A comparative analysis of subsidy reforms in the Middle East and North Africa region, policy research working paper no. 7755, World Bank Group, Washington, July. Deards, B, Leith, R, Mifsud, C, Murray, C, Martin, P & Gleeson, T 2014, Live export trade assessment, ABARES report to client prepared for the Live Animal Exports Reform taskforce of the Department of Agriculture, Canberra, July. ICAEW 2015, ICAEW Economic Insight: Middle East, quarterly briefing Q2, Oxford Economics, United Arab Emirates, available at icaew.com/en/technical/economy/ economic-insight/economic-insight-middle-east. Lahn, G 2016, Fuel, food and utilities price reforms in the GCC: a wake-up call for business, Chatham House, Royal Institute of International Affairs, London, available at chathamhouse.org/publication/fuel-food-and-utilities-price-reforms-gcc-business. Sdralevich, C, Sab, R, Zouhar, Y & Albertin, G 2014, Subsidy reform in the Middle East and North Africa: recent progress and challenges ahead, International Monetary Fund, Washington, available at imf.org/external/pubs/cat/longres.aspx?sk=41548.

94


Sheep meat and wool

Outlook sheep meat and wool Outlook for for sheep meat and wool Category Sheep numbers a Sheep shorn Slaughterings Lambs Sheep Production Lamb b Mutton b Wool production (greasy) – shorn – other c – total Exports Lamb – value Mutton – value Live sheep – value Wool – volume (greasy equivalent) – to China – value d Prices Lambs e Sheep e Eastern Market Indicator g

% change

unit

2014–15

2015–16 s

2016–17 f

million

70.9

68.4

71.5

4.5

million

76.9

73.4

72.2

– 1.6

’000

22 867

23 131

22 858

–1.2

’000

9 022

8 127

6 500

–20.0

kt

507

516

511

–1.0

kt

214

196

156

–20.4

kt

346

325

325

0.0

kt

81

79

75

–5.1

kt

427

404

400

–1.0 –1.2

kt swt

242

242

239

$m

1 695

1 640

1 692

3.2

kt swt

169

148

121

–18.2 –17.2

$m

778

663

549

’000

2 180

1 859

1 900

2.2

$m

245

228

234

2.6

kt

459

426

422

–0.9

kt

352

316

325

2.8

$m

3 154

3 284

3 467

5.6

c/kg cw

518

533

595

11.6

c/kg cw

332

316

360

13.9

c/kg 1 102 1 253 1 300 3.8 a At 30 June. b Carcase weight. c Includes wool on sheepskins, fellmongered and slipe wool. d Balance of payments basis. e Saleyard prices. f ABARES forecast. g Clean equivalent. s ABARES estimate. Sources: ABARES; Australian Bureau of Statistics; Australian Wool Exchange; Department of Agriculture and Water Resources, Canberra


95

Chicken meat Tim Whitnall

• Australian chicken meat production is forecast to rise by 4 per cent in 2016–17

in response to low feed prices.

• Higher retail prices for competing meats and lower chicken meat prices are

forecast to encourage increased chicken meat consumption.

Chicken meat production to rise

Australian chicken meat production is forecast to increase by 4 per cent in 2016–17 to 1.20 million tonnes (carcase weight), reflecting forecast low feed grain prices. Chicken slaughter is forecast to increase by 3 per cent and average carcase weight by 1 per cent over the same period. In 2015–16 chicken meat production rose by 3 per cent to 1.15 million tonnes. The number of birds slaughtered rose at an average rate of 3 per cent a year over the five years to 2015–16 to reach 623 million head. Much of this growth occurred in Queensland, where slaughter was 23 per cent higher in 2015–16 than in 2010–11. In contrast, NSW and Victorian slaughter increased by 2 per cent and 6 per cent, respectively, over the same period.

Chicken meat production, Australia, 2010–11 to 2016–17 1 400

700

1 200

600

1 000

500

800

400

600

300

400

200

200

100

kt (cw)

million head 2010 –11

2011 –12

2012 –13

2013 –14

2014 –15

2015 –16

f ABARES forecast.

96

Other Queensland Victoria New South Wales Slaughter (right axis)


2016 –17f

Chicken meat

Average carcase weights remained relatively unchanged over the five years to 2015–16, at around 1.86 kilograms per bird. This is 50 per cent higher than in 1975–76, 30 per cent higher than in 1995–96 and 5 per cent higher than in 2005–06. Since the 1970s, the chicken meat industry has benefited from productivity gains achieved primarily through increases in bird weights resulting from improved genetics and nutrition.

Increased feed grains in rations assist bird growth. Low grain prices boost producer margins, making it profitable for producers to seek increased yields. Chicken feed in the Australian industry consists primarily of feed grains such as wheat, barley and grain sorghum. Prices for these grains are low and are expected to remain relatively low in 2016–17, supporting a forecast 1 per cent increase in carcase weights as producers seek to increase yield per bird.

Lower retail prices to drive increased domestic consumption Chicken meat continues to be the most consumed meat in Australia. Consumption per person increased by 80 per cent (to 46 kilograms per person) between 1995–96 and 2015–16, driven by lower relative prices of chicken meat. Retail prices for chicken meat fell by 3 per cent in 2015–16, while prices for beef, lamb, and pig meat rose by 11 per cent, 7 per cent and 4 per cent, respectively. Retail prices for competing meats are forecast to rise again in 2016–17, encouraging continued strong sales of chicken meat. In 2016–17 consumption of chicken meat is forecast to increase by 2 per cent to 47 kilograms per person.

Meat consumption per person, Australia, 1995–96, 2005–06 and 2015–16 50

1995–96 2005–06 2015–16

40 30 20 10 kg Beef

Lamb

Pig meat

Chicken meat

Meat price disparity has grown markedly over the past 20 years. Averaged over the five years to 1995–96, chicken meat on a per kilogram basis at retail outlets cost 54 per cent less than beef, 20 per cent less than lamb and 32 per cent less than pork. Over the five years to 2015–16, the price of chicken meat averaged 67 per cent lower than beef, 59 per cent lower than lamb and 51 per cent lower than pork.


97

Chicken meat

Meat retail prices, Australia, 1995–96 to 2015–16 2 500

Beef Pig meat Lamb Chicken meat

2 000 1 500 1 000 500 2015–16 c/kg 1997 –98

2000 –01

2003 –04

2006 –07

2009 –10

2012 –13

2015 –16

Exports to remain subdued Australian exports of chicken meat fell by 22 per cent in 2015–16 to total 26 683 tonnes. Exports to Papua New Guinea, Australia’s largest chicken meat export market, fell by 17 per cent in 2015–16 to 10 543 tonnes. The PNG Government placed a ban on imports of Australian raw poultry meat products in April 2015. An exemption was granted for mechanically deboned meat products, and trade in these products has continued. The import ban was officially lifted in February 2016, but as at the end of August trade had not resumed because exporters were yet to be issued import permits for Australian poultry products. Exports to the Philippines fell by 65 per cent to 3 583 tonnes in 2015–16, largely reflecting increased competition from the European Union. EU exports of chicken meat have been increasingly diverted into countries such as Ghana, the Philippines and Saudi Arabia following the South African Government’s imposition of anti-dumping tariffs on poultry imports from Germany, the Netherlands and the United Kingdom in February 2015. Exports make up a very small component of the Australian chicken meat industry, with only 4 per cent of production exported over the five years to 2015–16. Chicken meat exports largely consist of offal (such as feet, kidney and liver), which attracts higher prices in international markets.

98


Chicken meat

Imports of chicken meat grew steadily year on year over the 10 years to 2015–16, to reach a record high of 12 339 tonnes. Under Australia’s strict biosecurity restrictions, all chicken meat imports (except where the Australian Government has determined that the originating country is disease free) must be heat processed under controlled conditions. As a result, chicken meat imports typically consist primarily of prepared or preserved meat—and in 2015–16 all imports were either prepared or preserved. New Zealand is the main source of Australian chicken meat imports, accounting for 80 per cent (9 895 tonnes) in 2015–16.

Net trade is forecast to be relatively unchanged in the short term. The forecast growth in domestic production if realised will result in an increased supply of offal available for export. Australian exports of chicken meat are forecast to increase by 2 per cent to 27 300 tonnes in 2016–17. Imports of chicken meat are similarly forecast to rise by 2 per cent to meet increasing consumer demand in 2016–17.

Trade in chicken meat, Australia, 2006–07 to 2016–17 40

Exports Imports

30 20 10 0 –10 kt 2006 –07

2008 –09

2010 –11

2012 –13

2014 –15

2016 –17f

f ABARES forecast.

Outlook for chicken Outlook for chicken meat Category Production a Slaughterings Export volume b Export value

meat

unit

2014–15

2015–16 s

2016–17 f

% change

kt

1 116

1 154

1 200

4.0

million

591

623

640

2.7

kt

34.2

26.7

27.3

$m 53.7 46.5 47.0 a Carcase weight. b Shipped weight. f ABARES forecast. s ABARES estimate. Sources: ABARES; Australian Bureau of Statistics

2.2 1.1


99

Pig meat Jack Mullumby

• The Australian weighted average over-the-hooks price of pigs is forecast to rise by

4 per cent in 2016–17 to average 380 cents a kilogram (dressed weight), reflecting strong domestic demand for pig meat.

• Higher slaughter and an increase in average slaughter weights are forecast to result

in pig meat production expanding by 2 per cent in 2016–17 to 385 000 tonnes (carcase weight).

• Rising tradeable supplies in major exporting countries are expected to place

downward pressure on pig meat import prices in Australia in 2016–17. Pig meat imports are forecast to rise by 5 per cent to 175 000 tonnes (shipped weight) in response to increased domestic demand for processed pig meat products.

Domestic demand for pig meat supported by high beef and lamb prices In 2015–16 the Australian weighted average over-the-hooks price of pigs rose by 15 per cent to average 366 cents a kilogram (dressed weight), reflecting strong domestic demand for pig meat. Per person pig meat consumption increased year on year by 0.7 per cent to a record 26.9 kilograms, as a result of high beef and lamb prices increasing the competitiveness of pig meat at retail. Beef and lamb prices are forecast to remain high in 2016–17, encouraging strong demand for pig meat and continued support for Australian pig prices. The Australian weighted average over-the-hooks pig price is forecast to increase by 4 per cent to average 380 cents a kilogram (dressed weight). Pig meat production and imports are forecast to rise, resulting in Australian consumption rising for the third consecutive year.

100


Pig meat

Pig meat supply and weighted average pig price, Australia, 2010–11 to 2016–17 800

400

700

375

600

350

500

325

400

300

300

275

200

250

100

225

kt (cw) 2010 –11

2011 –12

2012 –13

2013 –14

2014 –15

2015 –16

2016 –17f

Imports Production Over-the-hooks price (right axis)

2016–17 c/kg

f ABARES forecast.

Production to rise for eighth consecutive year Australian pig slaughter is forecast to rise by 1.5 per cent in 2016–17 to 5.08 million head. Forecast low feed prices are expected to result in increased average slaughter weights and pig meat production expanding by 2 per cent to 385 000 tonnes (carcase weight). This will be the eighth consecutive year that pig meat production has risen. From 2008–09 to 2015–16 it increased by an average of 2.4 per cent a year.

National pig inventory to expand

Despite a forecast rise in slaughter, 2016–17 Australian sow numbers are forecast to expand by 1.8 per cent to 280 000 head. High pig prices and low feed costs continue to provide producers with an incentive to expand sow numbers. Ratios of pig prices to feed prices provide an indicator of returns from pig production. In 2015–16 the pig-to-wheat price ratio rose to 1.30, the second highest in the past 10 years. With further declines in wheat prices and higher pig prices expected, the pig-to-wheat price ratio is forecast to rise to a record 1.61 in 2016–17.

Pig-to-wheat price ratio and change in closing sow inventory, Australia, 2006–07 to 2016–17 15

1.80

10

1.50

5

1.20

0

0.90

–5

0.60

–10

0.30

%

Change in sow inventory Pig-to-wheat price ratio (right axis)

ratio 2006 –07

2008 –09

2010 –11

2012 –13

2014 –15

2016 –17f

f ABARES forecast. ABARES Agricultural commodities – vol. 6 no. 3 • September quarter 2016

101

Pig meat

Australian exports largely unchanged Fresh, chilled and frozen pig meat exports fell by around 2 per cent in 2015–16 to 27 000 tonnes (shipped weight) despite increased production. This reflects the strength of domestic demand for pig meat in Australia. Average export unit values rose by 19 per cent over the same period, resulting in the value of Australian fresh, chilled and frozen pig meat exports increasing by 17 per cent to $119 million.

In 2016–17 the value of Australian pig meat exports is forecast to rise by 4 per cent to $124 million. The rise is a result of forecast higher average export unit values, with Australian pig meat export volumes to remain largely unchanged at around 27 000 tonnes. Singapore is expected to be the largest single market, accounting for around 50 per cent of the total volume shipped.

Import volumes to rise

Australia’s biosecurity protocols permit importation of deboned pig meat from approved countries, subject to specific import conditions. Imported pig meat must be processed before it is sold, so it can only be sold as a manufactured product. Processed pig meat (both imported and domestically produced) accounts for around two-thirds of total pig meat consumption and domestically produced fresh pork accounts for the remaining third. Australian pig meat imports rose by 4 per cent in 2015–16 to 167 000 tonnes (shipped weight). Denmark and the United States were the two largest suppliers of imported pig meat, accounting for a combined 75 per cent of the total. Imports from the United States increased by around 20 per cent on the previous year, following resolution of the west coast port dispute (from August 2014 to March 2015).

In 2016–17 pig meat production is forecast to expand in major exporting countries, including the United States and Denmark. This is forecast to place downward pressure on average Australian import prices throughout 2016–17. Reflecting this, Australian pig meat imports are forecast to increase by 5 per cent to 175 000 tonnes (shipped weight).

Trade in pig meat, Australia, 1989–90 to 2016–17 180

Exports Imports

150 120 90 60 30 kt (sw) 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 –90 –93 –96 –99 –02 –05 –08 –11 –14 –17f f ABARES forecast.

102


Pig meat

Outlook formeat pig meat Outlook for pig Category Sow numbers a Over-the-hooks price Slaughterings Production Import volume b Export volume bc – value

unit

2014–15

2015–16 s

2016–17 f

% change

’000

270

275

280

1.8

Ac/kg cw

317

366

380

3.8

’000

4 924

5 000

5 075

1.5

kt

371

378

385

1.9

kt

160

167

175

4.8

kt

27.5

27.0

27.0

A$m 102 119 124 a At 30 June. b Shipped weight. c Excludes preserved pig meat. f ABARES forecast. s ABARES estimate. Sources: ABARES; Australian Bureau of Statistics; Australian Pork Limited

0.0 4.2


103

Dairy Tim Whitnall

• World dairy prices are forecast to remain low in 2016–17, reflecting continued

strong competition in export markets.

• Global production growth is slowing but tradeable stocks remain high.

• Australian milk production in 2016–17 is forecast to be lower in response to

reduced farmgate milk prices and a reduced cow herd.

Export market competition to underpin further price declines World dairy product prices declined in 2015–16 as a result of increased competition among major suppliers for export markets. The average annual price of whole milk powder fell by 18 per cent, reflecting weak global demand, particularly in China. The skim milk powder price fell 24 per cent, reflecting increased supplies, particularly from the European Union. Average annual prices of butter and cheese fell by 10 per cent and 18 per cent, respectively, as a result of the continued Russian Federation embargo on dairy imports from major exporters such as Australia, the European Union and the United States. In 2016–17 world dairy prices are forecast to fall further, reflecting increased EU production and exports—particularly to Asia and Latin America. World prices for skim milk powder and whole milk powder are forecast to fall by 1 per cent in 2016–17 to average US$1 950 and US$2 250 a tonne, respectively. World prices of butter and cheese are forecast to fall by 2 per cent to average US$3 100 and US$3 150 a tonne, respectively.

104


Dairy

World dairy prices, 2006–07 to 2016–17 6 000

Cheese Skim milk powder Whole milk powder Butter

5 000 4 000 3 000 2 000 1 000 2016–17 US$/t 2006 –07

2008 –09

2010 –11

2012 –13

2014 –15

2016 –17f

f ABARES forecast.

Global supply growth to slow but stocks remain high Global milk production is forecast to be higher in 2016–17, but the rate of growth in milk production among the major dairy exporting countries is forecast to slow in response to low farmgate milk prices. Production growth in the European Union and the United States in 2016–17 is expected to offset a forecast decline in NZ production. Stocks of dairy products remain high in the European Union and the United States, increasing the tradeable surplus available for export.

European Union

EU milk production over the 12 months to June 2016 increased by an estimated 4 per cent following the lifting of production quotas in April 2015. Production growth was strongest in northern member states such as Ireland and the Netherlands, where dairy cow numbers increased by 10 per cent and 7 per cent, respectively, in the 2015 calendar year. In 2016–17 EU milk production is expected to be higher than in 2015–16, largely as a result of higher opening cow numbers in the member states with lower costs of production. However, production growth is expected to slow to 1 per cent, reflecting a decrease in yields because low farmgate milk prices and rising feed costs— particularly for soymeal—are expected to limit the use of supplementary feed. EU stocks of dairy products increased in 2015–16 because production grew faster than consumption and exports. The European Commission allows EU processors to sell skim milk powder into a public intervention scheme, which holds it as public stocks. At the end of August 2016, in the calendar year so far, 333 372 tonnes of skim milk powder had been sold into public intervention and another 39 261 tonnes was in EU-subsidised private storage. The public intervention and private storage aid schemes are both scheduled to end in February 2017. This is expected to result in additional skim milk powder production being diverted into export markets in Asia and Latin America.


105

Dairy

United States US milk production was 1 per cent higher year on year in 2015–16. This increase came largely as a result of increased yields reflecting lower feed costs and transfer of herds to Midwestern states such as Michigan, South Dakota and Wisconsin. Seasonal conditions in these states were relatively favourable over the 2015–16 year and recent investment in the dairy industry has improved production efficiency. With a strong US dollar in 2015, butter exports fell by 61 per cent, imports rose by 77 per cent and the United States became a net importer of butter for the first time since 2006. US exports of cheese fell by 14 per cent in 2015 to 317 000 tonnes. Cheese exports to two of the largest US export markets, Japan and the Republic of Korea, were down 39 per cent and 20 per cent, respectively. Reduced cheese exports resulted in strong growth in domestic stocks, which increased 13 per cent year on year to 520 000 tonnes—the highest since 1983.

Stocks and exports of cheese, United States, 2006 to 2015 600

US cheese stocks US cheese exports

500 400 300 200 100 kt 2007

2009

2011

2013

2015

US milk production is forecast to grow by 1 per cent in 2016–17 as a result of high domestic demand supporting farmgate milk prices and larger opening herds in the Midwestern states.

New Zealand

Milk production in New Zealand was 1.6 per cent lower year on year in 2015–16, reflecting adverse seasonal conditions and low farmgate milk prices. New Zealand is the largest global exporter of whole milk powder, but the softening of Chinese demand in 2014–15 resulted in NZ processors diverting more milk from the production of whole milk powder into the production of cheese. NZ cheese production grew by 9 per cent in 2015. NZ milk production is forecast to average 2 per cent lower year on year in 2016–17. This reflects lower opening cow numbers and decreased yields as farmers attempt to cut costs by reducing supplementary feeding in response to low farmgate milk prices.

106


Dairy

Global imports to grow but demand remains weak The Russian Federation embargo on dairy products from Australia, Canada, the European Union, Norway and the United States is to continue until the end of 2017. As a result, global demand for dairy products remains relatively weak. The loss of access to the Russian market resulted in more dairy exports being diverted to markets such as Asia and Mexico, where competition has intensified and driven down prices.

China

Chinese imports of whole milk powder grew by 6 per cent in 2015–16 to 399 159 tonnes. This follows a more than 50 per cent fall to 375 204 tonnes in 2014–15, because of high stock levels and weak domestic demand.

Chinese consumption of whole milk powder grew on average by 12 per cent a year over the five years to 2014, reflecting strong economic growth. Domestic production did not meet the demand for milk powder, leading to an increased reliance on imports. Consumption growth weakened to 6 per cent in 2014 and contracted by 3 per cent in 2015 as income growth slowed and constrained retail sales. This resulted in the build-up of stocks, which are still being drawn down. Chinese imports of whole milk powder are expected to increase in 2016–17 in response to lower world prices and reduced stocks. However, slower assumed economic growth in 2016 is expected to constrain growth in consumption. As a result, import growth is expected to be marginal and the level of imports is expected to be well below that achieved in 2014.

China is a significant importer of infant milk formula. Consumers favour products from the European Union, New Zealand and Australia because they are often perceived as higher quality and safer than local products. Chinese imports of infant milk formula increased by 42 per cent in 2015–16 to around 200 000 tonnes. Slower import growth is expected in 2016–17, reflecting assumed slowing economic growth.

Whole milk powder supply and consumption, China, 2006 to 2016 2 500

Imports Domestic production Opening stocks Domestic consumption

2 000 1 500 1 000 500 kt 2006

2008

2010

2012

2014

2016f

f ABARES forecast.


107

Dairy

ASEAN ASEAN imports of dairy products are forecast to rise in 2016–17, reflecting lower world prices and income growth. The region is a significant importer of skim milk powder, with countries such as Indonesia, Malaysia and the Philippines each estimated to have imported between 125 000 tonnes and 145 000 tonnes in 2015–16.

Competition for ASEAN export markets is increasing among the major dairy exporting countries. In 2015–16 EU skim milk powder exports to the Philippines grew by 53 per cent and to Indonesia by 17 per cent. Australian skim milk powder exports to Malaysia grew by 21 per cent and to the Philippines by 5 per cent but exports to Indonesia fell by 2 per cent. NZ exports to the Philippines and Indonesia grew by 21 per cent and 7 per cent, respectively, but to Malaysia fell by 19 per cent. US exports to the Philippines also grew (by 47 per cent) but fell to both Malaysia (20 per cent) and Indonesia (19 per cent).

Skim milk powder imports by origin, Indonesia, Malaysia and the Philippines, 2015–16 150

Others United States New Zealand Australia European Union

120 90 60 30 kt Indonesia

Malaysia

Philippines

Mexico Mexico became the largest global importer of skim milk powder in 2015 as a result of weakening Chinese demand. Low world prices led to imports of skim milk powder into Mexico growing by 27 per cent year on year to 258 523 tonnes. The United States supplied most of this. However, competition from other major exporters, particularly the European Union, led to a 10 per cent fall in the US share of Mexican imports in 2015. Lower world prices also resulted in Mexican butter imports increasing by 15 per cent in 2015 to 35 010 tonnes. NZ exports to Mexico grew by 27 per cent to 30 220 tonnes that year and the US share of Mexican imports fell by 10 per cent as a result.

Mexican demand for dairy is expected to continue to increase in response to low world prices and assumed stronger economic growth in Latin America. However, increased competition from other major exporting countries is expected to continue to challenge the market dominance of the United States.

108


Dairy

Australian dairy outlook The weighted average Australian farmgate milk price is forecast to fall by 2 per cent in 2016–17 to 42 cents a litre, reflecting forecast lower world prices for traded dairy products.

Australian milk production is forecast to decline by 2 per cent in 2016–17 to 9.32 billion litres. Low farmgate milk prices and relatively strong saleyard prices for cows are expected to result in producers increasing their culling of less-productive cows, which is forecast to result in a 2 per cent contraction of the milking herd to 1.66 million head. Assuming average seasonal conditions, improved pasture growth is expected in 2016–17. This will offset some of the negative effects on yields caused by producers purchasing lower quantities of supplemental feed, leaving yields largely unchanged.

Milk production and dairy cows, Australia, 2006–07 to 2016–17 12

2 400

10

2 000

8

1 600

6

1 200

4

800

2

400

Milk production Dairy cows (right axis)

’000 head

BL 2006 –07

2008 –09

2010 –11

2012 –13

2014 –15

2016 –17f

f ABARES forecast.

Australian exports to fall The total value of Australian dairy exports rose by 4 per cent in 2015–16 to $3.01 billion, largely as a result of increased exports of cheese and infant milk formula. Australian cheese exports increased by 8 per cent to 172 199 tonnes, mainly to China, the Philippines and the Republic of Korea. Infant milk formula exports increased by 260 per cent to 16 911 tonnes, mainly to China. These increases more than offset declines in Australian export volumes for butter (by 22 per cent), whole milk powder (17 per cent) and skim milk powder (3 per cent).


109

Dairy

In 2016–17 the total value of Australian dairy exports is forecast to fall by 1 per cent to $2.98 billion as a result of continuing low world prices and further decreases in export volumes. Exports of skim milk powder are forecast to fall by 2 per cent as a result of lower domestic production and increased competition from the European Union and New Zealand in South-East Asian markets. Exports of butter and whole milk powder are also forecast to fall by 5 per cent and 1 per cent, respectively, reflecting lower domestic production. Exports of cheese are forecast to increase by 3 per cent.

Skim milk powder exports by destination, Australia, 2010–11 to 2016–17 200

Rest of world Other Asia Middle East North Asia South-East Asia

150 100 50 kt 2010 –11

2011 –12

2012 –13

2013 –14

2014 –15

2015 –16

2016 –17f

f ABARES forecast.

