Rural Bank says farmers will continue to be pressured by above average input costs and global economic headwinds next year, but farm commodity markets should become more rewarding.
Beef export opportunities were improving, strong demand and reduced supplies should buoy grain markets, lamb prices should strengthen, too, and wool markets would be stable in the year ahead, although still soft.
Strong horticulture production and demand suggested an upbeat outlook for that market in the first six months, according to the bank's Australian agriculture outlook report for 2024.
Frustratingly, though, high interest rates, the Australian dollar's lingering low value, high gas prices, volatile oil output and labour shortages would keep production costs, including elevated fertiliser and diesel prices, above long term averages.
While labour supply options were improving thanks to strong migration numbers and the return of working holiday makers, the bank tipped low unemployment rates and minimum wage awards would keep shearing and seasonal worker costs inflated.
Tight margins
Rural Bank, part of the Bendigo and Adelaide Bank group, found while labour supply had improved in 2023 and lower fertiliser costs provided some relief, farming's margin prospects continued to appear tight.
Export demand had rebounded in grain and horticulture, but demand for livestock and wool had finished the year subdued, primarily due to economic pressures.
Ongoing global economic challenges and tighter domestic household budgets, plus the prospect of a hotter summer and generally below average commodity prices, would all weigh on the farm sector in the first half of 2024.
Thankfully, strong domestic population growth was assisting the domestic economy and more favourable economic environments were expected to support markets as the back progressed.
Rural Bank's agribusiness development head, Andrew Smith, said trade with India and Britain was set to continue expanding in 2024 and a potential trade deal with the United Arab Emirates was another positive development.
Improved trade conditions in the later part of 2023, including some normalisation of Australia's trade relationship with China and recalibrated supply chains would also continue helping farm exports into the new year.
Another positive was the forecast breakdown of both the El Nino and IOD climate driver.
"These will hopefully see a return to more average conditions for eastern Australia," Mr Smith said.
"However, global grain market volatility remains a concern, driven by Russia's ongoing invasion of Ukraine.
"Economic headwinds will again be challenging for agribusiness in the first half of 2024, with slower economic growth in major economies like the EU and US expected to affect global consumption, while farm input costs are forecast to remain stubbornly above long-term averages."
Looking to the upside, a more favourable economic environment is expected to begin supporting agricultural markets in the back end of 2024
- Andrew Smith, Rural Bank
Seasonal labour costs continued to be high with no relief in sight, while elevated fertiliser and diesel prices would similarly keep the cost of production high.
"As was the case for 2023, the three key themes that will impact Australian agriculture in the first half of 2024 continue to be seasonal conditions, trade conditions and economic headwinds," he said.
"But looking to the upside, a more favourable economic environment is expected to begin supporting agricultural markets in the back end of 2024."
Winter crop planting prospects should benefit from the stabilised weather forecast which, if it eventuated, would also deliver more favourable conditions for fruit and vegetable crops and lower irrigation costs.
Red meat rising
Rising beef production and further opportunities for red meat sector export growth were set to improve producer prospects in the first half of 2024.
Lamb markets were likely to improve as the supply surge eased, supported by the overall cheaper lamb market which should also keep export volumes closer to current levels and improve domestic appetite for lamb.
Rural Bank noted while cattle slaughter rates in Queensland, NSW and Victoria would likely increase on the back of the strong supplies available, most processing plants were fully booked for months in advance, so significant demand growth may be limited.
Cattle prices were likely to continue the rising trend of the past two months, helped by export demand, but stay below the five year average.
Global economic conditions were set to keep demand for wool constrained, with any price improvement most likely to come from a small decline in production because of drier seasonal conditions.
Although relatively stable, wool prices would remain below average and woolgrowers would remain challenged by high shearing costs.
Andrew Marshall
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
Andrew Marshall is the group agribusiness writer for ACM's state agricultural weeklies and websites. He is a former editor at The Land and has worked in various Rural Press group roles in Canberra, North Richmond (NSW) and Toowoomba (Qld).
