By CAMERON MORSE
INCOME forecasts for Australian farmers have been boosted again, as farm exports continue to gain value on world markets.
Three months ago the Australian Bureau of Agriculture and Resource Economics (ABARE) was projecting the gross value of farm production would be $34.9 billion in 2001/02, thanks to a $29.8b in farm exports.
But the latest commodity forecast released by ABARE this week predicts another increase in gross receipts to $35.2b for this financial year while exports are tipped to generate $30.4b.
In 2000/01, farmers received $33.5b for their food and fibre thanks to $29.2b in exports.
Pushing the total 2001/02 ABARE estimates higher were a forecast $17/t increase in wheat prices (all compared to last quarter's predictions), $7/t increase in barley, $50/t increase in canola, 20c/kg clean increase for wool, 2c/kg dressed weight increase for beef, 20c/kg increase for mutton, and 18c/kg increase for lamb.
Its forecast for milk prices this financial year remained stable, but the chief commodity forecaster lowered its cotton outlook by US3.3c/pound, and its sugar forecast by US0.7c/lb compared to its previous forecast three months ago.
The commodity forecast also indicated large price volatility for a number of commodities, which could easily change their expected rates. Wheat is exposed to more downside than upside risk, while the reverse is suggested for beef and sugar, ABARE claims. Wool, it proposes, is an each way bet.
Compared to last year's rates, ABARE still expects prices in the livestock sector to lift by 5pc, while cropping receipts are tipped to jump by 2.6pc.
The price increases in most commodities are expected to push farmers' terms of trade back to 1996/97 levels (after declining fortunes in the past three years), thanks also to a forecast drop in fuel, fertiliser and interest costs.
But ABARE is warning that many of the expected commodity price increases are supply rather than demand driven, as world prices in the minerals and energy sector, the other major commodity market, have dropped by 10-30pc in the last year.
"A major factor underlying the strength of agricultural prices is a tightening of supply in major world markets," ABARE analyst Jamie Penm said.
"Despite a modest weakening in demand, world production ‹ as well as stocks ‹ of many agricultural commodities has declined considerably over the past few years."
If the world economy continues to weaken and world agriculture production increases in response to the high prices now on offer, things could change rapidly.
"In such an event, in the absence of a marked increase in demand, there could be considerable downward pressure on prices," Mr Penm warned.
In devising its forecasts, ABARE had assumed economic growth in the US will recover gradually in the next 12-18 months, helping world economic growth recover.
But the events of the past week may temper that forecast, and commodity prices, with it.
Still, as world economic growth contracts, Australia's currency is invariably devalued due to its reliance on commodity exports, sheltering farmgate prices from the contraction to a certain extent.