Outlook Outlook for for dairydairy Category Australia Cow numbers a Milk yields Production Total milk – market sales – manufacturing Butter b Cheese Whole milk powder Skim milk powder Farmgate milk price Value of exports World prices Butter Cheese Skim milk powder Whole milk powder

unit

2014–15

2015–16 s

2016–17 f

% change

’000

1 689

1 700

1 660

– 2.4

L/cow

5 761

5 611

5 614

0.1

ML

9 732

9 539

9 320

– 2.3

ML

2 485

2 495

2 500

0.2

ML

7 247

7 044

6 820

– 3.2

kt

119

121

119

– 1.7

kt

344

352

355

0.9

kt

97

90

85

– 5.6

kt

242

255

252

– 1.2

Ac/L

48.5

43.0

42.0

– 2.3

A$m

2 876

3 005

2 978

– 0.9

US$/t

3 483

3 146

3 100

– 1.5

US$/t

3 921

3 200

3 150

– 1.6

US$/t

2 592

1 975

1 950

– 1.3

US$/t 2 775 2 269 2 250 – 0.8 a At 30 June. b Includes the butter equivalent of butter oil, butter concentrate, ghee and dry butterfat. f ABARES forecast. s ABARES estimate. Sources: ABARES; Australian Bureau of Statistics; Dairy Australia

110


Articles

The EU almond industry Sarah Smith

The European Union is the world’s largest consumer and importer of almonds and since 2005–06 has been a growing export market for Australian almonds. In November 2015 the Australian Government and the European Commission agreed to begin the process of working towards a free trade agreement. Australian almond exporters could potentially benefit from improved access to the EU market. However, identifying where the opportunities might lie requires an understanding of the EU market and the policies that support its tree nut industry. This article examines the EU almond industry in that context and the Australian industry’s potential in the EU market.

Global production, consumption and trade of almonds

The United States is the world’s largest producer of almonds (Figure 1). In 2014–15 it produced 848 000 tonnes of almonds (kernel weight), accounting for more than 80 per cent of global production. The European Union and Australia were the second-largest and third-largest almond producers, producing 80 000 tonnes and 75 000 tonnes of kernel, respectively.

FIGURE 1 World almond production, 2004−05 to 2014−15 1 200

Rest of world Australia European Union 28 United States

1 000 800 600 400 200 kt 2004 –05

2006 –07

2008 –09

2010 –11

2012 –13

Note: Volume is expressed in kernel weight. Source: UDSA−FAS 2016

112


2014 –15

The EU almond industry

World consumption of almonds grew by an average of 6 per cent a year between 2004–05 and 2014–15 (Figure 2). The European Union is the largest almond consumer, with annual consumption since 2007–08 being relatively stable at around 300 000 tonnes of kernel. In 2014–15 the European Union accounted for 32 per cent of world consumption. The United States is the second-largest almond-consuming country. US consumption almost doubled between 2004–05 and 2014–15, to 275 000 tonnes or 28 per cent of global consumption. Other expanding markets for almonds include China, India and the United Arab Emirates. In 2014–15 each accounted for about 6 per cent of world consumption.

FIGURE 2 World almond consumption, 2004–05 to 2014–15 1 200

Rest of world China United Arab Emirates India United States European Union 28

1 000 800 600 400 200 kt 2004 –05

2006 –07

2008 –09

2010 –11

2012 –13

2014 –15

Note: Consumption is defined as domestic production plus imports minus exports. Source: UDSA−FAS 2016

The European Union is the world’s largest importer of almonds (Figure 3), accounting for 40 per cent of total world imports in 2014–15. India, the United Arab Emirates, China and Japan are also large importers—each accounting for between 6 per cent and 10 per cent of global imports in 2014–15 (USDA−FAS 2016).

FIGURE 3 Share of world almond imports, 2014–15

611 000 tonnes (kernel weight) European Union 28 India United Arab Emirates China Japan Rest of world

40% 10% 10% 8% 6% 26%

Source: UDSA−FAS 2016


113


The United States is the largest exporter of almonds at 533 000 tonnes, accounting for more than 85 per cent of global exports. In 2014–15 its principal markets by volume included the European Union (201 000 tonnes or 38 per cent of US exports), India (67 000 tonnes or 13 per cent), Hong Kong (48 000 tonnes or 9 per cent) and the United Arab Emirates (41 000 tonnes or 8 per cent) (US Census Bureau 2016).

The Australian almond industry

Australia is the world’s third-largest producer of almonds, behind the United States and the European Union. Significant plantings in 2006 and 2007 led to a twofold increase in the volume of production in the five years to 2015, reaching 83 000 tonnes of kernel in the March to February marketing year (Almond Board of Australia 2016). Production growth is expected to slow over the next five years because the number of new plantings has fallen since 2007 and trees have largely reached maturity (Moir 2016). The Australian almond industry is export oriented, with two-thirds of production exported in 2015−16. Export volumes have expanded rapidly since 2005−06 in response to strong global demand. Export growth averaged 30 per cent a year between 2005−06 and 2012−13 (Figure 4). Exports then nearly doubled in 2013−14, to around 58 000 tonnes of kernel, and remained high because drought-affected production in California constrained competing US almond exports to the European Union and India. In 2015−16 almonds were Australia’s largest horticultural export by value, worth $616 million. The European Union is an important and growing export market for Australian almonds. In 2015−16 Australia exported $263 million of almonds to the European Union, of which 99 per cent were shelled (kernel) (ABS 2016). This accounted for 41 per cent (23 000 tonnes) of total Australian almond export volume. India is also a growing export market, accounting for 22 per cent of export volume in the same year. Other important markets include the United States (9 per cent) and the United Arab Emirates (6 per cent).

FIGURE 4 Volume of Australian almond exports, 2005−06 to 2015−16 60

Rest of world United States United Arab Emirates India European Union 28

50 40 30 20 10 kt 2005 –06

2007 –08

2009 –10

2011 –12

2013 –14

Note: Volume is expressed in kernel weight. Source: ABS 2016

114


2015 –16


Australia’s exported almonds are subject to relatively low tariffs in its four major export markets (Table 1). The European Union applies its most favoured nation (MFN) tariff to imported Australian almonds. For almonds in shells the tariff is 5.6 per cent and for shelled almonds (kernels) it is 3.5 per cent. India applies fixed tariffs of US$0.55 a kilogram to almonds in shells and US$1.01 a kilogram to shelled almonds. In 2015−16 this is estimated to have been equivalent to about a 10 per cent tariff on almonds in shells (which account for 95 per cent of Australia’s total almond exports to India) and a 16 per cent tariff on shelled almonds (ABARES estimate). The United Arab Emirates applies a 5 per cent tariff to both types of almonds. Under the Australia–United States Free Trade Agreement, Australian shelled almonds entering the US market have been tariff free since January 2005 and almonds in shells have been tariff free since January 2008.

TABLE 1 Applied tariffs on Australian almond exports by destination Importing country

Unit

European Union India

Almonds in shells

Almonds shelled

%

5.6

3.5

US$/kg

0.55

1.01


%

5

5

United States

–

None

None

Note: The Harmonized System code for almonds in shells is 0802110000 and for shelled almonds 0802120000. Source: World Trade Organization 2016

The EU almond industry The European Union is the world’s second-largest almond producer. Most of this production is in Spain.

Germany, Spain, France and Italy are the largest almond-consuming countries in the European Union. Together these four countries account for over half of total EU almond consumption (International Nut and Dried Fruit Council 2015). Total annual consumption of almonds in the European Union is significantly higher than domestic production. As a result, three-quarters of annual EU consumption is imported (USDA−FAS 2016). The EU Common Agricultural Policy (CAP) and trade policies govern the production and trade of almonds in the European Union.

Common Agricultural Policy

The Common Agricultural Policy (CAP) was established in 1962 to support the agricultural sector of the European Union. Between 1962 and 2003, several CAP reforms changed the way agricultural producers received support. Support to nut producers remained relatively unchanged until the reforms of 2003. See Howden, McCarthy and Hyde (2016) for greater detail on the evolution and outcomes of the CAP.


115


In 2003 price support for nut producers under the CAP was replaced with an annual single farm payment of up to €120.75 for each nut-producing hectare, provided tree density and plot size requirements are met. In Spain, the maximum payment is estimated to have covered one-third of variable production costs between 2003 and 2005 (European Commission 2007). However, since the single farm payment for nut producers has remained unchanged since its introduction, the share of production costs it now covers will have decreased. The total nut-producing area eligible for the single farm payment within the European Union is 829 000 hectares, with each member state allocated a maximum eligible area by the European Commission. The member states are also entitled to independently supplement the single farm payment with an additional payment of up to €120.75 a hectare (European Commission 2003). Spain has made supplementary payments to its producers since the 2003 reforms, but the value of these payments has been declining since 2012 (USDA–FAS 2014).

Trade and trade policy

The European Union is a net importer of almonds, mostly almond kernels (99 per cent in 2014). Between 2000 and 2014, almond imports increased by 81 per cent to 237 000 tonnes (UN Statistics Division 2016). In 2014 the largest importing EU countries by volume were Spain (35 per cent of total EU imports), Germany (31 per cent) and Italy (12 per cent) (Figure 5).

FIGURE 5 EU almond imports by member country, 2000 to 2014 250

Rest of European Union 28 Netherlands France Italy Germany Spain

200 150 100 50 kt 2000

2002

2004

2006

2008

2010

2012

2014

Note: Excludes intra-EU trade. Volume is expressed in kernel weight. Source: UN Statistics Division 2016

Most EU almond imports, including those from the United States and Australia, are subject to the EU’s MFN tariffs. Almonds are tariff-free for countries that have negotiated agreements with the European Union, including Morocco, Chile, Tunisia and Turkey. However, these countries together accounted for only 1 per cent of total EU almond imports in 2014. Between 2000 and 2014, the United States supplied an average of 95 per cent of EU almond imports. Australia’s share of EU imports grew over the period but remained relatively small, from less than 1 per cent in 2000 to 8 per cent in 2014. Drought in the almond-producing regions of California caused EU imports of US almonds to fall by 14 per cent between 2013 and 2015 (US Census Bureau 2016), which benefited Australian exporters. 116



The European Union also imposes several non-tariff measures. These include meeting: • tolerance limits of contamination by certain substances, including aflatoxins,

salmonella, pests, soil, weed seeds and extraneous material

• tolerance limits for pesticide residues

• labelling and packaging requirements

• hygiene requirements during production and processing • inspection requirements

• traceability requirements, including origin of materials and processing history

(Department of Agriculture and Water Resources 2016; World Bank 2016).

The EU non-tariff measures are similar to those of Australia’s other major export markets and comply with the general standards of Codex Alimentarius (the UN international food standards body). For example, all almond-importing countries, including Australia, impose tolerance limits on aflatoxins, a toxic fungus that can infect almonds in the orchard, in stockpiles or in storage. Before 2010 the EU tolerance for aflatoxins in almonds was four parts per billion for ready-to-eat almonds and 10 parts per billion for almonds for further processing. In March 2010 the European Union raised the aflatoxin limit in line with the Codex general standard of 10 parts per billion for ready-to-eat almonds and 15 parts per billion for almonds for further processing (European Commission 2010). Nevertheless, these limits are lower than for Australia’s other major almond export markets, including the United States (20 parts per billion), the United Arab Emirates (20 parts per billion) and India (30 parts per billion) (Almond Board of California 2012).

Conclusion

Growth in Australian almond exports to the European Union has been driven principally by expanding EU import demand, but the recent reduction in US production has also contributed. Australia’s access to the EU market is broadly similar to that of other almond-exporting countries, including its main competitor the United States. A decrease in the EU-applied tariffs that may be derived through a free trade agreement would improve the competitiveness of Australian almonds relative to those of other almond-exporting countries. However, any export gains from such a policy change would be modest over the longer term. This is because EU import tariffs on Australian almonds are already relatively low and equal to those applied to US almonds. Any rise in Australian exports stemming from a tariff decrease would likely be at least partially offset by the expected recovery of the US almond industry and its subsequent capacity to regain the EU market ceded during drought years.

References

ABS 2016, International trade in goods and services, Australia, June 2016, cat. no. 5368.0, Australian Bureau of Statistics, Canberra, available at abs.gov.au/ausstats/[email protected]/mf/5368.0, accessed 15 August 2016.

Almond Board of California 2012, ‘International aflatoxin tolerances’, Industry Backgrounder, March, available at almonds.com/sites/default/files/content/ attachments/march_2012_international_aflatoxin_tolerances.pdf (pdf 268 kb). Almond Board of Australia 2016, Almond Insights 2015–16, available at growing. australianalmonds.com.au/australian-almond-insights-statistics.


117


Department of Agriculture and Water Resources 2016, Manual of Importing Country Requirements, Canberra, available at micor.agriculture.gov.au. European Commission 2003, ‘Council regulation (EU) no. 1782/2003’, Official Journal of the European Union, 29 September.

— —2007, Nut sector—impact of the coupled payment suppression on nuts margins, Directorate-General for Agriculture and Rural Development, Brussels, December, available at ec.europa.eu/agriculture/rica/publications_en.cfm. ─ ─2010, ‘Commission regulation (EU) no. 165/2010’, Official Journal of the European Union, 26 February.

Howden, M, McCarthy, O & Hyde, M 2016, ‘The EU dairy industry’, in Agricultural commodities: June quarter 2016, Australian Bureau of Agricultural and Resource Economics and Sciences, Canberra.

International Nut and Dried Fruit Council 2015, Global Statistical Review 2014−15, available at nutfruit.org/201415-global-statistical-review.

Moir, B 2016, ‘Horticulture’, in Agricultural commodities: March quarter 2016, Australian Bureau of Agricultural and Resource Economics and Sciences, Canberra.

UN Statistics Division 2016, ‘United Nations Commodity Trade Statistics Database (UN Comtrade)’, United Nations, New York, available at comtrade.un.org/db/default. aspx, accessed 4 July 2016. US Census Bureau 2016, ‘USA Trade Online’, available at usatrade.census.gov, accessed 18 July 2016.

USDA−FAS 2016, ‘Production, Supply and Distribution Online’, Foreign Agricultural Service, United States Department of Agriculture, Washington, available at apps.fas.usda.gov/psdonline/psdhome.aspx, accessed 5 July 2016.

— —2014, ‘EU-28 Tree nuts annual 2014’, Global Agricultural Information Network, Foreign Agricultural Service, United States Department of Agriculture, Washington.

World Bank 2016, ‘World Integrated Trade Solution’, available at wits.worldbank.org, accessed 6 July 2016. World Trade Organization 2016, ‘Tariff Download Facility’, available at tariffdata.wto.org, accessed 7 July 2016.

118


EU sugar industry Benjamin K Agbenyegah and Natasha Frawley

The Australian Government and the European Union are expected to commence negotiating a free trade agreement (FTA) in 2017. The European Union is one of the largest consumers of sugar in the world. Improved access to the EU sugar market could present opportunities to Australian exporters. The EU sugar market is complex and highly regulated, with strict production quotas, support prices and restrictive trade policies. This article examines the EU sugar market and the policies that support it to better understand the opportunities for Australian sugar exporters.

Overview of the EU sugar market

Production of sugar and related products Sugar production The European Union is the world’s third-largest sugar producer behind Brazil and India. Over three-quarters of the world’s sugar is produced from cane (77 per cent). In contrast, 98 per cent of sugar in the European Union is produced from sugar beet. A small cane sugar refining industry processes imported raw cane sugar to produce the remaining 2 per cent. In the 10 years to 2014–15, the European Union produced an average of 17.4 million tonnes of sugar a year (ISO 2015, 2016b; USDA–FAS 2016b). The European Union is the world’s largest producer of beet sugar, accounting for nearly 50 per cent of global production. Other producers of beet sugar are the United States (13 per cent), the Russian Federation (11 per cent), Turkey (6 per cent) and Ukraine (6 per cent) (ISO 2009, 2014c, 2016b; USDA–FAS 2016b).

Beet sugar is produced from sugar beet, which is grown in 19 EU member states. Together the northern countries of France, Germany, Poland and the United Kingdom produced almost 70 per cent of total EU sugar beet in the 10 years to 2014–15 (Figure 1). The climate in those countries was best suited for sugarbeet production (CEFS 2015; European Commission 2016c).


119

EU sugar industry

FIGURE 1 Sugarbeet production, by country, European Union, 2005–06 to 2014–15 150

Other European Union United Kingdom Poland Germany France

120 90 60 30 Mt 2006 –07

2008 –09

2010 –11

2012 –13

2014 –15

Note: Data presented in crop year (October to September). Sources: CEFS 2015; European Commission 2016c

The area planted to sugar beet declined significantly after 2005–06, when EU policies were introduced that limited its production (see ʻEU sugar policies’ in this article). The beet area harvested fell from around 2.2 million hectares in 2005–06 to around 1.6 million hectares in 2014–15 (Figure 2). During this period the industry became more concentrated. The number of beet growers reduced by more than half, from 304 900 to 141 200, but the size of an average beet farm increased from around 7.2 hectares to 11 hectares. At the same time, productivity improved and the average beet yield increased by 36 per cent to 79.2 tonnes a hectare (CEFS 2015). Higher beet yields were the result of increased investment in genetic research; more widespread adoption of disease and pest controls; increased mechanisation of various growing and harvesting phases to reduce wastage and soil compaction; and improved seed selection (FAO 2009; Gianessi 2013).

FIGURE 2 Sugarbeet area harvested and average beet yield, European Union, 2005–06 to 2014–15 2.5

100

2.0

80

1.5

60

1.0

40

0.5

20

million ha

Area harvested Beet yield (right axis)

t/ha 2006 –07

2008 –09

2010 –11

2012 –13

2014 –15

Note: Sugar beet yield is measured as total beet production divided by area harvested of sugar beet. Data presented in crop year (October to September). Sources: CEFS 2013, 2015

120


EU sugar industry

The four largest sugarbeet-growing countries in the European Union are also the largest sugar producers. Each year between 2005–06 and 2014–15, they produced about two-thirds of the European Union’s sugar (Figure 3). France and Germany alone accounted for around 45 per cent (ISO 2009, 2014c, 2016b; USDA–FAS 2016b).

FIGURE 3 Sugar production, by country, European Union, 2005–06 to 2014–15 25

Other European Union United Kingdom Poland Germany France

20 15 10 5 Mt 2006 –07

2008 –09

2010 –11

2012 –13

2014 –15

Note: Production in raw value equivalent. Data presented in crop year (October to September). Sources: CEFS 2010, 2013, 2015; European Commission 2016c; USDA–FAS 2016b

By-products of sugar cane and beet The quality of the sugar produced from cane and beet is similar, but the extraction processes for each produces different by-products. Sugarbeet by-products, such as beet pulp and sugarbeet molasses, are generally used in animal feed because they do not have the biomass content nor the solar conversion efficiency to be used in the industrial sector. Bagasse, a by-product of sugar cane, is used as a biofuel and in the manufacture of pulp and building materials. Molasses is a by-product of both sugar beet and cane. It can be used for human consumption and to produce rum if it is sourced from sugar cane, but beet molasses is unpalatable for human consumption, so it is used as an additive to animal feed (FAO 2009).

Isoglucose

Isoglucose is an artificial sweetener that is 375 times sweeter than sugar. It is often derived from corn and is known as high-fructose corn syrup (HFCS). In the European Union, isoglucose is derived from either wheat, corn or potato.

The European Union accounts for less than 5 per cent of annual world isoglucose production (OECD 2007). Nine EU countries produce isoglucose. Production is mainly concentrated in Hungary and Belgium, which have ethanol plants that produce isoglucose for human consumption. In 2014–15 these two countries together accounted for around 51 per cent of EU production. Other large producers of isoglucose include Bulgaria (15 per cent), Slovakia (9 per cent), Germany (7 per cent) and Spain (7 per cent). Poland, Italy and Portugal produce the remainder (CEFS 2013, 2015; European Commission 2016a; OECD 2007, 2011).

Isoglucose does not compete with sugar for food use in the European Union because domestic production quotas and restrictions on imports limit its availability (see ʻEU sugar trade and trade policy’ in this article) (USDA–FAS 2016a). ABARES Agricultural commodities – vol. 6 no. 3 • September quarter 2016

121

EU sugar industry

Ethanol The current regulatory framework for biofuels in the European Union is based on two directives that were adopted in 2009. The directive promoting the use of energy from renewable sources requires that 10 per cent of the energy used in EU transport is to come from renewables by 2020. The EU Fuel Quality Directive 2009/30/EC requires greenhouse gas emissions from transport fuels be reduced by 6 per cent between 2008 and 2020. Ethanol comprises about a fifth of the EU biofuels market (UNICA–Apex-Brasil 2016a).

The European Union is the fourth-largest ethanol producer in the world behind the United States, Brazil and China. From 2009 to 2014, EU ethanol production increased by 75 per cent to 5.6 billion litres. In 2014 less than one-fifth of the European Union’s ethanol production was sourced from sugar beet. During the same period, most EU-produced ethanol was sourced from corn (42 per cent) and wheat (33 per cent) (ePURE 2015).

EU sugar consumption

The European Union is the second-largest consumer of sugar in the world behind India, accounting for about 11 per cent of total world consumption since 2004–05. In the 10 years to 2015, EU sugar consumption grew by around 2 per cent a year to around 19.4 million tonnes (Figure 4). This increase mainly reflected population growth, higher consumer incomes in EU countries and limited availability of alternative sweeteners in the European Union.

FIGURE 4 EU and world sugar consumption, per person, 2005 to 2015 25

50

20

40

15

30

10

20

5

10

Mt

EU total consumption EU consumption, per person (right axis) World consumption, per person (right axis)

kg/person 2005

2007

2009

2013

2013

2015

Note: Consumption in raw value equivalent. Sources: ABARES; ISO 2013, 2015, 2016a; United Nations 2015

Consumption of sugar per person in the European Union has remained consistently above the world average since 2000. In 2015 EU sugar consumption was 38 kilograms per person, significantly higher than the world average of 25 kilograms per person (ISO 2012, 2015, 2016a; United Nations 2015). Relatively high sugar consumption is the result of the low availability of alternative sweeteners. The production quota and import restrictions on alternative sweeteners means the European Union uses fewer of these products in food production than countries such as the United States and Canada, two of the world’s largest consumers of isoglucose. 122


EU sugar industry

EU sugar policies The EU sugar market is regulated under the Common Agricultural Policy (CAP). Until 2006 the policy objectives for the sugar market were to guarantee EU self-sufficiency in sugar and ensure a fair income for growers of sugar beet (Agrosynergie 2011). High import tariffs, restrictive import quotas and export subsidies were the main measures used to protect the industry. Domestically, guaranteed sugar beet and sugar prices also protected farmers and processors from market variability. These policies did not extend to sugar beet produced for industrial use, which included beet processed into fuel ethanol, rum and yeast. Until 2006 sugar for food purposes was produced under two quotas, A quota and B quota, which together totalled 17.441 million tonnes (refined sugar equivalent). The two quotas were used to guarantee availability of sugar to the domestic market. The A quota accounted for 82 per cent of the total quota allocation and covered sugar produced for general consumption. B quota accounted for 18 per cent of the production quota. It was used to cover year-to-year variability of sugarbeet production resulting from adverse seasonal conditions or particularly low yields. Sugar beet produced for the A and B quotas was eligible for the guaranteed minimum price. Beet supplied for A quota sugar received a guaranteed minimum price of €46.72 a tonne and beet for B quota received a guaranteed minimum price of €32.42 a tonne.

Beet sugar produced under the A and B quotas was mainly sold domestically and had a guaranteed minimum price of €631.90 a tonne for refined sugar and €523.70 a tonne for raw sugar. Sugar produced within the quotas but in excess of the needs of the domestic market was eligible for export subsidies. However, these were seldom needed because exports of A quota and B quota sugar were minimal. Sugar produced outside of these two quotas was the main source of EU sugar exports. This sugar could not be sold on the domestic market and was ineligible for the guaranteed minimum price or export subsidies (Elbehri, Umstaetter & Kelch 2008). In 2004 Australia, Brazil and Thailand filed a complaint to the World Trade Organization (WTO). The complaint accused the European Union of violating its WTO obligations by providing export subsidies for sugar in excess of its WTO export subsidy commitment levels. The European Union was spending more than €1 billion annually on sugar export subsidies, more than double the WTO agreed limit of €499.1 million (DFAT 2005). In 2005 the WTO found that the out-of-quota sugar, the majority of the European Union’s sugar exports, was cross-subsidised by sugar produced under the A and B quotas. The WTO ruling required that from 2007 EU sugar exports be limited to the equivalent of 1.35 million tonnes of refined sugar or 1.5 million tonnes raw value equivalent (RVE) per year (Elbehri, Umstaetter & Kelch 2008; ISO 2015; USDA–FAS 2016a).


123

EU sugar industry

2006 sugar reforms The WTO ruling constrained the European Union’s capacity to export excess domestic production. As a result, the European Commission re-evaluated its sugar policies. The EU sugar reforms of 2006 simplified the A and B quotas to a single quota, limiting annual sugar production for food purposes to the equivalent of 13.5 million tonnes of refined sugar (14.7 million tonnes RVE). The quota was allocated across the 19 member states that produce sugar (Table 1) and was phased in over four years from 2006–07 to 2009–10 (Figure 5) (European Commission 2006, 2016e; OECD 2007; Řezbová, Maitah & Sergienko 2015).

TABLE 1 Sugar and isoglucose production quotas, by EU member state or region, 2016 and 2017 Member states or regions France (metropolitan)

Isoglucose (tonnes)

3 004 811

–

432 220

–

Germany

2 898 256

56 638

Poland

1 405 608

42 861

United Kingdom

1 056 474

–

804 888

–

676 235

114 580

Italy

508 379

32 493

Spain

498 480

53 810

Czech Republic

372 459

–

Denmark

372 383

–

Austria

351 027

–

Sweden

293 186

–

Croatia

192 877

–

Greece

158 702

–

Slovakia

112 320

68 095

Hungary

105 420

220 266

Romania

104 689

–

Lithuania

90 252

–

Finland

80 999

–

French overseas departments

Netherlands Belgium

Portugal (mainland) Portugal—Autonomous Region of the Azores Bulgaria TOTAL Note: Sugar quotas in refined sugar equivalent. Source: European Commission 2009a, 2013c

124

Sugar (tonnes)


–

12 500

9 953

–

–

89 198

13 529 618

690 441

EU sugar industry

FIGURE 5 Sugar production, by quota type, European Union, 1999–00 to 2014–15 25

Out-of-quota Post 2006 reform quota B quota A quota

20 15 10 5 Mt 1999 –2000

2002 –03

2005 –06

2008 –09

2011 –12

2014 –15

Note: Production in raw value equivalent. Sources: Agrosynergie 2011; European Commission 2006, 2016a, e

Isoglucose production quotas were amended alongside the 2006 sugar reforms. Production quotas were increased from 507 681 tonnes in 2006–07 to 690 441 tonnes in 2009–10 for the 27 countries in the European Union at that time. Some of this increase was because Bulgaria (a large isoglucose producer) and Romania joined the European Union in 2007.

Over the same period, the European Commission also steadily reduced the guaranteed minimum beet price by around 40 per cent to €26.29 a tonne and the sugar price by 36 per cent to €404.40 a tonne (refined sugar equivalent). It also introduced compensation to farmers for loss of income and designed a restructuring fund. The fund was created to encourage uncompetitive sugar producers to leave the sector or diversify to other commodities. Under the fund, the European Commission bought quota from sugar processors and provided payments to encourage factory closures (Elbehri, Umstaetter & Kelch 2008; USDA–ERS 2016). The European Commission continues to set sugar and isoglucose production quotas and includes a small quota for cane sugar production in overseas territories, such as the Azores (an autonomous region of Portugal) and French overseas departments (Table 1). Out-of-quota sugar production is now either: • exported, pending availability of EU export licences and up to the WTO-imposed

export ceiling

• disposed of through non-food uses, including for bio-ethanol production • released on the domestic market with a €500 a tonne levy

or

• carried over into the following production year (European Commission 2013b;

USDA–FAS 2016a).


125

EU sugar industry

Support for beet and sugar producers In addition to guaranteed minimum beet prices, most sugarbeet farmers from the larger producing member states receive income support through the CAP direct payment system. These payments are not dependant on annual sugarbeet production but do require that farmers be actively engaged in agricultural activity on their land (European Commission 2016b).

Individual member states have flexibility in how income support is implemented. As a result, some of the newer EU member states or smaller beet-producing countries, including Poland, Spain and the Czech Republic, tie support to production. This is used to create incentives to maintain production and protect their national industries (European Commission 2016b).

The European Commission can also intervene in the sugar market by providing support for private storage aid (PSA). PSA has not been used for sugar since it was introduced in 2006. However, the European Commission can activate PSA for domestically produced refined sugar if certain market conditions prevail—for example, if the average EU market price for sugar falls below the European Commission’s reference price, if producers’ costs increase significantly or if any other difficult market situation significantly affects margins. PSA can be activated across the European Union as a whole if the average market price falls below 85 per cent of the reference price and is expected to remain below that level for two months. It can also be activated in a single member state if the local market price falls or is expected to fall below 80 per cent of the reference price. If PSA is activated, the domestically produced sugar remains in private ownership and the owner receives support to cover storage costs for a specified period. The EU reference price is currently €404.40 a tonne for refined sugar (Agrosynergie 2011; European Commission 2016e).

Recent market and policy developments

In its CAP reforms of 2013, the European Commission agreed to abolish sugar and isoglucose production quotas and the guaranteed minimum beet and beet sugar prices from 1 October 2017. Until then, sugar and isoglucose production quotas will remain at around the allocated volumes of the 2010–2011 marketing year. When the support for the domestic sugar industry is removed, EU sugar exports will no longer be restricted by the WTO-imposed export quota (European Commission 2013a, b, c; UNICA–Apex-Brasil 2016b). The European Commission will continue to support sugarbeet and sugar producers under the new regime if downturns in the market occur. For example, it will still be possible to make use of PSA intervention if the domestic refined sugar price falls significantly below the reference price. The reference price will remain unchanged after September 2017 (European Commission 2013a, b, c).

The effect of the removal of the EU quota system on sugarbeet production after September 2017 is uncertain. Sugarbeet planting in member states with more efficient production systems, including France and Germany, is expected to increase but the extent of the increase will depend on world sugar prices. The potential effect of the quota removal on smaller producers is uncertain (ISO 2014a).

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EU isoglucose production is expected to increase significantly following the removal of quotas in 2017 because it is generally cheaper to produce than beet or cane sugar (ISO 2014a). Increased isoglucose production in the European Union is expected to displace some demand for beet sugar, but the impact on overall beet production is unclear. Significant investment in infrastructure in the European Union will be required to expand the isoglucose industry and that will likely be influenced by the change in demand from the food manufacturing sector (European Commission 2015). The effect of the abolition of the sugar quota in 2017 on ethanol production from sugar beet will depend on changes to EU policy and the world price of oil. The oil price is expected to recover in the five years to 2021, lending support to increased world demand for ethanol in the medium term (Bernie 2016). With world sugar prices also expected to increase over the medium term, EU sugarbeet planting is likely to rise. Stronger demand from the energy sector for ethanol feedstock would lift the volume of beet used in ethanol production even if the European Union continues to rely mainly on cereals for that purpose (European Commission 2015).

No certainty about impact of Brexit on UK and EU sugar industries On 23 June 2016 the people of the United Kingdom voted to leave the European Union (Brexit). As of mid September 2016, the United Kingdom had not officially declared its intention to leave the European Union but it is expected to do so in 2017. The sugar industry in the United Kingdom consists of beet sugar production and cane sugar refining. In 2014–15 the United Kingdom was the fourth-largest sugar producer in the European Union behind France, Germany and Poland. It produced around 8 per cent of the European Union’s total sugar production. The United Kingdom was the third-largest consumer of sugar behind France and Germany (13 per cent of EU consumption), the seventh-largest sugar exporter (6.6 per cent of total EU sugar exports by volume) and the fourth-largest sugar importer (11 per cent of total EU sugar imports by volume) (European Commission 2016c; ISO 2015). In 2014–15 only four of the 109 EU sugarbeet processing factories were in the United Kingdom. UK processing factories are more productive than many other EU sugar producers because of their higher processing capacity. However, France and Germany have significantly more factories (25 and 20, respectively) and the majority also have high processing capacity (CEFS 2015). The United Kingdom is the largest refiner of cane sugar in the European Union. In 2014–15 the United Kingdom imported 23 per cent of all EU raw sugar imports for refining. However, cane refining only represents 2 per cent of the European Union’s sugar production (Agritrade 2014; European Commission 2016f). Until the United Kingdom releases more information on proposed changes to its agricultural policies following the negotiated exit from the European Union, the effect on the UK and EU sugar industries is uncertain.


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EU sugar trade and trade policy Between 2000 and 2006 the European Union was the second-largest exporter of sugar in the world behind Brazil. It exported an average of 5.7 million tonnes of sugar a year (RVE) to countries mainly in the Middle East, North Africa and non-EU Europe (Figure 6). Its largest markets were Algeria, Syria, Israel, Switzerland and Norway (ISO 2009).

FIGURE 6 Sugar exports, by destination, European Union, 2000 to 2015 7

Rest of world Other Africa North Africa Europe (non-EU) Middle East

6 5 4 3 2 1 Mt 2000

2003

2006

2009

2012

2015

Note: Exports in raw value equivalent. Under exceptional circumstances, a small volume of sugar can be exported from the European Union over the export limit (European Commission 2010). Sources: ISO 2011, 2012, 2013, 2014b, 2015, 2016b

Rising consumption, the stricter limits on production and the 2005 WTO ruling that resulted in export-limiting quotas led to the European Union becoming a net sugar importer rather than a net sugar exporter. In 2015 it contributed only 2.2 per cent to world sugar exports but imported 5.2 per cent of the world’s traded sugar (ISO 2016a). Despite EU production quotas largely meeting domestic sugar demand, in 2015 the European Union was the third-largest sugar importer behind China and the United States. The European Union generally imports raw cane sugar that is processed by its small refining industry. Most of this imported raw cane sugar (75 per cent) was from least developed countries (LDCs) and those in the African, Caribbean and Pacific (ACP) group.

EU trade policies

The European Union operates a system of tariffs and restrictive quotas to control imports of sugar. Sugar imports from countries that are not party to a preferential trade agreement with the European Union are subject to prohibitive most favoured nation (MFN) tariffs of €339 a tonne for raw cane sugar for refining and €419 a tonne for refined sugar. Almost all countries with preferential access are subject to tariff-rate quotas, with country-specific import quotas, reduced tariff or tariff-free in-quota access and a prohibitive out-of-quota tariff equal to the MFN tariff (Table 2) (European Commission 2016g; Unica–Apex-Brasil 2016b).

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TABLE 2 Import arrangements for raw sugar, European Union, 2015–16 and 2016 Countries or regions Most favoured nation tariff rate African, Caribbean and Pacific and least developed countries

Quota level (tonnes)

In-quota tariff rate (€ per tonne)

Out-of-quota tariff rate (€ per tonne)

na

na

339

unlimited

0

na

CXL total a

676 925

–

–

Brazil a

334 054

98

339

Cuba a

68 969

98

339

India a

10 000

0

339

Australia a any third country a Balkan total ab

9 925

98

339

253 977

98

339

200 000

–

–

180 000

0

339

Bosnia and Herzegovina ab

12 000

0

339

former Yugoslav Republic of Macedonia ab

7 000

0

339

Albania ab

1 000

0

339

Serbia and Kosovo ab

Moldova c

37 400

0

339

Ukraine c

20 070

0

339

Peru c

23 980

0

339

Colombia c

67 580

0

339

163 500

0

339

13 080

0

339

Central America (excluding Panama) c Panama c

a Quota for marketing year (October to September). b Quota includes isoglucose. c Quota for calendar year. na Not applicable. Note: Sugar quota in ʻtel quel’—the weight of sugar regardless of polarisation (100 tonnes tel quel of raw sugar is estimated to equal about 106 tonnes raw value equivalent). Quota can also include refined sugar. Sources: European Commission 2009b, 2012a, b, 2014a, b, 2016i; USDA–FAS 2016a

Isoglucose imports from countries without a preferential agreement with the European Union attract a tariff of €507 a tonne. In 2015 the European Union imported 32 656 tonnes of isoglucose and exported 58 321 tonnes (European Commission 2016a, c, i).

EU sugar produced within the production quota and that is exported is eligible for export subsidies. These subsidies (or ‘refunds’) are available if the export market price is lower than the EU domestic price (HMRC 2015). As the EU domestic price is often higher than those in other markets, most in-quota sugar exports are eligible for subsidies. When production quotas are removed in 2017, export subsidies will also be abolished (European Commission 2016e; UNICA–Apex-Brasil 2016b).


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EU sugar industry

Existing trade agreements As of September 2016 the European Union does not have free trade agreements with any major sugar exporters such as Brazil, Thailand or Australia. However, it provides several countries with preferential access under different arrangements. Most countries and regions are subject to tariff-rate quotas. ACP countries and LDCs are the only groups of countries that have unlimited access to the EU market (European Commission 2016e).

The European Union has several preferential trade agreements with countries and regions that export isoglucose. These agreements provide unlimited tariff-free access to LDC and ACP countries, the Caribbean region (not including Haiti), Georgia, Moldova and the Republic of Korea. Ukraine and the non-EU Balkan countries have access to tariff-free quotas (European Commission 2016i; Informa Agra 2016c).

Economic partnership agreements and the Everything-But-Arms initiative Economic partnership agreements (EPAs) are aimed at improving regional integration and economic development in ACP countries, most of which were former colonies of EU member states. The EU-led Everything-But-Arms initiative (EBA) allows almost unlimited tariff-free access to all non-armament imports into the European Union from LDCs. In 2014–15 import licences were granted for around 2 million tonnes of sugar under the EPA and EBA agreements. This was about four times the volume granted under other EU sugar-preferential agreements over the same period (Informa Agra 2015c; USDA–FAS 2016a).

CXL quota and tariff

As the number of EU member states has grown, countries that had exported raw sugar to the newest member states were given preferential access to the European Union’s sugar import quota (Table 2). This preferential treatment was designed to help compensate those exporting countries that would have lost access to the EU market when new member states joined the European Union. The quota and associated tariff are known as the CXL quota and CXL tariff. The total CXL quota is 0.68 million tonnes a year and the in-quota tariff is €98 a tonne. The exception is India, which has tariff-free in-quota access. Around 30 per cent of sugar imported by the European Union is through CXL agreements (European Commission 2009b; Informa Agra 2016a).

Australia has the smallest country-specific CXL quota at 9 925 tonnes for each marketing year (October to September). Australia usually fills its quota but does not often export additional sugar to the European Union because of the prohibitive out-of-quota tariff. EU imports through the CXL quota depend on demand by refiners for raw sugar. Australian sugar cannot easily compete with what is available locally or imports from countries with tariff-free access. For example, in 2014–15 the world and EU sugar prices were low. As a result, the European Union did not issue import licences for Australian sugar because it was cheaper for EU refiners to source the product from other countries with better market access arrangements. However, expected higher market prices in 2015–16 led the European Union to issue import licences for Australia’s entire CXL quota in the first month of the marketing year. This gave Australian exporters the right to export the quota volume over the following 12 months as stronger prices prevailed (ABS 2016; Informa Agra 2015a, b).

130


EU sugar industry

Association agreements with Western Balkan countries, Moldova and Ukraine Several non-EU Western Balkan countries (Albania, Bosnia and Herzegovina, the former Yugoslav Republic of Macedonia, Kosovo and Serbia) have association agreements with the European Union that provide tariff-free quota access for sugar and isoglucose (Table 2). The agreements came into force between 2004 and 2013 and are aimed at establishing a free trade area between the European Union and the Western Balkans. Unlike the other tariff-rate quotas, which are reserved for EU imports of sugar, Balkan quotas are for sugar and isoglucose imports combined (European Commission 2016i).

In 2014 Moldova and Ukraine each signed association agreements with the European Union. In these agreements, Moldova received tariff-free access for 37 400 tonnes of sugar and Ukraine for 20 070 tonnes a year. Ukraine also has access to a 10 000 tonne tariff-free quota for isoglucose. EU imports of isoglucose from Moldova are quota and tariff-free (European Commission 2014a, b, 2016g).

EU–Central America association agreement

The Central American countries of Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama have had an association agreement with the European Union since 2013. Under this agreement, Panama’s country-specific tariff-free quota was 13 080 tonnes of raw sugar in 2016. The tariff-free quota increases annually by 360 tonnes. The other countries party to the agreement have a combined tariff-free quota of 163 500 tonnes in 2016, which increases annually by 4 500 tonnes (European Commission 2012a). Since the agreement entered into force in 2013, EU sugar imports from the region have increased to meet the quota (ISO 2016a).

EU–Colombia and Peru trade agreement

A trade agreement between the European Union and Colombia and Peru entered into force in 2013. Under this agreement, Colombia and Peru gained tariff-free access for 67 580 tonnes and 23 980 tonnes of sugar, respectively, in 2016. Colombia’s quota increases annually by 1 860 tonnes and Peru’s by 660 tonnes (European Commission 2012b).

Prospective trade agreements

EU–South African Development Community Economic Partnership Agreement The EU–South African Development Community Economic Partnership Agreement was signed by the South African Development Community (SADC) and the European Union in June 2016. The EU-SADC EPA must be ratified by the European Parliament, the 28 EU member states and SADC group countries before coming into force. It is uncertain when this ratification process will be completed.

Under the EU–SADC EPA, Botswana, Lesotho, Mozambique, Namibia and Swaziland will receive permanent unlimited tariff-free access to the EU sugar market. Sugar exports from these countries totalled less than 1 million tonnes in 2015 (Informa Agra 2016b; ISO 2016a).


131

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EU–Mercosur free trade agreement Mercosur is a South American subregional customs union of Argentina, Brazil, Paraguay, Uruguay and Venezuela. An EU–Mercosur FTA is under negotiation, with preliminary market access offers exchanged in May 2016. The offer made by the European Union excluded both sugar and ethanol (European Commission 2016d; UNICA 2016).

Despite the European Union excluding sugar from negotiations to date, it does import sugar from Brazil under the CXL quota. In 2015, 241 595 tonnes of sugar were imported from Brazil, accounting for 7 per cent of total EU sugar imports in that year (ISO 2016a).

EU–Thailand free trade agreement

Negotiations for the EU–Thailand FTA were formally launched on 6 March 2013. Thailand is the second-largest sugar exporter in the world. However, the European Union imported only 9 802 tonnes of sugar from Thailand in 2015, accounting for around 0.3 per cent of its total sugar imports in that year (European Commission 2016h; ISO 2016a).

Overview of Australia–EU sugar trade

In the 10 years to 2014–15, Australia exported around 70 per cent of its sugar production. Around 90 per cent of sugar exports were destined for Asian markets. Australia’s biggest export markets are all parties to free trade agreements, including the ASEAN economies, the Republic of Korea, Japan and China (Figure 7).

FIGURE 7 Australian sugar export volumes, by destination, 2005–06 to 2014–15 4

Other China Japan Republic of Korea ASEAN

3 2 1 Mt 2006 –07

2008 –09

2010 –11

2012 –13

2014 –15

Note: Exports are raw bulk exports. Refined exports are not available by destination country. Source: ABS 2016

Recent free trade agreements with the Republic of Korea (KAFTA) and Japan (JAEPA) improved access for Australian sugar to those markets. Under KAFTA the 3 per cent tariff on raw sugar was eliminated and the 35 per cent tariff on refined sugar will be phased out by 2031. Under JAEPA, the 21.5 yen a kilogram tariff on high-polarity raw sugar was eliminated and the domestic levy was reduced on commencement of the agreement. The China–Australia Free Trade Agreement does not have concessions for sugar. However, China is a growing market for Australia’s sugar exporters given its expanding food manufacturing industry (ABS 2016; Hyde 2015). 132


EU sugar industry

From 2005–06 to 2014–15, Australia exported only small quantities of sugar to the European Union under the restrictive CXL quota. Australian sugar exports to the European Union totalled 92 613 tonnes over the 10-year period and were valued at $60.2 million (in 2016–17 dollars). This is equivalent to approximately 0.3 per cent of the total value of Australia’s sugar exports during that period (ABS 2016). Australia does not import sugar from the European Union. Until 2008 Australia imported very little sugar overall, usually less than 10 000 tonnes a year. Sugar imports increased from around 43 000 tonnes in 2009 to 140 000 tonnes in 2015 and were sourced mainly from Thailand (37 per cent), Brazil (18 per cent), Malaysia (16 per cent) and South Africa (10 per cent). The remainder came mainly from Central America and Mexico.

Export growth during the 2000s was affected by domestic production constraints, including the millennium drought, which limited the water available for sugar cane cultivation. Despite improved access to the sugar markets of the Republic of Korea and Japan, future growth in Australian sugar exports is expected to continue to be challenged by land and water availability.

Conclusion

The European Union will remove production quotas for beet sugar and isoglucose, and support pricing for sugar beet and beet sugar from 1 October 2017. The potential effects of this significant policy change on total EU beet sugar production are uncertain. While higher sugarbeet plantings in the larger and more efficient sugar-producing countries are expected, plantings in smaller producing countries and by less-efficient producers will be more vulnerable to downward movements in the domestic market price. This could come from an increase in the supply of beets from the major EU producers or from the expected increase in the production of isoglucose, which may put downward pressure on demand for sugar by the food manufacturing sector as it substitutes towards the lower-cost input. However, with EU exports no longer constrained by the 2005 WTO ruling, new export opportunities for EU sugar could lend support to the EU beet sugar industry.

Australia’s access to the European Union is constrained by its CXL quota, which is among the lowest country-specific quotas granted to those with preferential access to the European Union. In addition, unlike India’s tariff-free in-quota access, the Australian CXL quota is subject to a €98 a tonne in-quota tariff. Many preferential sugar arrangements negotiated by the European Union have been based on historical relationships. However, recent trade agreements with some Central and South American countries have given them larger quota access for raw cane sugar than Australia receives. These agreements have also provided tariff-free access and quotas that increase annually. Despite the CXL in-quota tariff, Australia continues to export sugar to the European Union. Any improved access to the EU market, either through a larger or increasing quota or through lower tariffs, would improve that competitiveness. Although the majority of Australia’s sugar exports are currently destined for Asian markets, improved access to the European Union—the second-largest sugar-consuming market in the world—would broaden opportunities for Australian sugar exporters.


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UNICA 2016, ‘UNICA's position paper on Mercosur-EU trade negotiations’, UNICA position papers, Brazilian Sugarcane Industry Association (UNICA), São Paulo, available at sugarcane.org/resource-library/unica-materials/. UNICA–Apex-Brasil 2016a, ‘EU ethanol policy’, São Paulo, available at sugarcane.org/ global-policies/policies-in-the-european-union/policy-overview-ethanol-in-europe. —— 2016b, ‘EU sugar policy’, São Paulo, available at sugarcane.org/global-policies/ policies-in-the-european-union/eu-sugar-policy. United Nations 2015, World population prospects: the 2015 revision, DVD edition, Department of Economic and Social Affairs, Population Division, New York.

USDA–ERS 2016, ‘Common agricultural policy’, European Union, Economic Research Service, US Department of Agriculture, Washington DC, available at ers.usda.gov/topics/international-markets-trade/countries-regions/europeanunion/common-agricultural-policy.aspx.

USDA–FAS 2016a, EU 28—Sugar annual, GAIN Report, no. E16020, 25 April, Foreign Agricultural Service, US Department of Agriculture, Washington DC, available at gain.fas.usda.gov/Recent%20GAIN%20Publications/Sugar%20Annual_Brussels%20 USEU_EU-28_4-25-2016.pdf (pdf 0.8mb).

—— 2016b, ʻProduction, supply and distribution online’, Foreign Agricultural Service, US Department of Agriculture, Washington, DC, available at apps.fas.usda.gov/ psdonline/psdquery.aspx, accessed 5 July 2016.


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Investment in Australian farms Tom Jackson

• Investment on Australian farms is substantial, with net additions of non-

land capital items on broadacre and dairy farms currently worth around $2 billion a year.

• Farm operators and their spouses provide most of the capital used to fund the

ownership and operation of Australian farms; corporate investors account for less than one-fifth of total capital.

• Family-funded investment in Australian farms has been sufficient to drive

substantial productivity growth, sustain long-run growth in land values and allow turnover of the farmer population.

• Investment in farms by corporate entities may or may not increase in coming years,

but the strength of the family farm business structure suggests that corporate investors are unlikely to significantly displace family farmers in the near future.

• New sources of capital are not necessarily required for the Australian farm sector

to grow and prosper into the future; nonetheless, greater diversity of capital sources may generate some benefits and should be welcomed.

Investment in Australia’s agriculture sector has been a hot topic in recent years, largely because more investment is considered necessary for farmers to benefit from an anticipated increase in global demand for food. Community interest has been piqued by several high-profile farm acquisitions by corporate investors—including private equity firms, fund managers and sovereign wealth funds. These transactions have led to debate about the future of family farms and the role of foreign investors.

The objective of this article is to explore trends in investment on Australian farms and to better understand the role of corporate entities in providing the capital used to fund investment. The data used in this analysis are drawn from the ABARES farm survey programme. These data provide insight into investment at the farm level but do not lend themselves to evaluation of broader questions such as the relative contribution of domestic and foreign-sourced capital. As such, these questions are not explicitly considered in the analysis.

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Investment in Australian farms

Family and corporate investment in farms In economic terms, investment is the process of creating additional productive assets or maintaining productive capacity of existing assets and is critical to running a farm. Investment may involve the construction of buildings, the purchase of machinery and equipment or the development of land such as conversion from dryland to irrigated farming. Australian broadacre and dairy farmers invest more than $2 billion a year in their businesses to improve technology and develop land and other resources. The capital used to fund this investment takes a variety of forms—including equity provided by farm operators and their families, or corporate and foreign investors, and debt provided by banks and other lenders. The focus of this article is on the role of corporate entities (as distinct from families) in providing the capital used to fund investment in the Australian agriculture industry. Corporate investors can contribute capital to the farm sector by owning and operating farms either outright or in partnership with family farmers. Corporate investors own farms in the cropping, livestock, horticulture, aquaculture and other sectors. The large number and diversity of arrangements indicate that ample opportunities are available and that few constraints are binding.

However, the Australian agriculture industry remains dominated by family-owned businesses. In the broadacre sector, approximately 96 per cent of all farms are family owned. This is similar to the ownership of farms in other developed countries such as Canada and the United States, for good reasons. Most importantly, the strong alignment of incentives between capital providers and managers in owner-operator businesses means that the family farm remains a highly effective and resilient business structure. Although family-owned farms tend to outperform corporate farms of a similar size, a greater corporate presence in Australian agriculture could generate a range of benefits. These could include: • an increase in skilled employment opportunities for farm managers and workers • an increase in the availability of land for lease

• better decision-making through the use of boards of directors and other structures • fewer workplace injuries as a result of more explicit occupational health and

safety procedures

• faster adoption of new technologies

• large-scale development of land and water resources such as expansion of

irrigated agriculture in northern Australia.

The main risk associated with greater corporate investment is that much of this activity may lead only to higher land prices but not to any significant increase in productivity or profitability. Transferring the ownership of farms from families to corporate entities (or between corporate entities) will not in itself lead to any efficiency gains. For gains to be realised, investment needs to involve more than trading of existing farms; it must involve improvements to farm technologies and production practices.


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Recent trends in investment ABARES and the Australian Bureau of Statistics collect information about capital expenditure on farms but this does not comprehensively indicate whether the source of capital used to fund the expenditure is a family or corporate entity. Similarly, the total value of farmland transactions in a period is known, but family and corporate entities cannot be distinguished. Nonetheless, ABARES farm survey data provide several useful insights. The $2 billion a year invested in Australian broadacre and dairy farms represents the lower bound of agricultural investment in Australia because it does not include investment on farms in sectors that are not comprehensively covered by the ABARES farm survey programme, such as horticulture and intensive livestock. Together, the broadacre and dairy sectors account for around 73 per cent of commercial-scale farm businesses in Australia and around 60 per cent of the total gross value of agricultural output.

FIGURE 1 Investment on broadacre and dairy farms, 1995–96 to 2014–15 non-land capital average per farm 50 40 30 20 10 2014–15 $’000 1996 –97

1999 –2000

2002 –03

2005 –06

2008 –09

2011 –12

2014 –15p

p Preliminary estimate. Sources: ABARES Australian Agricultural and Grazing Industries Survey, Australian Dairy Industry Survey

Figure 1 illustrates the average per farm value of investment in non-land capital items on Australian broadacre and dairy farms between 1995–96 and 2014–15. Australian broadacre and dairy farmers currently invest around $36 000 a year on average. Investment has increased over time, albeit with significant volatility. The growth over time largely reflects increases in the capital stock of farms as farmers have substituted labour and other inputs for capital.

ABARES productivity analysis has found that Australian farmers use substantially more capital in production than farmers in other developed countries such as Canada and the United States (Sheng, Nossal & Ball 2013). Differences in geography, farm size and labour costs are the main reasons for the relatively high proportion of capital used on Australian farms compared with those of other countries. The relatively high capital-to-labour ratio achieved by Australian farmers suggests they have had sufficient access to capital to fund the required level of capital investment.

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In the future, Australian farmers are likely to continue increasing the amount of capital services used in production. However, they will not necessarily need to own the machinery and other assets that produce these services. It may be more efficient and profitable for farmers to obtain these services by hiring contractors. The use of contractors by Australian farmers has increased in recent years, and a similar trend has been observed in the United States.

The measure of investment shown in Figure 1 includes all net additions to the capital stock of farms but excludes purchases of land. This is because land transactions do not create additional assets but instead transfer the ownership of existing land from the seller to the buyer. Assuming no new land is being brought into production, these transactions sum to zero in net terms. In some cases, purchasing land is a necessary precursor to investment in additional capital items by the new owner. However, this is not the case for all farmland transactions and, even when this does occur, only the expenditure on additional productive capital items should be counted as investment. This is the only part of the transaction that increases the overall stock of productive assets rather than simply changes their ownership. Investment and farm profit are positively correlated. Farmers tend to reduce or delay expenditure on additional capital items in years when profit is relatively low and increase expenditure when profits are higher. Investment also varies between agricultural industries. This reflects differences in the capital requirements of farms in particular industries and other factors such as the average size of farms, commodity prices and seasonal conditions. Crop farmers tend to invest the most, followed by dairy farmers and then beef and sheep producers (Figure 2).

FIGURE 2 Investment by industry, 1995–96 to 2014–15 non-land capital average per farm 150

Cropping Dairy Beef Sheep

120 90 60 30 2014–15 $’000 1996 –97

1999 –2000

2002 –03

2005 –06

2008 –09

2011 –12

2014 –15p


The value of investment on farms generally increases in line with farm size. Figure 3 illustrates average annual investment on small, medium and large broadacre and dairy farms. Small farms are those with receipts less than $450 000 a year, medium farms are those with receipts between $450 000 and $1 million and large farms are those with receipts of more than $1 million a year. Large farms account for the majority of total investment. They account for around 13 per cent of the broadacre and dairy farm population and around 52 per cent of total investment. ABARES Agricultural commodities – vol. 6 no. 3 • September quarter 2016

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FIGURE 3 Investment on broadacre and dairy farms by size, 1995–96 to 2014–15 non-land capital average per farm 250

Large farms Medium farms Small farms

200 150 100 50 2014–15 $’000 1996 –97

1999 –2000

2002 –03

2005 –06

2008 –09

2011 –12

2014 –15p


Capital items such as machinery and equipment generally represent a small share of the total value of capital invested in a farm. Typically, the most valuable broadacre farm asset is land and fixed improvements. Figure 4 illustrates the average value of different types of capital on broadacre farms from 1995–96 to 2014–15. Land and fixed improvements accounted for approximately 80 per cent of the total value of capital throughout this period. This is similar to other developed countries such as the United States.

FIGURE 4 Value of capital assets by type, broadacre farms, 1995–96 to 2014–15 average per farm 5 000

Total closing capital Land and fixed improvements Liquid capital items

4 000 3 000 2 000 1 000 2014–15 $’000 1996 –97

1999 –2000

2002 –03

2005 –06

2008 –09

2011 –12

p Preliminary estimate. Source: ABARES Australian Agricultural and Grazing Industries Survey

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2014 –15p


The large share of land in the total value of farm capital means that the value of farm assets can change substantially independently of trends in investment in productive capital items. Changes in land value have been a more significant driver of the total value of capital invested in broadacre farms than investment during much of the 20 years to 2014–15 (Figure 5).

FIGURE 5 Investment and capital appreciation, broadacre farms, 1995–96 to 2014–15 average per farm 400

Capital appreciation Investment

300 200 100 0 2014–15 $’000 1996 –97

1999 –2000

2002 –03

2005 –06

2008 –09

2011 –12

2014 –15p

p Preliminary estimate. Source: ABARES Australian Agricultural and Grazing Industries Survey

Changes in land prices substantially affect the wealth of farmers, but these changes should be distinguished from changes in the productive capacity of farm businesses brought about through investment. Factors such as the quality of land for agricultural production are often overwhelmed by broader trends affecting supply and demand in the market for land. As a result, farmland values are only loosely linked to the productive capacity of land or farm profit (Lane 2016).

Sources of farm capital

The proportion of total capital provided by farm operators and their spouses, other equity providers and lenders was largely stable between 1995–96 and 2014–15. The farm operator and spouse generally provided 60 per cent to 65 per cent of total capital (Figure 6). The proportion of equity capital obtained from other sources varied between 20 per cent and 30 per cent of the total, and the share of debt ranged from 11 per cent to 14 per cent.


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FIGURE 6 Farm capital sources, broadacre and dairy farms, 1995–96 to 2014–15 100

Debt Equity–other Equity–operator and spouse

80 60 40 20 % 1996 –97

1999 –2000

2002 –03

2005 –06

2008 –09

2011 –12

2014 –15p


The ‘equity–other’ category includes all equity capital used by farms apart from that provided by the operator and their spouse. This category includes the capital provided by corporate entities, the capital contributed by other family members (such as parents and siblings of the operator—either directly or through structures such as family trusts and companies) and the value of any land used by the farm through lease or sharefarming arrangements. The individual components of this category cannot be distinguished in the historical data, but the widespread use of structures such as trusts and companies by family farmers suggests that corporate entities provide substantially less than the 20 per cent of total capital represented by this category. The relatively constant share of the ‘equity–other’ category over the survey period suggests overall transfer of farm assets from families to corporate investors over the past 20 years has been relatively limited, despite many corporate acquisitions. This suggests that many farms have been traded between corporate entities, rather than from families to corporates—for three possible reasons.

First, corporate investors generally seek to invest relatively large amounts of capital in individual transactions, and many family farms are too small for this. Second, corporate investors generally require relatively large amounts of farm-level data to conduct due diligence. These data describe variables such as the farm’s physical characteristics, prevailing climate conditions, historical yields and financial performance, and not all family farms have sufficient data available on these variables. Third, many family-owned farms large enough to interest corporate investors are profitable businesses owned by people with little reason to sell them. In particular, many large family-owned Australian farms generate substantial profits and have relatively high equity ratios. The owners of these farms have sufficient access to owner equity and debt capital to fund investment and therefore have little need to obtain additional capital from corporate investors.

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In many cases investment on family farms is initially funded using debt capital, which is then replaced with equity capital over time. This approach has been used by Australian farmers for many years and remains an effective means of funding investment. The total amount of debt used by farms increased significantly in the 20 years to 2014–15, but this growth was largely in line with growth in equity levels (mainly the result of land price appreciation). Further, the proportion of farms experiencing difficulty in servicing debt did not rise—largely because most of the increase in debt flowed to farms with sufficient cash flow to service and repay debts. Farms of this kind are likely to continue to have access to debt as a source of capital to fund investment into the future, and rural lenders actively seek opportunities to increase the amount of capital available to these farmers. Overall: • investment on Australian farms is substantial

• most of this investment is undertaken by family-owned businesses

• despite reports of greater investment by corporate entities in recent years,

evidence that this is changing the way Australian farms are financed in aggregate terms is limited.

Performance of farms as investments

To understand likely future trends in corporate investment in Australian farms it is important to consider how farms perform as investment opportunities. The key considerations are returns and risk. These variables are specific to individual investments and must be considered on a case-by-case basis, but some insight into the outcomes likely to be associated with investing in farms can be gained by considering historical performance.

Returns

The two key drivers of investment returns are the price paid for underlying assets and the profits generated during the period of ownership, including any capital gains. Table 1 summarises operating and capital returns generated by relatively large Australian farms (receipts greater than $1 million a year) over several different time periods. Data are presented for the largest farms since these are the main focus of corporate investors. These farms represent around 10 per cent of the population of broadacre farms and about 43 per cent of all broadacre output.

TABLE 1 Rates of return for broadacre farms with receipts greater than $1 million, 1995–96 to 2014–15 Time period

Cash return (%)

Capital growth (%)

Total return (%)

5 years

4.9

0.1

5.0

10 years

4.2

1.5

5.7

15 years

4.7

3.1

7.8

20 years

5.5

2.4

8.3

Source: ABARES Australian Agricultural and Grazing Industries Survey


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Cash (or operating) returns for these farms were relatively stable at around 4 per cent to 5 per cent a year. In contrast, the capital growth component of farm returns was relatively volatile, ranging from 0.1 per cent to 3.1 per cent a year (depending on the period). This variation mainly reflects substantial changes in agricultural land prices over the 15 years to 2014–15—particularly rapid appreciation during the early and mid 2000s, followed by a gradual decline from 2008. Overall, the data indicate that over the long run relatively large Australian broadacre farms generate average total returns of around 8 per cent a year. Potential investors in Australian farms should be aware that the returns presented in Table 1 are paid to both capital and management. This is because ABARES estimates farm returns assuming that all workers, including the farm manager, are paid an award wage. In reality most farm managers in Australia are also farm owners and receive income in the form of profits generated by the business. Similarly, hired farm managers are typically paid above award wages. If these higher wages were taken into account, returns to capital alone would be lower. Furthermore, these returns are estimated at the farm gate and do not include any fees charged by management companies to operate farms on behalf of investors. Investors should also be aware that ABARES farm survey data indicate that large corporate-owned farms generate somewhat lower operating returns than similar-sized family farms in the cropping and dairy industries (Figure 7). Corporate and family returns are similar in the beef industry, but this most likely reflects the relatively high proportion of corporate beef farms in northern Australia—where farms tend to be much larger and somewhat more profitable than those in the south.

FIGURE 7 Rate of return (excluding capital appreciation) for large farms, by type and industry, 2009–10 to 2013–14 average per farm 7

Corporate Family

6 5 4 3 2 1 % Cropping

Beef

Dairy

Note: Large farms are those with receipts of more than $1 million a year. Sources: ABARES Australian Agricultural and Grazing Industries Survey, Australian Dairy Industry Survey

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These results indicate that the relatively large scale of most investor-owned farms should not be seen as a guarantee of relatively high operating returns. Larger farms tend to be more profitable than their smaller counterparts because they invest well in new technologies to create more efficient production systems and because they tend to have the best management (Jackson & Martin 2014). Unless investors create the incentives and structures required for the right technologies to be adopted and for management to be of the highest quality, large size in itself will not lead to superior performance.

The most likely explanation for the generally higher profitability of large family farms is the well-documented difficulty of creating the right incentives for managers of corporate-owned farms. It is also likely that corporate-owned farms have somewhat higher costs than family-owned farms and less capacity to reduce costs (for example, labour costs) when conditions are unfavourable. Investor-owned farms may have greater access to funds for investment in new technologies than family farms, but these data show that this does not necessarily result in higher returns. New technologies offer the ability to produce more outputs or to use fewer inputs. However, unless the value of benefits generated by these technologies outweighs the value of all costs incurred, the use of such technologies will not increase profits. Investor-owned farms are no more likely to make these decisions well than their family-owned counterparts.

Risk

Systematic differences in returns between farms primarily reflect factors such as management skill, enterprise choice and location. Investors have some control over this variation through their choice of assets and managers. However, individual farms generate a distribution of returns over time because of random and uncontrollable factors such as weather conditions and commodity prices. This variation in returns over time represents risk, and it is a critical element of farming in Australia.

FIGURE 8 Distributions of rate of return (including capital appreciation) for large farms, by industry, 2004–05 to 2013–14 7

Beef Dairy Cropping

6 Probability

5 4 3 2 1 0 –20

–10

0 10 20 Rate of return (%)

30

40

Note: Large farms are those with receipts of more than $1 million a year. Sources: ABARES Australian Agricultural and Grazing Industries Survey, Australian Dairy Industry Survey


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The distributions of returns generated by investments made now are unknown because they depend on project-specific factors and on future prices and yields. Nonetheless, historical distributions of farm returns give some insight into the level of risk to which investors are likely to be exposed. Figure 8 illustrates the distribution of returns on capital (including capital appreciation) generated by large farms in various industries over the 10 years from 2004–05 to 2013–14. These distributions illustrate the likelihood of particular rates of return being realised over a given period. These distributions can be used to evaluate risk by considering the probability that returns will fall below some relevant value. Given the complexity of the distributions, this is a more effective approach for understanding risk than alternatives such as calculating the standard deviation or range of possible outcomes. For example, for large farms in the cropping industry, the probability of generating negative returns is 11 per cent, for large beef farms it is 23 per cent and for large dairy farms it is 14 per cent. In summary, ABARES farm survey data show that relatively large Australian farms can generate attractive returns. However, investors should be aware that family farms dominate in Australia and in other developed countries for good reasons. Most importantly, family-owned farms create the incentives required for making the best management decisions and managing the variation in profits that is inevitable when farming in Australia.

Creating the right incentives

For investors in Australia’s agriculture sector to realise satisfactory returns, they must employ a good farm manager and create an incentive structure that aligns the manager’s interests with their own. This is fundamental to success in agricultural investment, and the history of corporate farming in Australia and other countries indicates that it can be difficult to achieve.

The key impediment to creating an effective incentive structure is information asymmetry between investors and farm managers. Agriculture, more than other industries, is affected by random, uncontrollable factors such as weather conditions and pest and disease infestations. These events can significantly affect production and profits and can be indistinguishable from the effects of relatively good or poor management.

Information asymmetry means managers might not always make decisions or act as the investor would like them to. This applies to most aspects of farm management, including decisions about which tasks to perform and when, how to manage risk, attention to detail when performing tasks and the level of work effort. In contrast, the main source of income for the operators of large family farms is the profits (and losses) generated by the business. This gives operators a strong incentive to maximise profits while managing the likelihood of unacceptable outcomes. This longstanding contrast is thought to be one of the main reasons why family farms dominate the agriculture sector in Australia and many other countries (Deininger & Byerlee 2011).

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Management fees are usually designed to create the right incentives for managers. For example, payments linked to farm performance are often included in employment contracts. However, these structures can be ineffective in the presence of information asymmetry and almost certainly end up distorting management decisions. For example, an incentive fee based on maximising profit in a particular year might encourage excessive risk-taking, under investment in maintenance or running down soil quality. The incentive problem is likely to remain significant until improvements in technology allow the outcomes of farming to be more observable—for example, through improvement of location-specific climate and soil data.

Drivers and consequences of corporate investment Corporate investment has long been an important part of Australian agriculture. In addition to financing the ownership and operation of individual farms, corporate entities have been instrumental in developing land and water resources and establishing new industries. The frequency of transactions and diversity of arrangements indicate that many opportunities are available to corporate investors and few constraints are binding. This section evaluates the motivations of and constraints on corporate investors and considers the implications of an increase in corporate investment.

Motivations of corporate investors in Australian agriculture Motivations for investing in Australia’s agriculture sector are specific to individual investors, but some generalisations can be made.

A near-universal motivation is to invest in assets that generate competitive risk-adjusted returns. It is not possible to quantify precisely what this means because the returns and risk generated by competing investment opportunities are unknown and constantly changing. For example, the relatively low returns currently being generated by investments in listed equity and bonds are boosting the competitiveness of farms as investment opportunities. However, the regular purchase of Australian farm assets by corporate investors indicates that many believe farms generate competitive returns given the risk involved. Many corporate investors make this assessment in the context of a broader portfolio of investments. This is significant because the correlation between farm returns and those of other investments is often relatively low, which allows farm investments to make a relatively large contribution to reducing portfolio risk through diversification. Some investments in agriculture are motivated by not just returns but risk reduction at the portfolio level. Some investors are motivated by the proposition that rising incomes and population levels in developing countries will drive commodity prices, farm profits and agricultural land prices higher in coming years. For these investors the expectation of higher returns in the future is sufficient to justify investment, even if risk-adjusted returns generated by farms are currently lower than those generated by other assets. Other investors are motivated by a desire for greater control over the production and processing of food. For example, the Hassad Food Company operates farms in Australia to generate profits and contribute to Qatar’s food security (Hassad 2016). In other cases, foreign retailers and other investors have purchased farms and processing facilities so that they can control more of the supply chain for food products that they sell.


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Farmland is also attractive to some investors because it is a real asset and can be used as a hedge against inflation. One view is that real assets such as land have an intrinsic value that is not eroded during periods of rising prices. It is not entirely clear that farmland is immune to the effects of inflation, or that land is the best asset to use as an inflation hedge (more fungible assets such as gold may be better), but this is an important motivation for some investors. Finally, a major reason why investors are seeking to invest in agricultural assets in Australia rather than elsewhere is that Australia is considered to have high-quality legal, financial and political institutions. The cost and risk of investing in agriculture is higher in many other countries because of factors such as poor governance, absence of the rule of law, high levels of corruption, insecure property rights and arbitrary trade rules (FAO 2012).

Constraints on corporate investment

The number and diversity of investments made by corporate entities suggest that few constraints are preventing this kind of investment in Australia’s agriculture sector. However, several factors could be limiting greater corporate investment. Perhaps the most significant constraint is the lack of well-defined, proven structures that effectively align the interests of farm managers with those of investors. A wide range of arrangements have been employed in the past, reflecting the diverse interests of investors and managers. However, the relatively poor performance of various corporate agriculture enterprises in the past suggests that some of these arrangements have not been effective.

Most investors require sufficient information about a proposed project to undertake due diligence. This includes data that describe the physical characteristics of a farm (such as rainfall, soil type, crop yields and stocking rates) and its financial performance (such as operating profit, capital appreciation and rate of return on capital). Conducting due diligence also involves assessing the whole project, including the production plan, the outlook for relevant commodity markets and potential risks. Not all farms have these data, which effectively limits the availability of suitable projects for corporate investors.

A mismatch between the minimum investment size of some investors and the total value of farm businesses can also constrain investment. For example, institutional investors such as Australian superannuation funds are often looking to invest at least $100 million in individual projects. Most Australian farms have total assets worth less than this, which limits the availability of investment opportunities. The relatively low liquidity of very large farm assets is also a concern for many institutional investors because this may restrict their ability to exit investments profitability. Risk is another barrier to greater investment by corporate entities in Australia’s agriculture sector. Australian farms operate under significant variation in climatic conditions and commodity prices and receive relatively little government support to mitigate the effects of this on profits. The degree of volatility in farm returns is greater in Australia than in most other countries, and it is greater than in most other sectors of the Australian economy (Keogh 2012). To the extent that farm returns are not commensurate with this level of risk when compared with alternative investments, this will deter some investors.

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Some media commentary has suggested that Australia’s foreign investment review system is acting as a deterrent to greater corporate investment in Australian agriculture (Cranston 2015; Neales 2015; Uren 2015). Similarly, government decisions that restrict particular agricultural activities could deter potential investors. It is not possible to precisely quantify the likely impact of these decisions on the willingness of foreign investors to contribute capital to Australia’s agricultural sector, but it is important to recognise that investors consider the overall policy and regulatory environment when making decisions about where to invest. In this context, the relatively high quality and stability of Australian regulatory and economic institutions is regarded as a positive by many investors. A final constraint is that data about the performance of existing corporate-owned farms are scarce, which makes it difficult for new investors to understand the returns and risk likely to be generated by a farm investment. Detailed data describing the financial performance of specific farm investments or data that explain past performance (such as the appointment/termination of key personnel or market conditions) are rarely made publically available. These data are critically important for potential investors to understand likely returns and risk. This is particularly the case in farming, where returns are highly dependent on idiosyncratic factors such as management, climate conditions and soil type.

Implications of greater corporate investment

The implications of an increase in corporate investment depend on the nature of the transactions involved. The most important distinction is between purchasing existing land assets and adding to the capital stock of farms.

Land transactions

Land transactions allow farmers to enter and exit the industry and to increase the size of their operations. However, in aggregate terms, these transactions do not represent economic investment because they involve the transfer of existing assets from sellers to buyers, rather than the creation of additional productive assets. Although the buyer has ‘invested’ in the sense of acquiring additional productive assets for their business, the seller has ‘disinvested’ by exactly the same amount so the total capital available to the industry does not change overall.

Despite this, land transactions may have a positive effect on industry-level profitability because they allow farmers to increase the size of their operations, and larger farms tend to be more profitable than their smaller counterparts (Jackson & Martin 2014). Accordingly, if greater corporate investment accelerates the trend towards larger farms, this can be expected to lead to greater overall productivity and profitability.

One potential downside of greater corporate investment in farmland is that more bidders in the market for land will increase land prices, all else being equal. Although family farmers will continue to account for the majority of land purchases, the large amounts of capital available to corporate investors and their relatively limited experience in the sector may push land prices higher than would have otherwise been the case. If land prices become unsustainable, a price fall would cause significant disruption.


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On-farm capital improvements This form of investment includes expenditure on items such as new capital equipment and the development of land—for example, through establishing an orchard or converting from dryland to irrigated farming. These investments are likely to have positive effects on farm profits because they increase the stock of productive assets and thereby contribute to the capital deepening process (the substitution of capital for labour), which has been a major driver of productivity growth in Australian agriculture for many years. The value of corporate investment in these items is unknown, but it is likely to be a relatively small share of the total because ownership of real estate assets has been a central aspect of corporate investment activity to date. Land and fixed improvements generally account for around 80 per cent of the total value of a farm’s assets, so improvements made by corporate investors typically represent a relatively small share of the total capital invested. Investing heavily in on-farm capital items may be unattractive to corporate investors with little direct experience in agriculture because this is relatively risky. Well-developed, highly productive farms with good track records represent safer investment options than undeveloped farms that require substantial capital improvements. In many cases the financial performance of farms in need of significant additional capital will not be strong enough to justify investment.

What the future might hold

The capital used to finance the ownership and operation of Australian farms is largely provided by families, and this has changed little over the past 20 years. Corporate investors of foreign and domestic capital have also made a significant contribution in some sectors. However, the owner-operator model has proven to be highly effective. It has supported productivity growth that has outstripped most other sectors of the Australian economy, facilitated significant structural change, sustained growth in land prices over time and allowed ongoing turnover of the farmer population. Given the historical success of this capital structure, it may remain dominant into the future. However, corporate entities may begin to play a greater role in financing Australia’s farm sector. One argument to support corporate investors continuing to play a relatively small role in Australia’s agriculture sector is that existing capital sources may be sufficient to satisfy future growth in demand for capital. Projected growth in demand for food is expected to create opportunities for agricultural exporters, but this will not necessarily create a new set of profitable investment opportunities. Australian farmers already make shrewd decisions about how much capital to use, and the most profitable response to an increase in demand may be to continue producing at the lowest possible cost rather than to seek to expand output by investing in additional capital. This is particularly the case when risk is taken into account.

152



Corporate entities may also remain a relatively small part of the agricultural sector because greater use of capital on farms does not necessarily require greater corporate investment. Family-owned farms use their own equity and bank debt to fund investment, and these sources of capital will continue to be available in the future. Increases in rural debt in recent years have primarily occurred on the largest Australian farms, which generally have strong balance sheets and generate sufficient returns to service this debt. Banks and other lenders will continue to supply these farms with additional capital into the future. Farmers may also increase their use of capital services by hiring contractors rather than by purchasing new capital items. However, future trends in global financial markets may mean corporate investors substantially increase their investment in Australian farms. For example, deterioration in the returns generated by other asset classes such as equities and bonds could make farms more attractive opportunities. Devaluation of the Australian dollar also increases the competitiveness of investments made in Australia by foreigners, which may increase demand for Australian farm assets. Additionally, sovereign wealth funds and retailers may substantially increase their investment in Australian farms in pursuit of objectives such as food security and greater integration of supply chains.

Conclusion

The likely implications of greater corporate investment in Australian agriculture are much the same as those associated with investment by any other entity. Investment in some items, such as on-farm capital improvements, will boost the productivity and profitability of Australian farms if decisions are made well. The purchase of farmland is unlikely to have substantial effects in isolation but may do so in cases where this leads to increases in farm size or adoption of new technologies that would not otherwise have occurred. The future of corporate investment in Australian farms will be driven by trends in global capital markets and changes that may occur on farms (such as the development of technologies that allow inputs and outputs to be more closely observed and the creation of new farm systems that require substantially more capital). Ongoing growth in the demand for food and the growing global pool of retirement savings is likely to result in corporate interest in Australian agriculture remaining strong. However, the highly effective incentive structures and relatively low costs of family-owned farms are likely to see these farms remain dominant for the foreseeable future.


153


References Cranston, M 2015, ‘Foreign investment, branding big issues for $1tn agri target’, Australian Financial Review, 1 December, p. 2.

Deininger, K & Byerlee, D 2011, The rise of large farms in land abundant countries— do they have a future?, Policy Research Working Paper 5588, The World Bank, Washington.

FAO 2012, The state of food and agriculture: investing in agriculture for a better future, Food and Agriculture Organization of the United Nations, Rome. Hassad 2016, Hassad Australia, Hassad Australia Pty Ltd, available at hassad.com.au/about-us/.

Jackson, T & Martin, P 2014, ‘Trends in the size of Australian farms’, Agricultural commodities: September quarter 2014, Australian Bureau of Agricultural and Resource Economics and Sciences, Canberra.

Keogh, M 2012, ‘Including risk in enterprise decisions in Australia’s riskiest businesses’, paper presented at the Australian Agricultural and Resource Economics Society (AARES) Conference, Fremantle, 7–10 February. Lane, T 2016, ‘The valuation of agricultural assets in Australia’, Farm Policy Journal, vol. 13, no. 2, pp. 1–11. Neales, S 2015, ‘FIRB scaring away capital’, The Australian, 6 August, p. 19.

Sheng, Y, Nossal, K & Ball, E 2013, ‘Comparing agricultural total factor productivity between Australia, Canada and the United States’, paper presented at the Australian Agricultural and Resource Economics Society (AARES) Conference, Sydney, 5–8 February.

Uren, D 2015, ‘Foreign capital built pastoral past’, The Australian, 20 November, p. 1.

154


Running Main Header Milo Pro Medium 8pt Running Sub Header Milo Pro Light 8pt

Statistical tables

Figures 1

Contribution to GDP

157

2

Markets for Australian merchandise exports

157

3

Sources of Australian merchandise imports

158

4

Principal markets for Australian agricultural, forestry and fisheries exports

159

5

Contribution to exports by sector, balance of payments basis

165

Tables 1

Indexes of prices received by farmers

2

Indexes of prices paid by farmers, and terms of trade

163

3

Farm costs and returns

164

4

Volume of production indexes

166

5

Industry gross value added

166

6 Employment

167

7

All banks lending to business

167

8

Rural indebtedness to financial institutions

168

9

Annual world indicator prices of selected commodities

168

10

Gross unit values of farm products

169

11

World production, consumption, stocks and trade for selected commodities

170

12

Agricultural, fisheries and forestry commodity production

172

13

Gross value of farm, fisheries and forestry production

174

14

Crop and forestry areas and livestock numbers

176

15

Average farm yields

177

16

Volume of agricultural and fisheries exports

178

17

Value of agricultural and fisheries exports (fob)

180

18

Agricultural exports to China (fob)

182

19

Agricultural exports to Indonesia (fob)

20 Agricultural exports to Japan (fob)

183 184

21

Agricultural exports to the Republic of Korea (fob)

185

22

Agricultural exports to the United States (fob)

186

23

Volume of fisheries products exports

187

24

Value of fisheries products exports (fob)

188

25

Volume of fisheries products imports

189

26

Value of fisheries products imports

190

27

Value of Australian fisheries products trade, by selected countries

191

28

Volume of forest products exports

192

29

Value of forest products exports (fob)

30 Volume of forest products imports

156

162

193 194

31

Value of forest products imports

195

32

Value of Australian forest products trade, by selected countries

196


GDP, exports

FIGURE 1 Contribution to GDP Australia, chain volume measures, reference year 2013–14 2005–06

2015–16

$1 272.5b

$1 668.7b Services Manufacturing

Services Mining

76% 8%

75% 9%

Mining Building and construction

6% 7%

Building and construction Manufacturing

8% 6%

Agriculture, fishing and forestry

3%

Agriculture, fishing and forestry

2%

FIGURE 2 Markets for Australian merchandise exports in 2015–16 dollars 2005–06 Total

$195.7b

Agriculture

$35.1b

Fisheries

$2.0b

2015–16 Japan China Korea, Rep. of United States New Zealand India European Union 28 Other

20% 12% 8% 6% 6% 5% 12% 31%

China 10% Japan 18% ASEAN 16% Other Asia 14% European Union 28 9% Middle East 7% United States 11% Other 15% Japan Hong Kong China United States Singapore Taiwan Vietnam Other

28% 38% 7% 9% 2% 4% 1% 11%

$243.1b

$44.5b

$1.5b

Japan 14% China 33% Korea, Rep. of 7% United States 5% New Zealand 4% India 4% European Union 28 7% Other 26% China Japan ASEAN Other Asia European Union 28 Middle East United States Other

21% 10% 19% 17% 7% 7% 10% 9%

Japan Hong Kong China United States Singapore Taiwan Vietnam Other

15% 18% 7% 4% 3% 1% 44% 8%


157

Import markets

FIGURE 3 Sources of Australian merchandise imports in 2015–16 dollars 2015–16

2005–06 Total

158

$214.9b

Agriculture

$9.3b

Fisheries

$1.6b

United States Japan China Germany Malaysia Singapore New Zealand Other

14% 10% 14% 5% 4% 6% 3% 44%

China ASEAN Other Asia European Union 28 New Zealand United States Other

5% 15% 5% 31% 19% 11 % 14%

Thailand New Zealand China Vietnam Malaysia United States Other

22% 13% 8% 11% 2% 4% 40%

$263.1b

$18.1b

United States Japan China Germany Malaysia Singapore New Zealand Other

11% 7% 23% 5% 4% 3% 3% 44%

China 7% ASEAN 19% Other Asia 6% European Union 28 24% New Zealand 19% United States 10% Other 15%

$2.1b


Thailand New Zealand China Vietnam Malaysia United States Other

20% 10% 15% 12% 4% 3% 36%

Export markets

FIGURE 4 Principal markets for Australian agricultural, forestry and fisheries exports (nominal) 2005–06

2015–16

Quantity wheat

Value wheat

Iraq

Iraq

Iran

Iran

Japan

Japan

Korea, Rep. of

Korea, Rep. of

Vietnam

Vietnam

Indonesia

Indonesia 1 000

kt

2 000

3 000

4 000

$m

Quantity barley United Arab Emirates

Korea, Rep. of

Korea, Rep. of

Vietnam

Vietnam

Japan

Japan

Saudi Arabia

Saudi Arabia

China

China 500

1 000

1 500

2 000

$m

Quantity sugar New Zealand

United States

United States

Malaysia

Malaysia

Japan

Japan

Indonesia

Indonesia

Korea, Rep. of

Korea, Rep. of 200

400

600

800

1 000

1 200

$m

Quantity wine Hong Kong

New Zealand

New Zealand

Canada

Canada

China

China

United States

United States

United Kingdom

United Kingdom 50

100

800

1 000

1 200

200

400

600

800

1 000

100

200

300

400

500

600

Value wine

Hong Kong

ML

600

Value sugar

New Zealand

kt

400

Value barley


kt

200

150

200

250

300

$m

200

400

600

800

1 000 continued ...


159

Export markets


2015–16

Quantity wool

Value wool

Taiwan

Taiwan

Italy

Italy

Czech Republic

Czech Republic

Korea, Rep. of

Korea, Rep. of

India

India

China

China kt

50

100

150

200

250

300

350

$m

Quantity beef and veal European Union 28

Taiwan

Taiwan

China

China

Korea, Rep. of

Korea, Rep. of

Japan

Japan

United States

United States 100

500

1 000

1 500

2 000

2 500

1 500

2 000

2 500

40

60

80

100

200

300

400

500

Value beef and veal

European Union 28

kt

continued

200

300

400

$m

Quantity sheep meat

500

1 000

Value sheep meat

European Union 28

European Union 28

Japan

Japan



Saudi Arabia

Saudi Arabia

United States

United States

China

China kt

5

10

15

20

25

30

$m

Quantity cheese

Value cheese

Hong Kong

Hong Kong

Singapore

Singapore

Malaysia

Malaysia

Korea, Rep. of

Korea, Rep. of

China

China

Japan

Japan kt

20

40

20

60

80

100

$m

100

continued ...

160


Export markets


2015–16

Quantity paper and paperboard

Value paper and paperboard

South Africa

South Africa

Philippines

Philippines

China

China

United States

United States

New Zealand

New Zealand kt

50

100

150

200

250

$m

Quantity edible fish Hong Kong

Vietnam

Vietnam

United States

United States

New Zealand

New Zealand

China

China

Japan

Japan 3

6

9

12

$m

Quantity edible crustaceans and molluscs Singapore

Taiwan

Taiwan

China

China

Japan

Japan

Hong Kong

Hong Kong

Vietnam

Vietnam 2

4

100

150

200

250

300

6

8

10

50

100

150

200

Value edible crustaceans and molluscs

Singapore

kt

50

Value edible fish

Hong Kong

kt

continued

$m

100

200

300

400

500

600

700


161

Prices

STATISTICS

1 Indexes received by farmers TABLE 1 Indexesof ofprices prices received by farmers Australia Australia Commodity Crops Grains Barley Canola Grain sorghum Lupins Oats Wheat Total grains a

Cotton Hay Fruit Sugar Vegetables Total crops Livestock Livestock for slaughter Cattle Lambs Sheep Live sheep for export Pigs Poultry Total livestock for slaughter Livestock products Wool Milk Eggs Total livestock products Store and breeding stock Total livestock Total prices received

2011–12

2012–13

2013–14

2014–15

2015–16 s

2016–17 f

131.7

173.4

167.9

175.6

155.8

129.7

133.1

142.1

144.1

130.6

142.4

146.0

111.6

148.9

177.2

178.1

144.9

116.4

118.7

173.5

176.4

149.3

148.2

118.6

147.7

172.9

156.0

183.1

183.1

164.1

114.6

158.3

159.8

151.7

146.8

123.9

115.7

147.9

149.9

147.0

142.4

122.3

110.8

98.2

103.9

104.4

103.7

112.2

133.0

144.9

160.9

169.6

176.4

180.4

181.4

156.5

158.8

170.4

162.0

164.7

147.1

117.5

125.4

127.2

132.3

154.6

161.3

172.8

174.1

179.1

172.9

175.8

117.8

129.3

131.1

131.8

128.1

121.4

173.3

163.3

156.3

196.7

261.3

284.6

250.8

182.8

201.8

233.4

256.1

293.0

390.3

200.0

250.8

337.8

329.8

401.1

343.7

247.6

233.4

286.6

313.1

314.0

134.5

132.5

151.7

157.3

181.0

188.0

108.3

114.4

116.9

126.2

128.5

125.9

175.0

158.6

161.2

192.7

235.1

254.0

169.2

147.3

153.3

159.2

181.2

187.9

139.5

134.7

169.1

162.6

144.1

140.7

104.2

107.4

112.7

114.6

112.7

113.7

145.2

136.1

157.2

155.9

152.3

152.7

199.5

173.8

169.2

209.9

271.2

311.1

163.2

149.0

157.5

178.0

205.4

219.0

137.2 138.2 142.9 152.4 162.7 164.5 a Total for the group includes commodities not separately listed. f ABARES forecast. s ABARES estimate. Note: The indexes for commodity groups are calculated on a chained weight basis using Fisher’s ideal index with a reference year of 1997–98 = 100. Indexes for most individual commodities are based on annual gross unit value of production. Prices used in these calculations exclude GST. Source: ABARES

162


Prices

STATISTICS

2 Indexes ofofprices paidbyby farmers, and of terms trade Australia TABLE 2 Indexes prices paid farmers, and terms trade of Australia Category Farmers’ terms of trade a Materials and services Seed, fodder and livestock Fodder and feedstuffs Seed, seedlings and plants Store and breeding stock Total seed, fodder and livestock Chemicals Electricity Fertiliser Fuel and lubricants Total Labour Marketing Overheads Insurance Interest paid Rates and taxes Other overheads Total Capital items Total prices paid Excluding capital items Excluding capital and overheads Excluding seed, fodder and store and breeding stock

2011–12

2012–13

2013–14

2014–15

2015–16 s

2016–17 f

93.3

95.3

98.2

103.9

109.3

109.5

115.6

127.1

126.9

134.5

138.5

128.9

116.4

128.0

130.6

130.4

133.0

124.7

199.5

173.8

169.2

209.9

271.2

311.1

135.1

137.9

136.9

151.3

167.6

168.7

112.6

110.3

113.6

114.7

115.8

118.4

176.8

180.8

185.7

176.4

176.4

179.4

165.5

157.9

153.2

154.7

157.8

161.3

228.2

216.8

221.1

196.8

177.1

177.1

149.2

149.5

150.7

155.1

160.8

163.0

155.6

159.2

163.5

166.3

168.6

171.5

154.1

153.5

159.3

152.9

147.6

150.1

185.8

190.0

195.2

198.5

201.3

204.7

114.9

96.4

85.3

79.5

75.6

72.3

152.9

156.4

160.6

163.4

165.6

168.4

148.3

151.7

155.8

158.5

160.7

163.4

129.9

117.6

110.6

107.1

104.7

102.8

153.2

157.0

161.5

164.8

167.7

171.1

147.2

145.1

145.5

146.7

148.8

150.2

146.6

143.9

143.9

144.9

146.9

148.2

151.2

151.9

154.2

156.8

160.4

162.7

149.7

146.5

147.2

145.6

144.7

146.1

a Ratio of index of prices received by farmers and index of prices paid by farmers. f ABARES forecast. s ABARES estimate. Note: The indexes for commodity groups are calculated on a chained weight basis using Fisher’s ideal index with a reference year of 1997–98 = 100. Prices used in these calculations exclude GST. Sources: ABARES (compiled from various market sources); Australian Bureau of Statistics


163

Costs and returns

STATISTICS

3 Farm costs and Australia TABLE 3 Farm costs andreturns returns Australia Category Costs Materials and services Chemicals Fertiliser Fuel and lubricants Marketing Repairs and maintenance Seed and fodder Other Total materials and services Labour Overheads Interest paid Rent and third-party insurance Total overheads Total cash costs Depreciation a Total farm costs Returns Gross value of farm production Net returns and production Net value of farm production b Real net value of farm production c Net farm cash income d Real net farm cash income c

unit

2011–12

2012–13

2013–14

2014–15

2015–16 s

2016–17 f

$m

1 471

1 369

1 406

1 451

1 505

1 484

$m

2 344

2 168

2 091

2 121

2 183

2 190

$m

2 407

2 232

2 247

1 978

1 769

1 745

$m

4 007

3 849

4 108

4 119

4 122

4 435

$m

3 876

4 108

4 529

4 935

5 265

5 605

$m

4 133

4 619

4 650

4 939

5 109

4 848

$m

4 411

4 538

4 705

4 721

4 717

4 871

$m

22 648

22 883

23 735

24 264

24 670

25 178

$m

4 170

4 297

4 363

4 302

4 246

4 383

$m

4 836

4 259

3 956

3 874

3 868

3 883

$m

525

537

551

561

569

578

$m

9 531

9 092

8 870

8 736

8 683

8 843

$m

32 179

31 976

32 605

33 000

33 353

34 021

$m

5 070

5 197

5 345

5 455

5 552

5 665

$m

37 249

37 173

37 950

38 455

38 905

39 686

$m

47 760

48 705

51 519

54 471

56 524

58 390

$m

10 510

11 532

13 569

16 017

17 619

18 704

$m

11 579

12 422

14 230

16 514

17 919

18 704

$m

15 580

16 729

18 914

21 471

23 172

24 369

$m 17 165 18 020 19 836 22 138 23 565 24 369 a Based on estimated movements in capital expenditure and prices of capital inputs. b Gross value of farm production less total farm costs. c In 2016–17 Australian dollars. d Gross farm cash income less total cash costs. f ABARES forecast. s ABARES estimate. Note: Prices used in these calculations exclude GST. Sources: ABARES (compiled from various market sources); Australian Bureau of Statistics

164


Exports

FIGURE 5 Contribution to exports by sector, balance of payments basis Australia Proportion of merchandise exports 2015–16 Other merchandise 17%

Rural a 22%

Other merchandise 18%

Rural a 16%


Rural a 16%


Rural a 16%

Other merchandise 15% Mineral resources 70%

Rural a 13%

Services 18%

Mineral resources 53%

Rural a 13%

Services 16%


Rural a 13%



2011–12

Services 20%




2012–13

Rural a 15%



2013–14

Services 20% Other merchandise 12%


2014–15

Proportion of exports of goods and services

Rural a 15%

Services 17% Other merchandise 13%


Rural a 12% Mineral resources 58%

a ABARES rural balance of payments adjusted to include farm, fisheries and forestry products classified as other merchandise by Australian Bureau of Statistics. Sources: ABARES; Australian Bureau of Statistics


165

Sectors

STATISTICS

TABLE 4 Volume of production indexes 4 Volume Australia of production indexesAustralia Commodity Farm Grains and oilseeds Total crops Livestock slaughterings Total livestock Total farm sector Forestry a Hardwood Softwood Total forestry

unit

2011–12

2012–13

2013–14

2014–15

2015–16 s

2016–17 f

index

158.4

138.4

144.9

138.8

137.3

162.0

index

135.0

133.2

131.9

125.0

127.4

143.0

index

110.2

116.1

127.7

137.0

126.9

118.9

index

100.9

104.7

111.4

118.1

111.1

105.4

index

118.6

119.6

122.3

122.3

119.5

122.8

index

94.1

89.0

107.5

121.8

123.0

124.3

index

126.6

123.0

130.4

136.2

136.8

137.6

index 111.1 106.7 119.4 129.3 130.2 131.2 a Volume of logs harvested excluding firewood. f ABARES forecast. s ABARES estimate. Note: ABARE revised the method for calculating production indexes in October 1999. The indexes for the different groups of commodities are calculated on a chained weight basis using Fisher’s ideal index with a reference year of 1997–98 = 100. Sources: ABARES; Australian Bureau of Statistics STATISTICS

TABLE 5 Industry grossvalue value added added ababAustralia 5 Industry Australia gross Industry Agriculture, forestry and fishing Agriculture Forestry and fishing Total Mining Manufacturing Food, beverage and alcohol Textile, clothing, footwear and leather Wood and paper products Printing, publishing and recorded media Petroleum, coal, chemical products Non-metallic mineral products Metal products Machinery and equipment Total manufacturing Building and construction Electricity, gas and water supply Taxes less subsidies on products Statistical discrepancy Gross domestic product

unit

2010–11

2011–12

2012–13

2013–14

2014–15

2015–16

$m

30 243

30 595

30 372

30 605

30 119

29 471

$m

4 840

4 984

5 010

5 038

5 341

5 160

$m

35 082

35 579

35 382

35 644

35 461

34 633

$m

101 790

109 456

119 067

130 420

138 863

148 995

$m

25 596

26 182

26 635

26 627

26 315

25 762

$m

5 052

4 851

4 794

4 939

4 937

4 938

$m

6 890

6 321

6 317

6 420

6 741

6 748

$m

3 985

3 582

3 542

3 340

3 090

3 023

$m

19 313

19 659

18 577

18 337

17 869

17 488

$m

6 572

6 232

5 954

6 012

6 513

6 520

$m

17 133

17 490

16 000

16 339

15 817

14 751 18 424

$m

21 272

22 199

21 210

19 793

19 039

$m

105 889

106 588

103 011

101 807

100 318

97 655

$m

106 820

117 640

120 167

125 511

125 841

129 162

$m

43 657

43 921

44 316

43 237

43 834

44 758

$m

102 161

103 990

105 300

105 266

105 328

106 475

$m

1

0

–1

0

443

416

$m 1 456 208 1 509 109 1 545 932 1 584 578 1 621 349 1 668 712 a Chain volume measures, reference year is 2013–14. b ANZSIC 2006. Note: Zero is used to denote nil or less than $0.5 million. Source: Australian Bureau of Statistics, Australian national accounts: national income, expenditure and product, cat. no. 5206.0, Canberra

166


Employment, banks

STATISTICS

TABLE 6 Employment ab Australia 6 Employment ab Australia Industry Agriculture, forestry and fishing Horticulture c Sheep, beef cattle and grain Other crop growing Dairy cattle Poultry Other livestock d Other agriculture nfd Total agriculture Forestry and logging Forestry support services Aquaculture Fishing Other agriculture, forestry and fishing Hunting and trapping Fishing hunting and trapping nfd Agriculture and fishing support services e Total agriculture, forestry and fishing Manufacturing Food product Beverage and tobacco Wood product Pulp, paper and converted paper product Total manufacturing Total employment

unit

2010–11

2011–12

2012–13

2013–14

2014–15

2015–16

59 133 10 27 10 12 45 294 5 3 4 6 3 1 1 20 337

57 129 9 22 10 10 39 277 8 3 4 6 2 1 1 20 321

57 107 14 20 9 11 44 261 6 3 3 5 3 0 1 19 301

63 107 6 26 4 9 55 270 6 3 5 3 2 0 0 22 311

51 116 5 21 6 17 59 275 5 3 7 6 2 1 1 18 318

67 94 3 30 13 14 62 282 6 3 5 5 2 na 1 17 322

’000 ’000 ’000 ’000 ’000 ’000 ’000 ’000 ’000 ’000 ’000 ’000 ’000 ’000 ’000 ’000 ’000

195 186 197 190 197 194 ’000 25 33 26 26 31 34 ’000 36 38 37 48 43 42 ’000 19 15 15 14 13 13 ’000 970 938 934 926 913 877 ’000 11 111 11 247 11 381 11 448 11 652 11 881 ’000 a Average employment over four quarters. b ANZSIC 2006. c Includes nursery, floriculture, vegetable, fruit and tree nut growing. d Includes deer farming. e Includes agriculture, forestry and fishing support services not further defined. na Not available. nfd Not further defined. Notes: Australian Bureau of Statistics advises caution using employment statistics at the ANZSIC subdivision and group levels because estimates may be subject to sampling variability and standard errors too high for most practical purposes. Zero is used to denote nil or less than 500 persons. Source: Australian Bureau of Statistics, Labour force, Australia, cat. no. 6291.0.55.003, Canberra

STATISTICS

TABLE All banks lendingtotobusiness business a a Australia 7 All7banks Australia lending Industry Agriculture, forestry and fishing Mining Manufacturing Construction Wholesale and retail trade, transport and storage Finance and insurance Other Total

unit $b

Mar-15 63.0

Jun-15 65.0

Sep-15 64.4

Dec-15 63.3

Mar-16 64.3

Jun-16 66.9

$b

36.5

38.2

42.1

38.4

34.6

34.6

$b

43.1

46.9

47.8

46.8

45.5

44.8

$b

30.8

30.4

30.3

31.2

31.7

32.0

$b

109.8

109.1

114.4

113.0

114.1

115.1

$b

132.7

136.9

152.3

164.9

164.2

172.4

$b

390.1

394.7

405.6

414.8

426.9

431.5

872.4

881.3

897.4

$b 806.1 821.1 856.8 a Includes variable and fixed interest rate loans outstanding plus bank bills outstanding. Source: Reserve Bank of Australia, Bank lending to business–selected statistics, Bulletin Statistical Table D8


167

Farm debt, world prices STATISTICS

TABLE 8 Rural indebtednesstotofinancial financial institutions Australia 8 Rural Australia indebtedness institutions Institution Rural debt All banks a Other government agencies b

unit

2010–11

2011–12

2012–13

2013–14

2014–15

2015–16

$m

60 184

59 749

61 778

62 402

64 932

na

$m

1 871

2 076

2 236

2 364

771

na

Pastoral and other finance companies Large finance institutional debt c Deposits Farm management deposits

$m

2 010

1 801

1 569

1 486

1 464

na

$m

64 065

63 626

65 583

66 251

67 167

na

$m 3 216 3 532 3 721 4 139 4 604 5 068 a Derived from all banks lending to agriculture, fishing and forestry. b Includes the government agency business of state banks and advances made under War Service Land Settlement. c Sum of rural debt. na Not available. Sources: ABARES; Department of Agriculture and Water Resources, Canberra; Reserve Bank of Australia, Estimated rural debt to specified lenders, Bulletin Statistical Table D9

STATISTICS

9 Annual world prices of selected commodities TABLE 9 Annual worldindicator indicator prices of selected commodities Commodity Crops Wheat a Corn b Rice c Soybeans d Cotton e Sugar g Livestock products Beef h Wool i Butter j Cheese j Skim milk powder j

unit

US$/t

2011–12

2012–13

2013–14

2014–15

2015–16 s

2016–17 f

299

348

317

266

211

180

US$/t

281

312

219

174

168

150

US$/t

590

565

429

419

386

415

US$/t

506

597

547

418

373

395

USc/lb

100

88

91

71

70

75

USc/lb

23

18

17

13

16

19

USc/kg

434

440

440

551

451

425

Ac/kg

1 203

1 035

1 070

1 102

1 253

1 300

US$/t

3 883

3 727

4 498

3 483

3 146

3 100

US$/t

4 258

4 150

4 817

3 921

3 200

3 150

US$/t 3 233 3 731 4 513 2 592 1 975 1 950 a US no. 2 hard red winter wheat, fob Gulf. b US no. 2 yellow corn, fob Gulf. c USDA nominal quote for Thai white rice, 100 per cent, Grade B, fob, Bangkok (August–July basis). d US no. 2 soybeans, fob Gulf. e Cotlook ‘A’ index. f ABARES forecast. g Nearby futures price (October–September basis), Intercontinental Exchange, New York no. 11 contract. h Cow 90CL US cif price. i Australian Wool Exchange eastern market indicator. j Average of traded prices (excluding subsidised sales). s ABARES estimate. Sources: ABARES; Australian Bureau of Statistics; Australian Wool Exchange; Cotlook Ltd; Dairy Australia; Intercontinental Exchange; International Grains Council; Meat & Livestock Australia; New York Board of Trade; United States Department of Agriculture

168


Gross unit values

STATISTICS

10 Gross unit farm products a TABLE 10 Gross unitvalues values ofof farm products a Commodity Crops b Grains Barley Corn (maize) Grain sorghum Oats Rice Triticale Wheat Oilseeds Canola Soybeans c Sunflower seed c Pulses Chickpeas Field peas Lupins Industrial crops Cotton lint d Sugar cane (cut for crushing) Wine grapes Livestock Beef cattle Lambs Pigs Poultry Livestock products Wool Milk Eggs

unit

2011–12

2012–13

2013–14

2014–15

2015–16 s

2016–17 f

$/t

210

276

267

280

248

206

$/t

251

238

297

330

323

300

$/t

189

252

300

301

245

197

$/t

202

236

213

250

250

224

$/t

270

260

340

395

400

332

$/t

176

249

258

256

237

200

$/t

227

313

316

300

290

245

$/t

513

548

555

503

549

563

$/t

510

468

538

588

560

549

$/t

551

570

660

756

652

619

$/t

457

394

352

567

652

456

$/t

295

406

419

413

460

391

$/t

232

340

345

292

290

232

c/kg

225

199

229

199

226

240

$/t

40

37

40

40

42

50

$/t

458

499

441

476

485

495

c/kg

337

318

304

383

508

554

c/kg

509

371

410

474

520

595

c/kg

266

262

300

312

358

372

c/kg

194

205

209

226

230

226

c/kg

676

579

603

626

713

739

c/L

42

40

50

49

43

42

c/dozen 196 195 221 229 223 225 a Average gross unit value across all grades in principal markets, unless otherwise indicated. Includes the cost of containers, commission and other expenses incurred in getting the commodities to their principal markets. These expenses are significant. b Average unit gross value relates to returns received from crops harvested in that year, regardless of when sales take place, unless otherwise indicated. c Price paid by crusher. d Australian base price for sales in the financial year indicated. f ABARES forecast. s ABARES estimate. Note: Prices used in these calculations exclude GST. Sources: ABARES; Australian Bureau of Statistics


169

World STATISTICS

11 World production, consumption, stocks andfor trade for selected commodities a TABLE 11 World production, consumption, stocks and trade selected commodities a Commodity Grains Wheat production consumption closing stocks exports bc Coarse grains production consumption closing stocks exports b Rice production d consumption d closing stocks d exports be Oilseeds and vegetable oils Oilseeds production consumption closing stocks exports Vegetable oils production consumption closing stocks exports Vegetable protein meals production consumption closing stocks exports Industrial crops Cotton production consumption closing stocks exports Sugar production consumption closing stocks exports

unit

2011–12

2012–13

2013–14

2014–15

2015–16 s

2016–17 f

Mt

695

655

714

730

736

743

Mt

697

676

696

717

722

729

Mt

192

171

189

201

217

231

Mt

145

141

156

153

167

164

Mt

1 157

1 136

1 281

1 305

1 248

1 305

Mt

1 138

1 141

1 226

1 255

1 263

1 294

Mt

162

164

212

245

243

253

Mt

147

123

164

186

162

172

Mt

467

473

478

479

472

483

Mt

459

469

479

476

477

478

Mt

111

114

112

116

110

115

Mt

39

38

42

42

40

40

Mt

447

475

504

537

519

538

Mt

468

470

493

517

528

542

Mt

67

68

78

93

84

79

Mt

111

120

133

147

153

157

Mt

158

162

172

177

180

186

Mt

153

159

168

172

179

186

Mt

21

20

21

20

21

21

Mt

65

68

70

77

77

80

Mt

267

269

282

300

309

320

Mt

264

265

279

294

306

318

Mt

13

13

14

15

18

19

Mt

80

79

82

85

89

93

Mt

28

27

26

26

21

22

Mt

23

23

24

24

24

24

Mt

16

20

22

24

22

20

Mt

10

10

9

8

8

7

Mt

175

183

182

182

174

177

Mt

169

176

176

179

180

184

Mt

65

71

78

80

74

67

Mt

54

61

58

56

58

60 continued ...

170


World STATISTICS

TABLE 11 World production, consumption,stocks stocks and and trade commodities a continued 11 World production, consumption, tradefor forselected selected commodities a continued Commodity Livestock products Meat egh production consumption closing stocks exports b Wool i production consumption ej closing stocks k exports l Butter eh production consumption closing stocks exports Skim milk powder ehm production consumption closing stocks exports

unit

2011–12

2012–13

2013–14

2014–15

2015–16 s

2016–17 f

Mt

268

272

276

273

276

277

Mt

263

268

271

268

271

276

Mt

3.0

3.0

3.2

2.8

2.7

2.8

Mt

27

28

29

28

29

31

kt

1 135

1 163

1 163

1 158

1 155

1 154

kt

1 125

1 162

1 154

1 158

1 155

1 154

kt

24

25

35

35

30

30

kt

447

576

553

551

549

547

kt

9 027

9 249

9 634

9 880

10 073

na

kt

8 490

8 716

9 020

9 180

9 404

na

kt

247

231

254

328

346

na

kt

816

868

920

908

965

na

kt

4 059

4 051

4 512

4 712

4 786

na

kt

3 449

3 488

3 604

3 778

3 781

na

kt

431

383

503

558

748

na

kt 1 702 1 759 1 966 2 059 1 988 na a Some figures are not based on precise or complete analyses. b Excludes intra-EU trade. c Includes the grain equivalent of wheat flour. d Milled equivalent. e On a calendar year basis, e.g. 2011–12 = 2012. f ABARES forecast. g Beef and veal, mutton, lamb, goat, pig and poultry meat. h Selected countries. i Clean equivalent. j Virgin wool at the spinning stage in 65 countries. k Held by marketing bodies and on-farm in five major exporting countries. l Five major exporting countries.m Non-fat dry milk. s ABARES estimate. na Not available. Sources: ABARES; Argentine Wool Federation; Australian Bureau of Statistics; Capewools South Africa; Commonwealth Secretariat; Department of Agriculture and Water Resources, Canberra; Economic Commission for Europe; Fearnleys; Food and Agriculture Organization; International Grains Council; International Sugar Organization; International Wool Textile Organisation; Ministry of Agriculture, Forestry and Fisheries (Japan); New Zealand Wool Board; Poimena Analysis, Melbourne; United States Department of Agriculture; Uruguayan Association of Wool Exporters


171

Australian production STATISTICS

TABLE 12 Agricultural, fisheriesand andforestry forestry commodity Australia 12 Agricultural, Australia fisheries commodityproduction production unit Commodity Crops Grains kt Barley kt Corn (maize) kt Grain sorghum kt Oats kt Rice kt Triticale kt Wheat Oilseeds kt Canola kt Cottonseed kt Soybeans kt Sunflower seed kt Other oilseeds a Pulses kt Chickpeas kt Field peas kt Lupins Total grains, oilseeds and pulses b kt Industrial crops kt Cotton lint Sugar cane (cut for crushing) kt Sugar (tonnes actual) kt Wine grapes kt Horticulture Fruit Apples kt Bananas kt Oranges kt Vegetables kt Carrots kt Onions kt Potatoes kt Tomatoes Livestock Slaughterings ’000 Cattle and calves ’000 Lambs ’000 Sheep ’000 Pigs million Chickens Live exports Cattle exported live c ’000 Sheep exported live d ’000 Meat produced e kt Beef and veal kt Lamb kt Mutton kt Chicken meat kt Pig meat kt Total meat produced

172

2011–12

2012–13

2013–14

2014–15

2015–16 s

2016–17 f

8 221

7 472

9 174

8 646

8 593

9 496

451

506

390

495

439

483

2 239

2 229

1 282

2 209

2 037

1 932

1 262

1 121

1 255

1 198

1 308

1 632

919

1 161

819

690

250

920

285

171

126

143

195

181

29 905

22 855

25 303

23 743

24 193

28 079

3 427

4 142

3 832

3 540

2 944

3 632

1 732

1 439

1 252

746

819

1 237

52

70

32

37

40

54

28

38

18

30

25

34

39

42

25

21

24

28

673

813

629

555

1 013

1 234

342

320

342

290

205

317

982

459

626

549

607

705

51 164

43 439

45 724

43 459

43 348

50 905

1 225

1 017

885

528

579

875

27 943

30 001

30 521

32 360

34 828

35 500

3 683

4 248

4 364

4 572

4 920

5 100

1 582

1 642

1 438

1 607

1 701

1 660

289

289

267

295

300

300

286

330

254

252

350

330

390

401

350

338

420

420

319

272

243

261

305

310

347

302

256

315

320

340

1 288

1 273

1 171

1 155

1 155

1 155

372

456

326

389

395

395

7 873

8 457

9 473

10 103

8 796

7 500

18 879

21 122

21 899

22 867

23 131

22 858

5 175

8 192

10 066

9 022

8 127

6 500

4 733

4 745

4 778

4 924

5 000

5 075

551

563

580

591

623

640

683

634

1 133

1 379

1 261

1 103

2 562

2 000

2 020

2 180

1 859

1 900

2 115

2 245

2 464

2 662

2 344

2 122

419

457

474

507

516

511

120

183

228

214

196

156

1 030

1 046

1 084

1 116

1 154

1 200

351

356

360

371

378

385

4 034

4 287

4 610

4 869

4 588

4 374 continued ...


Australian production STATISTICS

TABLE 12 Agricultural,fisheries fisheries and forestry commodity production Australia continued 12 Agricultural, and forestry commodity production Australia continued Commodity Livestock products Wool g Milk h Eggs Butter i Cheese Casein Skim milk powder Whole milk powder Buttermilk powder Forestry products j Hardwood Softwood Total forestry products Fisheries k Tuna Salmonids l Other fish Prawns Rock lobster m Abalone Scallops Oysters Other molluscs Other crustaceans

unit

2011–12

2012–13

2013–14

2014–15

2015–16 s

2016–17 f

kt

404

427

420

427

404

400

ML

9 574

9 317

9 372

9 732

9 539

9 320

million dozen

298

335

322

318

330

349

kt

120

118

116

119

121

119

kt

347

338

311

344

352

355

kt

5

5

4

0

0

1

kt

230

224

211

242

255

252

kt

140

109

126

97

90

85

kt

11

11

11

12

11

11

’000 m3

9 548

9 029

10 899

12 356

12 476

12 603

’000 m3

13 949

13 551

14 367

14 999

15 074

15 156

’000 m3

23 497

22 580

25 266

27 355

27 549

27 759

kt

10.1

10.6

10.7

12.4

13.5

12.8

kt

44.2

43.0

41.8

48.6

55.0

60.4

kt

113.1

106.5

101.3

101.1

104.2

103.8

kt

22.5

21.3

25.0

25.1

26.1

26.3

kt

9.1

10.3

10.4

10.2

10.1

10.3

kt

5.1

5.0

4.7

4.6

4.8

5.0

kt

3.6

6.8

4.4

4.3

5.6

6.6

kt

12.6

12.4

11.6

12.7

10.9

10.3

kt

7.9

8.0

5.9

7.1

7.3

7.1

kt 5.5 5.3 5.5 5.6 5.3 5.5 a Linseed, safflower seed and peanuts. b Total includes components not listed separately. c Includes all bovine for feeder/slaughter, breeding and dairy purposes. d Includes animals for breeding. e In carcase weight and includes carcase equivalent of canned meats. f ABARES forecast. g Greasy equivalent of shorn wool (includes crutching), dead and fellmongered wool and wool exported on skins. h Includes the whole milk equivalent of farm cream intake. i Includes the butter equivalent of butter oil, butter concentrate, ghee and dry butterfat. j Excludes logs harvested for firewood. k Liveweight. l Includes salmon and trout production. m Includes Queensland bugs. s ABARES estimate. Note: Zero is used to denote nil or less than 500 tonnes. Sources: ABARES; Australian Bureau of Statistics; Australian Fisheries Management Authority; Dairy Australia; Department of Fisheries, Western Australia; Department of Primary Industries, Parks, Water and Environment, Tasmania; Fisheries Queensland, Department of Agriculture, Fisheries and Forestry; Fisheries Victoria, Department of Primary Industries; Industry & Investment New South Wales; Northern Territory Department of Regional Development, Primary Industry, Fisheries and Resources; Primary Industries and Regions, Fisheries, South Australia; Pulse Australia; Raw Cotton Marketing Advisory Committee; South Australian Research and Development Institute; state and territory forest services; various Australian forestry industries


173

Value of production STATISTICS

TABLE 13 Gross valueofoffarm, farm, fisheries andand forestry production Australia 13 Gross value fisheries forestry production Commodity unit Crops Grains $m Barley $m Corn (maize) $m Grain sorghum $m Oats $m Rice $m Triticale $m Wheat $m Other cereals Oilseeds $m Canola $m Soybeans $m Sunflower seed $m Other oilseeds a Pulses $m Chickpeas $m Field peas $m Lupins $m Other pulses Total grains, oilseeds and pulses b $m Industrial crops $m Cotton lint and cottonseed c $m Sugar cane (cut for crushing) $m Wine grapes $m Total industrial crops Horticulture $m Table and dried grapes $m Fruit and nuts (excl. grapes) $m Vegetables $m Nursery, cut flowers and turf $m Other horticulture nei d $m Total horticulture $m Other crops nei e $m Total crops

174

Australia

2011–12

2012–13

2013–14

2014–15

2015–16 s

2016–17 f

1 723

2 063

2 453

2 417

2 132

1 961

113

120

116

163

142

145

423

562

384

666

499

381

255

265

268

300

327

366

248

302

279

273

100

306

50

43

32

37

46

36

6 775

7 154

7 998

7 124

7 025

6 880

105

110

115

90

100

90

1 759

2 270

2 129

1 782

1 617

2 045

27

33

17

22

23

30

16

22

12

23

16

21

38

33

26

26

19

20

308

320

222

315

660

563

101

130

143

120

94

124

228

156

216

160

176

164

297

347

391

425

534

620

12 466

13 927

14 800

13 943

13 510

13 749

2 954

2 174

2 002

1 200

1 306

2 138

1 128

1 118

1 226

1 304

1 459

1 767

725

858

672

765

780

800

4 807

4 150

3 900

3 268

3 545

4 705

316

303

331

343

370

385

3 050

3 662

3 187

3 512

3 690

3 815

3 339

3 770

3 510

3 350

3 500

3 600

1 272

1 285

1 247

1 252

1 340

1 475

358

251

233

232

235

240

8 334

9 271

8 507

8 689

9 135

9 515

973

1 245

1 490

1 538

1 225

1 250

26 579

28 592

28 697

27 438

27 415

29 219 continued ...


Value of production STATISTICS

TABLE 13 Gross value farm,and fisheries and forestry production Australia continued 13 Gross value of of farm fisheries production Australia continued Commodity Livestock Slaughterings Cattle and calves gh Sheep h Lambs h Pigs h Poultry Live exports Cattle exported live i Sheep exported live j Total livestock k Livestock products Wool l Milk m Eggs Honey and beeswax Total livestock products Total farm Forestry products n Hardwood Softwood Total forestry products Fisheries products o Tuna Salmonids p Other fish q Prawns Rock lobster r Abalone Scallops Oysters Pearls t Other molluscs Other crustaceans Total fisheries products u

unit

2011–12

2012–13

2013–14

2014–15

2015–16 s

2016–17 f

11 753

$m

7 134

7 136

7 495

10 188

11 916

$m

419

329

513

650

580

562

$m

2 136

1 696

1 943

2 401

2 686

3 040

$m

934

934

1 081

1 156

1 353

1 434

$m

2 078

2 214

2 344

2 610

2 747

2 789

$m

651

589

1 049

1 356

1 557

1 464

$m

345

194

185

245

228

234

$m

13 797

13 212

14 765

18 806

21 278

21 412

$m

2 734

2 472

2 530

2 676

2 881

2 957

$m

3 986

3 687

4 729

4 722

4 102

3 914

$m

583

653

710

729

738

786

$m

79

88

88

101

110

102

$m

7 383

6 900

8 057

8 227

7 831

7 760

$m

47 760

48 705

51 519

54 471

56 524

58 390

$m

745

680

822

969

989

1 009

$m

879

836

1 018

1 066

1 081

1 098

$m

1 624

1 516

1 840

2 034

2 070

2 107

$m

172

176

147

161

166

160

$m

514

518

543

631

702

774

$m

456

446

403

434

456

457

$m

266

278

339

358

404

409

$m

394

439

586

665

750

792

$m

170

178

164

164

175

182

$m

8

15

11

11

14

17

$m

90

94

91

92

86

84

$m

102

79

61

68

90

93

$m

33

64

49

65

44

45

$m

67

64

64

66

67

67

$m 2 305 2 385 2 470 2 759 2 955 3 079 a Linseed, safflower seed and peanuts. b Total includes components not listed separately. c Value delivered to gin. d Includes miscellaneous products: aromatic and medicinal foliage, vegetables for seeds and other products. e Mainly fodder crops. f ABARES forecast. g Includes dairy cattle slaughtered. h Excludes skin and hide values. i Includes all bovine for feeder/slaughter, breeding and dairy purposes j Includes animals exported for breeding purposes. k Total livestock slaughterings includes livestock disposals. l Shorn, dead and fellmongered wool and wool exported on skins. m Milk intake by factories and valued at the farm gate. n Excludes logs harvested for firewood. o Value to fishers of product landed in Australia. p Includes salmon and trout production. q Includes an estimated value of aquaculture. r Includes Queensland bugs. s ABARES estimate. t Northern Territory aquaculture production not included in 2012–13 due to confidentiality. u Total may not equal the sum of the products due to values not elsewhere included not being present in table. nei Not elsewhere included. Note: The gross value of production is the value placed on recorded production at the wholesale prices realised in the marketplace. The point of measurement can vary between commodities. Generally the marketplace is the metropolitan market in each state and territory. However, where commodities are consumed locally or where they become raw material for a secondary industry, these points are presumed to be the marketplace. Prices used in these calculations exclude GST. Sources: ABARES; Australian Bureau of Statistics


175

Areas, stock STATISTICS

TABLE 14 Crop forestryareas areas and and livestock numbers Australia 14 Crop andand forestry livestock numbers Australia Commodity Crop areas Grains Barley Corn (maize) Grain sorghum Oats Rice Triticale Wheat Oilseeds Canola Soybeans Sunflower seed Other oilseeds a Pulses Chickpeas Field peas Lupins Total grains, oilseeds and pulses b Industrial crops Cotton Sugar cane c Wine grapes d Livestock numbers e Beef cattle Dairy cattle Milking herd g Total cattle Sheep Pigs Sows Forestry plantation area Hardwood Softwood Total plantation area h

unit

2011–12

2012–13

2013–14

2014–15

2015–16 s

2016–17 f

’000 ha

3 718

3 644

3 814

4 078

4 105

4 000

’000 ha

70

78

52

60

67

69

’000 ha

659

647

532

732

681

631

’000 ha

731

729

715

854

832

909

’000 ha

103

113

75

70

23

90

’000 ha

145

99

80

82

117

104

’000 ha

13 902

12 979

12 613

12 384

12 793

12 918

’000 ha

2 461

3 272

2 721

2 897

2 357

2 452

’000 ha

33

48

25

20

21

28

’000 ha

25

33

17

25

23

29

’000 ha

26

32

21

13

15

15

’000 ha

456

574

508

425

661

822

’000 ha

249

281

245

237

238

242

’000 ha

689

450

387

443

490

517

’000 ha

24 275

23 856

22 583

22 934

23 317

23 963

’000 ha

600

443

392

197

270

475

’000 ha

368

349

356

378

381

393

’000 ha

145

133

127

135

137

138

million

25.69

26.46

26.30

24.60

23.29

24.09

million

2.73

2.83

2.81

2.81

2.79

2.75

million

1.70

1.69

1.65

1.69

1.70

1.66

million

28.42

29.29

29.10

27.41

26.08

26.84

million

74.72

75.55

72.61

70.91

68.37

71.50

million

2.14

2.10

2.31

2.27

2.23

2.20

’000

267

260

266

270

275

280

’000 ha

977

976

963

928

na

na

’000 ha

1 024

1 024

1 024

1 035

na

na

’000 ha 2 013 2 013 2 000 1 973 na na a Linseed, safflower and peanuts. b Total includes components not listed separately. c Cut for crushing. d This figure is for grapes for wine only. e At 30 June. f ABARES forecast. g Cows in milk and dry. h Includes areas where plantation type is unknown. s ABARES estimate. na Not available. Sources: ABARES; Australian Bureau of Statistics; Pulse Australia

176


Yields

STATISTICS

15 Average yieldsAustralia Australia TABLE 15 Averagefarm farm yields Commodity Crops Grains Barley Corn (maize) Grain sorghum Oats Rice Triticale Wheat Oilseeds Canola Soybeans Sunflower seed Pulses Chickpeas Field peas Lupins Industrial crops Cotton (lint) Sugar cane (for crushing) Wine grapes Livestock products Wool a Whole milk

unit

2011–12

2012–13

2013–14

2014–15

2015–16 s

2016–17 f

t/ha

2.21

2.05

2.41

2.12

2.09

2.37

t/ha

6.47

6.49

7.45

8.30

6.54

6.97

t/ha

3.40

3.45

2.41

3.02

2.99

3.06

t/ha

1.73

1.54

1.76

1.40

1.57

1.80

t/ha

8.91

10.28

10.94

9.91

10.90

10.19

t/ha

1.97

1.73

1.57

1.76

1.67

1.73

t/ha

2.15

1.76

2.01

1.92

1.89

2.17

t/ha

1.39

1.27

1.41

1.22

1.25

1.48

t/ha

1.57

1.46

1.27

1.86

1.93

1.97

t/ha

1.14

1.16

1.05

1.20

1.10

1.16

t/ha

1.48

1.42

1.24

1.31

1.53

1.50

t/ha

1.38

1.14

1.40

1.23

0.86

1.31

t/ha

1.42

1.02

1.62

1.24

1.24

1.37

t/ha

2.04

2.30

2.26

2.68

2.14

1.84

t/ha

76

86

86

86

91

90

t/ha

10.9

12.3

11.3

11.9

12.4

12.0

kg/sheep

4.48

4.47

4.37

4.50

4.43

4.50

L/cow 5 631 5 518 a Shorn (including lambs). f ABARES forecast. s ABARES estimate. Sources: ABARES; Australian Bureau of Statistics; Pulse Australia

5 692

5 761

5 611

5 614


177

Export volumes STATISTICS

TABLE 16 Volumeofofagricultural agricultural and fisheries exports AustraliaAustralia 16 Volume and fisheries exports unit Commodity Farm Crops Grains Barley a kt Corn (maize) kt Grain sorghum kt Oats kt Rice kt Wheat b kt Oilseeds Canola kt Cottonseed kt Other oilseeds c kt Pulses Chickpeas kt Peas d kt Lupins kt Other pulses kt kt Total grains, oilseeds and pulses Industrial crops Raw cotton e kt Sugar kt Wine ML Meat and live animals Beef and veal g kt Live feeder/slaughter cattle h ’000 Live breeder cattle i ’000 Lamb g kt Live sheep j ’000 Mutton g kt Pig meat g kt Poultry meat g kt Wool Greasy ks kt Semi-processed kt (gr. eq.) Skins kt (gr. eq.) Total wool ks kt (gr. eq.) Dairy products Butter l kt Cheese kt Casein kt Skim milk powder kt Whole milk powder kt

2011–12

2012–13

2013–14

2014–15

2015–16 s

2016–17 f

6 568

5 165

7 124

6 208

5 499

6 935

68

134

83

58

41

86

1 112

1 291

701

1 205

1 075

826

163

241

213

284

230

376

537

584

544

461

321

150

23 026

21 265

18 336

16 571

15 779

18 403

2 323

3 488

3 194

2 445

1 946

2 697

654

754

464

167

147

214

6

10

14

6

10

13

653

852

562

674

1 141

1 083

248

208

155

179

143

165

316

416

274

270

206

250

775

691

795

597

485

525

36 448

35 100

32 458

29 124

27 023

31 722

994

1 305

1 036

681

531

691

2 572

3 004

3 052

3 675

3 946

4 051

737

717

717

745

727

730

948

1 014

1 184

1 349

1 167

1 025

579

513

1 006

1 295

1 126

993

105

121

127

83

135

110

174

201

226

242

242

239

2 562

2 000

2 020

2 180

1 859

1 900

89

144

183

169

148

121

29

26

27

27

27

27

38

32

37

36

29

30

301

316

295

325

305

305

37

34

35

41

35

35

67

86

97

92

86

82

405

437

428

459

426

422

49

54

49

44

34

32

161

174

151

159

172

177

4

4

3

0

0

0

141

147

143

186

181

178

102

87

94

69

57

57 continued ...

178


Export volumes STATISTICS

TABLE 16 Volumeofofagricultural agricultural and fisheries exports AustraliaAustralia continuedcontinued 16 Volume and fisheries exports unit Commodity Fisheries products kt Tuna kt Salmonids kt Other fish Prawns m Frozen kt Rock lobster Fresh, chilled, frozen or cooked kt Abalone kt Live, fresh or chilled kt Frozen or cooked kt Prepared or preserved Scallops n kt

2011–12

2012–13

2013–14

2014–15

2015–16 s

2016–17 f

8.9

8.9

11.0

12.1

13.8

12.3

5.8

2.6

1.8

5.0

8.0

8.5

6.5

5.5

4.9

5.8

19.8

7.3

5.3

3.9

7.0

6.4

6.6

6.6

6.9

7.8

8.0

8.2

8.0

8.4

1.6

1.4

1.5

1.3

1.4

1.4

0.8

0.7

0.7

0.8

0.7

0.8

0.8

0.7

0.5

0.5

0.5

0.6

0.4 0.4 0.5 0.3 0.4 0.6 a Includes the grain equivalent of malt. b Includes the grain equivalent of wheat flour. c Includes soybeans, linseed, sunflower seed, safflower seed and peanuts. Excludes meals and oils. d Includes field peas and cowpeas. e Excludes cotton waste and linters. f ABARES forecast. g In shipped weight. Fresh, chilled or frozen. h Includes buffalo. i Includes dairy cattle and buffalo. j Includes breeding stock. k Australian Bureau of Statistics recorded trade data adjusted for changes in stock levels held overseas. l Includes ghee, dry butterfat, butter concentrate and butter oil, and dairy spreads, all expressed as butter. m Excludes volume of other prawn products. n Includes crumbed scallops. s ABARES estimate. Note: Zero used to denote nil or less than 500 tonnes. Sources: ABARES; Australian Bureau of Statistics; Department of Agriculture and Water Resources, Canberra; Department of Foreign Affairs and Trade; United Nations Commodity Trade Statistics Database (UN Comtrade)


179

Export values STATISTICS

TABLE 17 Value agricultural and fisheries exports (fob)exports Australia (fob) 17 Value of of agricultural fisheries and forestry

180

Commodity Farm Crops Grains Barley a Corn (maize) Grain sorghum Oats Rice Wheat b Oilseeds Canola Cottonseed Other oilseeds c Pulses Chickpeas Peas d Lupins Other pulses Total grains, oilseeds and pulses Industrial crops Raw cotton e Sugar Wine Total industrial crops Horticulture Fruit Tree nuts Vegetables Nursery Other horticulture g Total horticulture Other crops and crop products Total crops Meat and live animals Beef and veal Live feeder/slaughter cattle h Live breeder cattle i Lamb Live sheep j Mutton Pig meat Poultry meat Total meat and live animals Wool Greasy k

unit

2011–12

2012–13

2013–14

2014–15

$m

1 875

1 626

2 199

$m

24

50

36

$m

299

364

Semi-processed Skins Total wool k

Australia

2015–16 s

2016–17 f

2 137

1 791

1 919

30

22

32

253

424

363

186 135

$m

47

83

80

106

104

$m

427

459

490

506

416

205

$m

6 378

6 776

6 103

5 547

5 120

5 115

$m

1 344

2 094

1 929

1 349

1 097

1 565

$m

195

219

168

75

69

103

$m

10

13

18

14

19

37

$m

384

533

297

414

1 014

693

$m

93

89

67

91

86

81

$m

86

143

116

119

103

113

$m

436

418

539

541

530

218

$m

11 598

12 869

12 296

11 352

10 734

10 400

$m

2 736

2 695

2 355

1 546

1 257

1 754

$m

1 556

1 437

1 384

1 643

1 893

2 299

$m

1 910

1 867

1 847

1 983

2 185

2 205

$m

6 203

5 999

5 587

5 172

5 335

6 258

$m

505

634

724

755

1 072

1 200

$m

240

348

610

734

930

960

$m

276

260

270

293

344

380

$m

15

12

11

12

15

18

$m

258

224

250

266

307

325

$m

1 294

1 478

1 865

2 060

2 668

2 883

$m

2 125

2 240

2 603

3 033

3 874

3 393

$m

21 219

22 585

22 351

21 617

22 612

22 934

$m

4 467

4 871

6 265

8 858

8 284

7 250

$m

412

339

795

1 163

1 299

1 245

$m

239

251

255

192

258

219

$m

1 060

1 086

1 468

1 695

1 640

1 692

$m

345

194

185

245

228

234

$m

362

480

758

778

663

549

$m

100

81

85

102

119

124

$m

45

43

50

56

53

54

$m

7 030

7 344

9 859

13 090

12 544

11 367

$m

2 448

2 261

2 212

2 497

2 591

2 768

$m

242

209

238

282

281

292

$m

433

398

426

375

412

408

$m

3 123

2 869

2 877

3 154

3 284

3 467 continued ...


Export values STATISTICS

TABLE 17 Value of agriculturaland and fisheries fisheries exports (fob) Australia continued 17 Value of agricultural exports (fob) Australia continued Commodity Dairy products Butter Cheese Casein Skim milk powder Whole milk powder Other dairy products l Total dairy products Other livestock and livestock products Total livestock exports Total farm exports Fisheries products Tuna Salmonids Other fish Prawns m Frozen Rock lobster Fresh, chilled, frozen or cooked Abalone Live, fresh or chilled Frozen or cooked Prepared or preserved Scallops n Pearls Other fisheries products Total fisheries products

unit

2011–12

2012–13

2013–14

2014–15

2015–16 s

2016–17 f

$m

201

180

243

198

158

151

$m

751

784

765

823

861

839

$m

48

46

42

10

10

9

$m

474

467

708

682

516

488

$m

378

312

532

294

257

191

$m

877

942

904

868

1 202

1 300

$m

2 730

2 731

3 194

2 876

3 005

2 978

$m

2 287

2 512

2 876

3 192

3 071

3 206

$m

15 170

15 456

18 806

22 312

21 903

21 017

$m

36 389

38 041

41 157

43 928

44 515

43 952

$m

163

163

136

151

163

159

$m

42

25

17

48

80

88

$m

85

70

72

72

111

77

$m

65

51

99

93

113

115

$m

387

447

590

691

693

795

$m

81

80

74

77

84

89

$m

57

55

56

60

59

64

$m

59

52

41

36

39

46

$m

15

11

14

11

12

20

$m

207

152

144

111

96

96

$m

66

70

61

89

91

113

$m 1 227 1 175 1 304 1 440 1 542 1 661 a Includes malt. b Includes wheat flour. c Includes soybeans, linseed, sunflower seed, safflower seed and peanuts. Excludes meals and oils. d Field peas and cowpeas. e Excludes cotton waste and linters. f ABARES forecast. g Other horticulture includes mainly coffee, tea, spices, essential oils and other miscellaneous horticultural products. h Includes buffalo. i Includes dairy cattle and buffalo. j Includes breeding stock. k On a balance of payments basis. Australian Bureau of Statistics recorded trade data adjusted for changes in stock levels held overseas. l Other dairy products include food preparations identified by industry as containing a high proportion of dairy products. m Other prawn products included in other fisheries products. n Includes crumbed scallops. s ABARES estimate. Sources: ABARES; Australian Bureau of Statistics; Department of Agriculture and Water Resources, Canberra; United Nations Commodity Trade Statistics Database (UN Comtrade)


181

Agricultural exports STATISTICS

18 Agricultural Australia exports (fob) Australia TABLE 18 Agricultural exportstotoChina China (fob) Commodity Farm Crops Grains Barley a Grain sorghum Wheat b Other grains c Oilseeds Pulses Total grains, oilseeds and pulses Industrial crops Raw cotton d Sugar Wine Total industrial crops Horticulture Fruit Tree nuts Vegetables Nursery Other horticulture e Total horticulture Other crops and crop products Total crops Meat and live animals Beef and veal Live breeder cattle g Lamb Mutton Other meat and live animals h Total meat and live animals i Wool Greasy Semi-processed Skins Total wool Dairy products Butter Cheese Casein Skim milk powder Whole milk powder Other dairy products Total dairy products Other livestock exports Total livestock and livestock products Total agricultural exports

unit

2010–11

2011–12

2012–13

2013–14

2014–15

2015–16 s

$m $m $m $m $m $m $m

311 14 144 0 45 3 516

454 4 457 1 116 4 1 036

494 98 357 6 344 1 1 300

1 080 215 484 0 627 1 2 407

1 464 410 323 0 317 17 2 531

865 350 426 1 14 20 1 676

$m $m $m $m

551 31 178 760

1 812 21 209 2 041

1 849 2 241 2 093

1 520 42 202 1 764

851 126 269 1 246

633 195 416 1 244

$m $m $m $m $m $m $m $m

8 6 2 1 3 20 8 1 305

10 11 3 1 4 29 22 3 128

28 36 3 0 4 71 30 3 493

37 37 3 0 4 82 31 4 284

64 39 4 1 5 113 46 3 936

187 63 4 1 8 263 23 3 206

$m $m $m $m $m $m

28 102 63 12 4 209

40 133 73 14 0 260

406 125 108 102 1 741

785 180 184 209 19 1 378

736 149 152 137 37 1 212

854 208 122 64 43 1 291

$m $m $m $m

1 864 21 351 2 235

1 925 24 369 2 319

1 844 18 337 2 200

1 713 18 378 2 109

1 986 32 336 2 354

2 017 15 385 2 417

$m $m $m $m $m $m $m $m $m

4 30 1 37 52 35 159 558 3 161

7 37 1 50 11 58 164 614 3 357

6 44 1 35 56 68 210 635 3 786

7 74 1 108 159 71 421 778 4 685

11 72 0 59 20 107 270 833 4 669

11 85 0 70 82 126 375 654 4 736

$m 4 466 6 485 7 280 8 969 8 604 7 942 a Includes malt. b Includes wheat flour. c Includes grains not separately listed. d Excludes cotton waste and linters. e Other horticulture includes mainly coffee, tea, spices, essential oils and other miscellaneous horticultural products. g Includes dairy cattle and buffalo. h Includes meat and other live animals not listed separately. i Excludes value of live feeder slaughter for October 2015. s ABARES estimate. Note: Zero is used to denote nil or less than $0.5 million. Sources: ABARES; Australian Bureau of Statistics; Department of Agriculture and Water Resources, Canberra

182


Agricultural exports STATISTICS Australia 19 Agricultural Indonesia TABLE 19 Agriculturalexports exports totoIndonesia (fob)(fob) Australia

Commodity Farm Crops Grains Barley a Wheat b Other grains, oilseeds and pulses c Total grains, oilseeds and pulses Industrial crops Raw cotton d Sugar Wine Total industrial crops Horticulture Fruit Tree nuts Vegetables Nursery Other horticulture e Total horticulture Other crops and crop products Total crops Meat and live animals Beef and veal Live feeder/slaughter cattle g Live breeder cattle h Lamb Mutton Other meat and live animals i Total meat and live animals Wool Dairy products Butter Cheese Casein Skim milk powder Whole milk powder Other dairy products Total dairy products Other livestock products Total livestock and livestock products Total agricultural exports

unit

2010–11

2011–12

2012–13

2013–14

2014–15

2015–16 s

$m $m $m $m

9 1 144 15 1 169

10 1 156 14 1 180

7 1 395 12 1 414

6 1 194 28 1 228

5 1 403 14 1 423

5 1 127 18 1 150

$m $m $m $m

247 296 4 547

282 302 4 588

220 316 5 540

174 467 3 644

136 519 4 659

127 483 4 614

$m $m $m $m $m $m $m $m

29 0 14 0 2 45 15

33 2 11 0 3 49 17

49 1 12 0 2 65 24

53 1 11 0 3 68 26

62 2 6 0 4 75 28

90 5 10 0 2 107 35

1 775

1 835

2 043

1 968

2 184

1 907

$m $m $m $m $m $m $m $m

169 287 3 6 1 0 466

156 252 2 9 1 0 421

132 165 9 8 2 0 316

245 452 9 4 1 0 712

233 595 5 7 4 0 844

311 578 7 8 6 0 910

1

0

0

1

1

0

$m $m $m $m $m $m $m $m

9 19 5 80 40 17 169

4 19 7 72 34 19 155

5 18 9 68 18 21 140

7 18 10 126 37 21 220

5 18 0 164 8 19 214

3 18 0 120 3 17 161

101

113

146

147

142

122

$m

737

689

603

1 079

1 201

1 193

$m 2 512 2 524 2 646 3 046 3 385 3 100 a Includes malt. b Includes wheat flour. c Includes grains, oilseeds and pulses not separately listed. d Excludes cotton waste and linters. e Other horticulture includes mainly coffee, tea, spices, essential oils and other miscellaneous horticultural products. g Includes buffalo. h Includes dairy cattle and buffalo. i Includes meat and other live animals not listed separately. s ABARES estimate. Note: Zero is used to denote nil or less than $0.5 million. Sources: ABARES; Australian Bureau of Statistics; Department of Agriculture and Water Resouces, Canberra


183


TABLE 20 Agricultural exports to Japan (fob) Australia Australia 20 Agricultural exports to Japan (fob) Commodity Farm Grains Barley a Grain sorghum Wheat b Oilseeds Canola Cottonseed Other grains and oilseeds c Pulses Total grains, oilseeds and pulses Industrial crops Raw cotton d Sugar Wine Total industrial crops Horticulture Fruit Tree nuts Vegetables Nursery Other horticulture e Total horticulture Other crops and crop products Total crops Meat and live animals Beef and veal Live feeder/slaughter cattle gh Lamb Mutton Other meat and live animals i Total meat and live animals Wool Greasy Semi‐processed Skins Total wool Dairy products Butter Cheese Casein Skim milk powder Whole milk powder Other dairy products Total dairy products Other livestock products Total livestock and livestock products Total agricultural exports

unit

2010–11

2011–12

2012–13

2013–14

2014–15

2015–16 s

$m $m $m

260 105 408

316 219 395

292 202 392

251 16 322

177 2 305

243 1 326

$m $m $m $m $m

41 24 4 10 853

47 31 9 12 1 030

72 36 17 10 1 021

113 31 10 11 754

175 23 6 8 697

63 27 5 8 673

$m $m $m $m

48 194 44 286

63 211 45 319

28 198 42 268

32 245 41 318

25 164 44 234

24 261 46 330

$m $m $m $m $m $m $m $m

70 16 46 4 7 142 54 1 335

59 20 41 3 6 129 47 1 524

63 23 41 3 4 133 50 1 472

61 19 39 2 9 130 40 1 242

59 23 38 2 8 130 45 1 106

89 35 44 2 9 180 36 1 219

$m $m $m $m $m $m

1 667 16 60 26 3 1 772

1 549 20 63 24 3 1 658

1 439 15 54 17 3 1 528

1 446 15 76 29 4 1 570

1 922 14 88 27 5 2 055

1 837 15 71 36 11 1 970

$m $m $m $m

9 23 1 33

12 26 2 39

8 21 1 30

1 10 2 12

0 14 2 16

0 20 2 22

$m 6 9 4 2 4 3 $m 356 423 415 343 407 410 $m 22 21 17 20 5 5 $m 2 2 5 17 30 5 0 1 0 0 0 0 $m $m 38 45 66 38 33 38 $m 423 500 507 420 480 461 $m 337 302 293 276 293 359 $m 2 566 2 499 2 358 2 278 2 845 2 812 $m 3 901 4 023 3 830 3 521 3 950 4 031 a Includes malt. b Includes the grain equivalent of wheat flour. c Includes grains and oilseeds not separately listed. d Excludes cotton waste and linters. e Other horticulture includes mainly coffee, tea, spices, essential oils and other miscellaneous horticultural products. g Excludes breeding stock and includes buffalo for feeder/slaughter purposes. h Excludes value of live feeder slaughter for October 2015. i Includes other meat and live animals not listed separately. s ABARES estimate. Note: Zero is used to denote nil or less than $0.5 million. Sources: ABARES; Australian Bureau of Statistics; Department of Agriculture and Water Resources, Canberra

184



21 Agricultural Australia ofKorea Korea (fob) TABLE 21 Agricultural exports exports toto theRepublic Republic of (fob) Australia Commodity Farm Crops Grains Barley a Wheat b Corn (maize) Oilseeds Cottonseed Other grains and oilseeds c Pulses Total grains, oilseeds and pulses Industrial crops Raw cotton d Sugar Wine Total industrial crops Horticulture Fruit Tree nuts Vegetables Other horticulture e Total horticulture Other crops and crop products Total crops Meat and live animals Beef and veal Lamb Mutton Other meat and live animals g Total meat and live animals Wool Dairy products Butter Cheese Casein Skim milk powder Whole milk powder Other dairy products Total dairy product Other livestock products Total livestock and livestock products Total agricultural exports

unit

2010–11

2011–12

2012–13

2013–14

2014–15

2015–16 s

$m $m $m

75 368 4

94 628 12

87 449 20

116 310 23

116 354 22

95 410 13

$m $m $m $m

16 1 51 514

26 0 36 797

37 2 74 668

30 6 57 541

15 2 68 577

19 4 15 556

$m $m $m $m

58 424 7 490

120 521 9 650

119 475 10 605

130 309 8 446

82 525 10 617

24 589 13 627

$m $m $m $m $m $m $m

4 1 8 2 15 119 1 138

5 3 9 2 19 117 1 583

7 2 7 3 19 131 1 423

6 4 5 5 19 144 1 151

10 11 9 3 32 135 1 362

12 18 17 3 50 138 1 370

$m $m $m $m $m $m

656 13 5 2 676 36

572 15 4 1 592 43

641 14 4 1 659 44

844 24 6 1 875 61

1 016 32 7 1 1 056 81

1 213 49 9 3 1 274 127

$m 16 9 7 6 10 14 $m 37 31 30 26 32 39 $m 2 2 2 1 0 0 $m 23 23 19 27 25 14 $m 6 7 2 3 2 2 $m 25 29 17 19 14 19 $m 109 103 77 82 83 88 $m 108 125 100 118 185 171 $m 930 862 879 1136 1 405 1 660 $m 2 068 2 446 2 303 2 286 2 766 3 030 a Includes malt. b Includes wheat flour. c Includes grains and oilseeds not separately listed. d Excludes cotton waste and linters. e Other horticulture includes mainly nursery, coffee, tea, spices, essential oils and other miscellaneous horticultural products. g Includes meat and other animals not listed separately. s ABARES estimate. Note: Zero is used to denote nil or less than $0.5 million. Sources: ABARES; Australian Bureau of Statistics; Department of Agriculture and Water Resources, Canberra


185


TABLE 22 Agricultural exports to the United States (fob) Australia 22 Agricultural exports to the United States (fob) Australia Commodity Farm Crops Grains Oilseeds Pulses Total grains, oilseeds and pulses Industrial crops Sugar Wine Total industrial crops Horticulture Fruit Tree nuts Vegetables Nursery Other horticulture a Total horticulture Other crops and crop products Total crops Meat and live animals Beef and veal Lamb Mutton Other meat and live animals b Total meat and live animals Wool Greasy Semi‐processed Skins Total wool Dairy products Butter Cheese Casein Whole milk powder Other dairy products Total dairy products Other livestock products Total livestock and livestock products Total agricultural exports

unit

2010–11

2011–12

2012–13

2013–14

2014–15

2015–16 s

$m $m $m $m

0 0 4 4

0 20 5 25

1 50 4 55

2 66 5 73

0 22 4 26

0 1 5 6

$m $m $m

92 524 616

135 493 628

66 483 549

43 472 515

60 463 522

160 477 637

$m $m $m $m $m $m $m $m

33 12 6 2 16 69 168 857

33 15 5 2 15 69 142 864

25 28 5 2 19 79 191 873

31 48 6 2 28 115 258 962

24 65 8 2 37 136 246 931

34 82 9 2 41 168 258 1 069

$m $m $m $m $m

704 335 38 0 1 077

896 305 21 0 1 222

961 295 34 0 1 290

1 375 399 49 0 1 823

3 240 504 75 1 3 820

2 458 525 90 0 3 073

$m $m $m $m

11 3 0 14

8 3 0 11

7 2 0 9

4 2 0 7

7 3 0 9

7 4 na 12

$m 3 7 13 1 13 10 $m 12 3 11 9 27 32 $m 13 7 9 4 1 1 $m 4 4 5 0 1 4 $m 18 15 16 11 10 13 $m 50 35 53 24 52 61 $m 125 115 136 176 289 301 $m 1 266 1 383 1 488 2 030 4 170 3 446 $m 2 123 2 248 2 361 2 992 5 101 4 515 a Other horticulture includes mainly coffee, tea, spices, essential oils and other miscellaneous horticultural products. b Includes meat and live animals not listed separately. s ABARES estimate. Note: Zero is used to denote nil or less than $0.5 million. Sources: ABARES; Australian Bureau of Statistics; Department of Agriculture and Water Resources, Canberra

186


Fisheries exports STATISTICS

TABLE 23 Volume of fisheriesproducts products exports 23 Volume of fisheries exportsAustralia Australia Commodity Edible a Fish Live Tuna Salmonids Swordfish Whiting Other fish Total fish Crustaceans and molluscs Rock lobster Prawns Abalone Scallops Crabs Other crustaceans and molluscs Total crustaceans and molluscs Total edible fisheries products

unit

2010–11

2011–12

2012–13

2013–14

2014–15

2015–16

kt kt kt kt kt kt kt

0.9 7.8 6.4 0.4 1.8 5.5 22.7

0.9 8.9 5.8 0.5 0.9 5.1 22.0

0.8 8.9 2.6 0.5 0.4 4.7 17.8

0.9 11.0 1.8 0.4 0.1 4.4 18.6

0.8 12.1 5.0 0.5 0.0 5.3 23.6

0.8 13.8 8.0 0.6 0.0 19.2 42.4

kt kt kt kt kt kt kt kt

7.0 6.4 3.4 0.6 1.0 1.2 19.6 42.4

6.9 5.4 3.1 0.4 0.8 1.7 18.4 40.5

7.8 3.9 2.8 0.4 0.4 2.1 17.5 35.3

8.0 7.1 2.7 0.5 0.4 1.6 20.3 38.9

8.2 6.5 2.6 0.3 0.6 1.6 19.7 43.3

8.0 6.7 2.6 0.4 0.6 1.5 19.7 62.1

a Includes prepared and preserved. Note: Zero is used to denote nil or less than 500 tonnes. Source: Australian Bureau of Statistics


187

Fisheries exports STATISTICS

TABLE 24 Value of fisheries products products exports (fob)(fob) Australia 24 Value of fisheries exports Australia Commodity Edible Fish Live Tuna Salmonids Swordfish Whiting Other fish Total fish Crustaceans and molluscs Rock lobster Prawns Abalone Scallops Crabs Other crustaceans and molluscs Total crustaceans and molluscs Total edible fisheries products Non-edible Marine fats and oils Fish meal Pearls a Ornamental fish Other non-edible Total non-edible fisheries products Total fisheries products

188

unit

2010–11

2011–12

2012–13

2013–14

2014–15

2015–16

$m $m $m $m $m $m $m

33.4 131.4 54.4 4.5 5.0 58.1 286.8

32.0 162.7 41.8 4.2 2.5 46.2 289.4

30.7 162.6 25.4 3.9 1.4 34.2 258.2

34.2 135.5 17.4 3.9 0.2 34.2 225.4

29.9 151.0 48.1 4.4 0.1 37.7 271.2

30.2 163.3 79.9 6.9 0.0 74.3 354.6

$m $m $m $m $m $m $m $m

369.3 77.1 212.0 15.4 13.4 16.3 703.6 990.3

386.7 66.7 197.3 15.3 11.0 34.4 711.3 1 000.7

447.3 51.8 186.0 10.8 8.2 40.2 744.2 1 002.3

590.3 101.0 170.0 13.6 5.5 32.5 912.9 1 138.3

691.2 94.2 173.8 10.7 7.9 43.7 1 021.5 1 292.7

693.2 114.4 182.0 11.7 7.6 54.8 1 063.7 1 418.3

$m 5.4 $m 1.6 $m 241.3 $m 2.3 $m 7.3 $m 257.9 $m 1 248.2 a Includes items temporarily exported and re-imported. Source: Australian Bureau of Statistics

7.3 0.4 206.6 2.3 9.4 226.1 1 226.8

10.0 1.0 151.5 3.8 6.5 172.8 1 175.2

9.1 0.7 144.4 2.0 9.7 165.9 1 304.3

20.9 1.0 110.8 1.9 12.3 147.0 1 439.6

11.2 0.5 95.9 2.1 13.8 123.5 1 541.8


Fisheries imports STATISTICS

TABLE 25 Volume of fisheriesproducts products imports Australia 25 Volume of fisheries imports Australia Commodity Edible a Fish Tuna Salmonids Hake Swordfish Toothfish Herrings Shark Other fish Total fish b Crustaceans and molluscs Prawns Lobster Crabs Mussels Scallops Squid and octopus Other crustaceans and molluscs Total crustaceans and molluscs Total edible fisheries products abc

unit

kt kt kt kt kt kt kt kt kt

2010–11

2011–12

2012–13

2013–14

2014–15

2015–16

45.6 9.9 6.7 0.2 0.1 1.0 0.5 83.1 147.1

40.8 10.2 5.3 0.2 0.1 0.9 0.5 86.6 144.4

46.9 11.9 6.1 0.2 0.2 1.8 0.5 92.8 160.5

50.1 14.2 4.5 0.2 0.2 0.9 0.7 90.0 160.8

49.2 16.1 4.9 0.2 0.1 1.1 0.6 87.6 159.8

44.9 15.1 5.1 0.2 0.2 2.2 0.4 86.4 154.5

kt 32.6 37.5 34.8 38.7 32.4 kt 0.9 0.9 0.8 1.0 1.1 kt 1.4 1.5 1.5 2.1 2.0 kt 2.6 2.8 3.7 3.6 3.1 kt 2.6 3.0 3.1 3.5 2.9 kt 15.2 17.0 19.9 23.2 22.3 kt 9.4 7.3 4.1 4.8 4.0 kt 64.7 69.8 67.9 76.7 67.8 kt 211.8 214.2 228.4 237.5 227.6 a Includes prepared and preserved. b Excludes live tonnage. c Includes other fisheries products not classified into fish or crustaceans and molluscs. Source: Australian Bureau of Statistics

31.9 0.9 1.9 3.3 2.6 23.4 4.2 68.3 222.8


189

Fisheries imports STATISTICS

TABLE 26 Value of fisheries products imports imports Australia 26 Value of fisheries products Australia Commodity Edible a Fish Tuna Salmonids Hake Swordfish Toothfish Herrings Shark Other fish Total fish b Crustaceans and molluscs Prawns Lobster Crabs Mussels Scallops Squid and octopus Other crustaceans and molluscs Total crustaceans and molluscs Total edible fisheries products abc Non-edible Pearls d Fish meal Ornamental fish Marine fats and oils Other marine products Total non-edible fisheries products Total fisheries products

unit

2010–11

2011–12

2012–13

2013–14

2014–15

2015–16

$m $m $m $m $m $m $m $m $m

200.8 84.4 27.2 1.5 1.4 4.3 4.4 443.7 769.1

205.5 91.8 20.9 1.2 1.3 4.2 4.0 459.6 788.6

258.2 118.8 23.4 1.7 2.2 5.1 4.6 480.0 866.5

296.1 167.5 19.5 1.4 3.0 4.5 5.5 507.5 1 004.9

283.9 190.7 21.8 1.7 3.5 3.9 4.9 544.2 1 054.6

274.8 184.7 23.6 1.6 8.2 5.7 3.9 570.3 1 072.7

$m $m $m $m $m $m $m $m $m

291.0 15.0 13.3 10.2 34.5 74.3 65.3 503.5 1 271.3

350.9 16.0 15.5 11.7 43.6 90.4 57.0 585.1 1 373.8

304.8 15.3 16.8 17.1 41.1 97.7 40.7 533.4 1 427.7

495.1 22.4 28.3 19.1 52.9 114.5 44.0 776.3 1 781.3

431.2 28.3 31.1 17.9 49.6 111.6 42.9 712.5 1 767.3

400.9 29.9 28.7 20.0 55.0 134.8 50.7 720.0 1 792.9

$m 166.9 138.2 105.4 102.1 97.2 144.4 $m 46.7 34.2 43.3 43.2 64.3 61.7 $m 3.9 3.7 4.0 4.5 4.4 4.9 $m 31.0 39.5 39.1 40.1 52.7 61.1 $m 9.9 17.1 29.0 30.4 22.2 21.3 $m 258.4 232.8 220.7 220.3 240.8 293.5 $m 1 529.7 1 606.6 1 648.4 2 001.6 2 008.1 2 086.4 a Includes prepared and preserved. b Includes live value. c Includes other fisheries products not classified into fish or crustaceans and molluscs. d Mainly re-imports. Source: Australian Bureau of Statistics

190


Fisheries trade STATISTICS

TABLE 27 Value of Australianfisheries fisheries products trade, by selected countries Australia 27 Value of Australian products trade, by selected countries Australia Trade Exports Edible (including live) Hong Kong Vietnam Japan China Singapore United States Taiwan Thailand New Zealand Malaysia Indonesia Non-edible Hong Kong Japan United States Imports a Edible (excluding live) Thailand New Zealand China Vietnam Malaysia United States Indonesia Taiwan South Africa Denmark Norway Other

unit

2010–11

2011–12

2012–13

2013–14

2014–15

2015–16

$m $m $m $m $m $m $m $m $m $m $m

425.9 8.4 225.9 143.2 41.2 35.7 29.6 16.0 9.6 12.9 8.7

479.1 60.5 254.6 58.5 42.5 23.1 17.5 18.1 10.1 7.7 6.1

317.0 293.2 236.0 45.2 31.0 17.9 9.8 9.3 9.1 7.8 7.4

208.9 565.6 192.1 36.6 34.2 22.1 13.7 8.0 14.5 9.9 9.9

192.3 715.6 192.1 48.7 35.0 28.0 15.1 10.0 13.9 11.2 9.3

223.7 681.7 205.3 104.6 35.3 44.8 20.9 9.4 19.9 7.5 10.0

$m $m $m

145.1 43.3 8.1

96.6 44.4 22.2

54.3 33.0 21.0

74.6 26.9 19.2

55.9 23.4 16.6

53.2 24.0 21.6

$m 340.2 $m 210.0 $m 185.6 $m 161.7 $m 71.2 $m 39.9 $m 27.9 $m 39.5 $m 33.1 $m 28.2 $m 18.8 $m 24.7 a Country details for non-edible imports are not available. Source: Australian Bureau of Statistics

362.1 197.3 231.5 174.5 73.2 45.1 36.3 38.9 32.2 31.3 25.3 27.1

399.8 206.3 196.5 163.1 81.0 52.2 50.9 48.1 36.2 35.1 32.2 29.9

417.0 206.8 341.5 231.7 97.9 56.0 73.5 44.5 50.5 31.6 44.8 45.4

422.1 189.6 284.7 233.1 94.7 53.0 85.6 58.3 53.0 27.5 58.2 68.1

416.1 199.8 292.2 243.0 88.9 54.9 89.5 60.3 66.5 27.7 47.7 66.8


191

Forest exports

STATISTICS

TABLE 28 Volume of forest products exports Australia 28 Volume of wood product exports Australia Commodity Volume Roundwood Sawnwood a Softwood roughsawn Softwood dressed Hardwood roughsawn Hardwood dressed Total sawnwood Railway sleepers Wood-based panels Veneers Plywood Particleboard Hardboard b Medium-density fibreboard Softboard and other fibreboards Total wood-based panels Paper and paperboard Newsprint Printing and writing Household and sanitary Packaging and industrial Total paper and paperboard Recovered paper Pulp Woodchips cd

192

unit

2010–11

2011–12

2012–13

2013–14

2014–15

2015–16

’000 m3

1 638

1 806

1 516

2 363

2 616

3 735

’000 m3 ’000 m3 ’000 m3 ’000 m3 ’000 m3 ’000 m3

265 9 39 30 344 8

198 13 26 15 252 8

207 3 20 7 237 8

268 5 73 25 371 17

299 25 117 73 514 14

248 11 20 23 302 7

’000 m3 ’000 m3 ’000 m3 ’000 m3 ’000 m3 ’000 m3 ’000 m3

119 7 6 2 115 5 254

106 18 4 2 79 5 214

52 36 2 2 52 1 146

64 36 6 3 75 1 184

50 14 11 11 78 21 185

45 31 11 21 85 4 197

kt 19 30 72 85 56 kt 84 132 139 153 141 kt 39 26 12 20 23 kt 887 933 906 950 948 kt 1 029 1 121 1 127 1 207 1 168 kt 1 323 1 403 1 506 1 449 1 397 kt 31 1 0 0 0 kt 5 064 4 150 3 806 4 776 5 707 a Excludes railway sleepers. b Uncoated hardboard confidential from January 2007. c Includes particles. d Bone dry tonnes. Note: Components may not add to totals due to rounding. Zero is used to denote nil or less than 500 tonnes. Sources: ABARES; Australian Bureau of Statistics

50 139 17 924 1 130 1 420 0 6 082


Forest exports STATISTICS

TABLE 29 Value of forest productsexports exports (fob) 29 Value of wood products (fob)Australia Australia Commodity Value Roundwood Sawnwood Softwood roughsawn Softwoods dressed Hardwood roughsawn Hardwood dressed Total sawnwood Railway sleepers Miscellaneous forest products a Wood-based panels Veneers Plywood Particleboard Hardboard b Medium-density fibreboard c Softboard and other fibreboards Total wood-based panels Paper and paperboard Newsprint Printing and writing Household and sanitary Packaging and industrial Total paper and paperboard Paper manufactures d Recovered paper Pulp Woodchips Total wood products

unit

2010–11

2011–12

2012–13

2013–14

2014–15

2015–16

$m

198

175

155

292

313

438

$m $m $m $m $m $m $m

67 5 34 10 115 3 60

55 3 23 7 88 3 59

61 2 20 6 90 3 61

75 3 22 7 108 3 71

74 11 20 5 110 2 75

68 7 17 11 104 2 110

$m $m $m $m $m $m $m

52 2 2 2 39 1 98

51 2 1 2 26 1 83

24 4 1 2 19 0 51

29 3 1 2 26 0 62

27 3 2 2 27 6 67

24 4 2 7 28 1 66

$m 13 15 36 59 39 33 $m 88 120 117 139 146 128 $m 94 64 33 49 60 53 $m 552 518 526 605 657 683 $m 747 717 712 853 901 898 $m 112 134 132 132 109 102 $m 240 240 230 241 241 249 $m 11 1 0 0 0 0 $m 884 729 611 768 954 1 096 $m 2 469 2 229 2 044 2 529 2 772 3 064 a Includes such items as wooden doors, mouldings, packing cases, parquetry flooring, builders carpentry, cork, gums, resins, eucalyptus and tea tree oils and other miscellaneous wood articles. Excludes wooden furniture. b Uncoated hardboard confidential from January 2007. c Some categories of medium-density fibreboard are confidential. d Includes other paper articles that have had some further processing. Note: Components may not add to totals due to rounding. Zero is used to denote nil or less than $0.5 million. Sources: ABARES; Australian Bureau of Statistics


193

Forest imports STATISTICS

TABLE 30 Volume of forest products importsAustralia Australia 30 Volume of wood product imports Commodity Volume Roundwood Sawnwood a Softwood roughsawn Softwood dressed Hardwood roughsawn Hardwood dressed Total sawnwood Wood-based panels Veneers Plywood Particleboard Hardboard Medium-density fibreboard Softboard and other fibreboards Total wood-based panels Paper and paperboard Newsprint Printing and writing Household and sanitary Packaging and industrial Total paper and paperboard Recovered paper Pulp Woodchips

unit

2010–11

2011–12

2012–13

2013–14

2014–15

2015–16

’000 m3

1

1

1

1

1

2

’000 m3 ’000 m3 ’000 m3 ’000 m3 ’000 m3

290 468 43 45 846

239 470 46 36 791

247 443 41 28 759

271 449 41 25 786

291 608 43 26 968

241 540 39 22 841

’000 m3 ’000 m3 ’000 m3 ’000 m3 ’000 m3 ’000 m3 ’000 m3

17 278 72 49 58 7 480

15 293 67 69 91 7 542

13 278 72 60 77 6 505

9 287 95 86 65 5 548

12 341 95 82 85 7 622

15 357 93 91 89 7 652

222 1 237 114 314 1 886 2 233 1

121 1 174 118 333 1 746 3 256 1

85 1 155 159 385 1 783 4 263 1

75 1 172 123 357 1 727 5 297 2

76 1 040 142 392 1 651 4 302 2

69 960 155 410 1 594 1 281 2

kt kt kt kt kt kt kt kt

a Excludes railway sleepers. Sources: ABARES; Australian Bureau of Statistics

194


Forest imports STATISTICS

TABLE 31 Value of forest products imports imports Australia 31 Value of wood products Australia Commodity Value Roundwood Sawnwood Softwood roughsawn Softwood dressed Hardwood roughsawn Hardwood dressed Total sawnwood Miscellaneous forest products a Wood-based panels Veneers Plywood Particleboard Hardboard Medium-density fibreboard Softboard and other fibreboards Total wood-based panels Paper and paperboard Newsprint Printing and writing Household and sanitary Packaging and industrial Total paper and paperboard Paper manufactures b Recovered paper Pulp Woodchips Total wood products

unit

2010–11

2011–12

2012–13

2013–14

2014–15

2015–16

$m

1

1

1

1

1

2

$m $m $m $m $m $m

135 248 40 50 473 707

105 248 44 51 448 756

100 246 41 35 423 769

111 281 46 31 468 946

128 382 57 34 601 1 102

112 361 55 28 555 1 304

$m $m $m $m $m $m $m

21 170 21 40 34 3 289

21 183 26 54 36 3 323

19 184 27 48 32 2 311

15 210 35 72 35 3 370

22 264 38 67 45 3 439

24 300 41 69 51 4 489

$m 176 91 58 49 48 44 $m 1 347 1 217 1 151 1 194 1 123 1 036 $m 185 187 244 208 254 305 $m 515 543 590 654 728 845 $m 2 223 2 037 2 043 2 105 2 153 2 231 $m 557 486 446 537 582 662 $m 0 1 1 2 1 0 $m 180 164 154 203 217 222 $m 2 2 3 3 3 4 $m 4 431 4 217 4 151 4 636 5 099 5 468 a Includes such items as wooden doors, mouldings, packing cases, parquetry flooring, builders carpentry, cork, gums, resins, eucalyptus oils and other miscellaneous wood articles. Excludes wooden furniture. b Includes other paper articles that have had some further processing. Note: Components may not add to totals due to rounding. Zero used to denote nil or less than $0.5 million. Sources: ABARES; Australian Bureau of Statistics


195

Forestry trade

STATISTICS

TABLE 32 Value Australian forest products trade, trade, by selected 32 Value of of Australian wood products by countries selecteda countries a Trade Exports China Hong Kong Japan Korea, Rep. of Malaysia New Zealand Taiwan Imports China Finland Germany Indonesia Malaysia New Zealand United States

unit

2010–11

2011–12

2012–13

2013–14

2014–15

2015–16

$m $m $m $m $m $m $m

544 42 745 40 106 314 79

534 39 579 40 112 305 68

474 16 394 33 73 269 68

542 10 21 45 87 290 57

816 12 316 38 70 296 73

1 331 11 427 37 71 317 110

$m 690 800 913 1 110 1 321 1 497 $m 143 120 205 221 184 160 $m 183 148 135 163 150 156 $m 332 342 313 348 427 495 $m 228 236 227 249 270 306 $m 715 634 557 605 646 673 $m 285 298 304 339 361 347 a Value of wood products trade to selected countries may exclude data where confidentiality restrictions apply. Sources: ABARES; Australian Bureau of Statistics

196


Report extracts ABARES reports released since Agricultural commodities (vol. 6 no. 2 June quarter 2016) This section provides an overview of the range of subjects covered by ABARES. Full reports can be downloaded from agriculture.gov.au/abares/publications. For more information, contact [email protected].

Research reports

Rice farms in the Murray–Darling Basin Research report 16.2 Publication date: 26 July 2016 This report presents key farm performance measures for irrigated rice growing farms in the Murray–Darling Basin. It includes data on water trading and use of irrigation technologies, focusing on results from 2012–13 to 2014–15.

Cotton farms in the Murray–Darling Basin Research report 16.3 Publication date: 26 July 2016

This report presents key farm performance measures for irrigated cotton growing farms in the Murray–Darling Basin. It includes data on water trading and use of irrigation technologies, focusing on results from 2012–13 to 2014–15.


197

Report extracts

Horticulture farms in the Murray–Darling Basin Research report 16.4 Publication date: 26 July 2016 This report presents key farm performance measures for irrigated citrus, pome and stone fruit growing farms in the Murray–Darling Basin. It includes data on water trading and use of irrigation technologies, focusing on results from 2012–13 to 2014–15.

Australian dairy: financial performance of dairy farms, 2013–14 to 2015–16 Research report 16.6 Publication date: 02 August 2016

This report presents the detailed financial performance of dairy farms from 2013–14 to 2015–16. It includes analysis of changes in farm performance, investment and debt by farm size to highlight variations in performance across the dairy industry. The analysis in the report is mainly based on data from the Australian Dairy Industry Survey 2015–16.

Climatic suitability of Australia’s production forests for myrtle rust Research report 16.7 Publication date: 10 August 2016

This report explores the potential impact of myrtle rust disease on wood production. Myrtle rust disease has caused defoliation and death of rainforest species trees in New South Wales and Queensland and significantly damaged eucalypt plantations in South America. It combines climatic suitability modelling for myrtle rust across Australia with spatial data on Australia’s production forests and forecast wood availability.

Short-term forecasts of selected wood product sales volume: method and assumptions Research report 16.8 Publication date: 23 August 2016

ABARES worked with Forest and Wood Products Australia (FWPA) on a three-year (2015–16 to 2017–18) project. ABARES developed quarterly sales volume forecasts for selected wood products from the FWPA Softwood Data series. This report documents the methods and assumptions underlying the forecasts.

198


Report extracts

Australian lamb: financial performance of lamb producers, 2013–14 to 2015–16 Research report 16.9 Publication date: 13 September 2016 This report presents detailed financial performance estimates for lamb producers for 2013–14 to 2015–16, with a focus on 2014–15 results. Lamb-producing farms are defined as those Australian broadacre farm businesses that sold, on average, 200 or more lambs for slaughter a year over the three years ending 2014–15. Meat & Livestock Australia commissioned and funded this report.

Australian beef: financial performance of beef farms, 2013–14 to 2015–16 Research report 16.10 Publication date: 13 September 2016

This report presents detailed financial performance estimates for beef-producing farms for 2013–14 to 2015–16, with a focus on 2014–15 results. Beef-producing farms are defined as those Australian broadacre farm businesses that had at least 100 head of beef cattle on hand at 30 June 2015. Meat & Livestock Australia commissioned and funded this report.

Technical reports

Resource reallocation and productivity growth in the Australian dairy industry: implications of deregulation Publication date: 26 August 2016 This report uses farm-level data to examine resource reallocation in the Australian dairy industry between 1979 and 2013. It assesses how this process contributed to industry-level productivity growth before and after deregulation reforms of 2000.

Other reports

About my region—agriculture, fisheries and forestry in New South Wales, 2016 Publication date: 23 June 2016 This report in the About my region series profiles the financial performance of the NSW broadacre, beef, sheep dairy and vegetable industries. It includes land-use and employment information.


199

Report extracts

Land use of Australia 2010–11 Publication date: 04 July 2016 This report is the latest in a series of digital national land use maps on a national scale. The spatial distribution of the agricultural land uses is modelled using Advanced Very High Resolution Radiometer satellite imagery. The non-agricultural land uses are drawn from existing digital maps covering seven themes: topographic features, catchment scale land use, protected areas, world heritage areas, tenure, forest type and vegetation condition.

Australian plantation statistics 2016 Publication date: 17 August 2016

This report is published every five years and presents information on total plantation area, new planting and ownership based on spatial data. This update complements two other National Plantation Inventory information products published by ABARES: the annual tabular plantations update and the five-yearly comprehensive log supply forecast report.

Australian crop report

Publication date: 13 September 2016 This quarterly report provides a consistent and regular assessment of crop prospects for major field crops, forecasts of area, yield and production, and a state-by-state summary of seasonal conditions.

Other publications

Australia’s agricultural industries 2016 Publication date: 30 August 2016 This map shows the status of agriculture in Australia and provides a snapshot of trends. It shows the locations of land used for agriculture across Australia and statistics on area and land tenure. The map reports on the top five livestock, crop and horticulture commodities based on gross value of production. It also shows trends in agricultural production, employment and exports for Australia’s top five export commodities and destinations.

Australian forest profiles: 2016 Publication date: 30 August 2016

This is a collection of eight fact sheets on Australia’s native forest types. They profile seven broad native forest types, defined by dominant native species in Australia: Acacia, Callitris, Casuarina, eucalypt, mangrove, Melaleuca and rainforest species. Each one covers forest type, importance, uses, maps and data based on Australia’s State of the Forests Report 2013 and subsequent updates. The last fact sheet provides an overview.

200 ABARES Agricultural commodities – vol. 6 no. 3 • September quarter 2016

ABARES contacts Executive Director (A/g)

Peter Gooday

Agricultural Commodities and Trade Assistant Secretary and Chief Commodity Analyst (A/g) Trish Gleeson Agricultural Trade Caroline Gunning-Trant Agricultural Commodities Lisa McKelvie Climate Impact Sciences Matthew Miller Regional Outlook Programmes and Stakeholder Engagement Peter Collins

[email protected]

(02) 6272 2138

[email protected] (02) 6272 2030 [email protected] (02) 6272 2123 [email protected] (02) 6272 3009 [email protected] (02) 6272 3527 [email protected]

(02) 6272 2017

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(02) 6272 2138 (02) 6272 2455 (02) 6272 2066 (02) 6272 2069

[email protected]

(02) 6272 4263

Fisheries, Forestry and Quantitative Sciences Assistant Secretary Ilona Stobutzki Domestic Fisheries and Marine Simon Nicol International Fisheries and Data James Larcombe Fisheries Economics Robert Curtotti Quantitative Sciences Tony Arthur Forest Sciences Steve Read Forestry Economics Beau Hug Land Use and Management Jane Stewart

[email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected]

(02) 6272 4277 (02) 6272 4638 (02) 6272 3388 (02) 6272 2014 (02) 6272 2277 (02) 6272 5582 (02) 6272 3929 (02) 6272 3541

Strategic Policy and Biosecurity Assistant Secretary (A/g) Alistair Davidson Deregulation Donna Hawkes Biosecurity Economics Alistair Davidson

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(02) 6272 2091 (02) 6272 4627 (02) 6272 2091

Julie Gaglia

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(02) 6272 4298

John Sims

[email protected]

(02) 6272 5732

Agriculture Productivity and Farm Analysis Assistant Secretary (A/g) David Galeano Productivity Shiji Zhao Climate and Water Economics Neal Hughes Farm Survey and Analysis Milly Lubulwa Invasive Species and Social Sciences Bertie Hennecke

Information Management Assistant Secretary Agricultural Intelligence Transformation Project


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ABARES contacts

Editing, Production, Online and Design

John Wilson

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Library Resources

Karen Kidd

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Media

[email protected]

(02) 6272 3232

Publication inquiries

[email protected]

(02) 6272 3933

(02) 6272 3811 (02) 6272 4270

Agricultural commodities September quarter 2016 was designed and produced by the Department of Agriculture and Water Resources and the Agricultural Commodities team of ABARES. Editors: Jane Wiles, Julia Church and Emma Rossiter Designer: Greg Richardson

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The ‘Biosphere’ Graphic Element The biosphere is a key part of the department’s visual identity. Individual biospheres are used to visually describe the diverse nature of the work we do as a department, in Australia and internationally.

Also in this series • Agricultural commodities, June 2015 • Agricultural commodities, September 2015 • Agricultural commodities, December 2015 • Agricultural commodities, March 2016 • Agricultural commodities, June 2016

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