30 May 2018
Over the last 20 years, South Australia’s agriculture industry has continued to evolve. Some sectors have grown significantly, new industries have been established, some have matured.
South Australian agriculture has continued to build a well-recognised and respected brand across Australia and internationally, underpinned by producing clean, high-quality products.
"South Australia’s population has benefitted from its slow and steady economic pace.” – Cherelle Murphy
Advances in technology have been adapted quickly and, as seen in the wine industry, the sector has recognised the need to move away from a “commodity” based producer to that of a niche player, building on branding and a point of differentiation.
This success has seen asset values rise with land values, in some areas, challenging their connection to economic returns. However, South Australian agri has not been without challenges, particularly in the production environment, including climatic and geographic limitations and water security.
Dry state, dry continent
In a lot of ways, South Australia is punching above its weight from a national perspective. Key commodities such as wine are contributing at a proportionately higher rate to national production with a continually strong flow of capital into both the production and processing sectors. Agricultural production and associated processing contributes significantly to the South Australian economy - accounting for $A20.3 billion or 6 per cent of gross state product in 2017.
The agricultural industry has grown from its traditional pastoral roots based on beef, sheep and wool to a diversified high-tech sector where 80 per cent of production is exported.
Geographically, the pastoral areas still dominate however the more intensive agricultural industries continue to find opportunity for growth. The state’s pork industry is now considered the largest pig processor at 1.3 million head or 25 per cent of the national total.
Meanwhile, as in other areas of Australia, farm numbers are falling as consolidation and a focus on efficiencies through scale continue.
Being the driest state in one of the driest continents, South Australia’s production areas vary significantly in both production systems and volumes - ranging from the wetter south eastern regions to the drier west coast cropping and northern pastoral zones.
Bio-security programs underpin all industries and South Australia’s clean and green growing conditions support export market access. It remains the only mainland state with fruit fly-free status, which has assisted in building export markets through Asia and Europe. In the wine industry, which produces 80 per cent of Australia’s premium wine, South Australia’s phylloxera-free status is critical.
South Australia’s population has benefitted from its slow and steady economic pace. It may not be super-charged but its lack of exposure to the negative influence of falling house prices and the mining correction has held the state in good stead.
In ANZ Research’s Stateometer, South Australia was the only state or territory to show above trend, accelerating growth. That means the state’s economy is growing a bit stronger than it usually does and its improving. Through the June quarter, the most positive influences came from the housing sector and labour market.
South Australia has exhibited a more muted house price cycle than the rest of Australia. The market has softened but it has been much less volatile than in the south east of the country.
Annual house price falls of just over 1 per cent in Adelaide in the year-to-August compare with declines of over 6 per cent in Sydney and Melbourne over the past year. Because house prices did not rise strongly in the upturn, South Australia did maintain an affordability advantage that has been beneficial for those able to secure employment in the state.
Building approvals for housing and units are off their 2018 highs, suggesting house building will flatten off and fall a little but, again, the decline hasn’t been as sharp as in the south east of the country.
South Australia’s labour market has softened since mid-year. The unemployment rate rose to an ugly 6.8 per cent in trend terms in August and employment growth has slowed. But the news is mixed because the workforce participation rate was at a record high, with female participation having risen sharply over the last year to touch almost 60 per cent. That means more South Australian women have been attracted into the workforce.
In part this may have been due to the strongly growing healthcare and social assistance sector. By 2017-18, this sector had grown to 10.5 per cent of South Australian output. As a share of the economy, this was second only to Tasmania and the Australian Capital Territory’s health and social assistance sectors. Tasmania and South Australia have the oldest populations in Australia and this is likely one of the drivers.
Over the last five years, as South Australia’s manufacturing sector continued to shrink, other industries took its place. The utilities sector has been the second fastest growing industry in South Australia over the five years to 2017-18.
South Australia’s appetite for renewable energy has also created jobs. The state has the largest amount of installed wind and solar capacity of any state or territory in Australia and is on track for 73 per cent renewably-sourced electricity in two years according to the Climate Council.
State of the state’s agri
South Australia’s key agricultural industries include grain, livestock (including wool), viticulture, horticulture and seafood.
The grain sector produces an average of 7.3 million tonnes - made up largely of wheat and barley but also an increasing amount of pulses and oilseeds. In total, South Australia represents nearly 20 per cent of Australia’s annual grain production across some 4 million hectares and 3,500 farms. In 2017-18, the state’s farm gate production by value was $A1.7 billion even after a drought and frost impacted 6.9 million tonnes. In line with broader agribusinesses in South Australia, the grains sector exports 85 per cent of production to 55 countries with Indonesia, China and Vietnam among the largest customers.
The livestock sector - including dairy and the broiler/egg industry - contributes approximately 30 per cent of farm gate revenue in South Australia. In 2017-18 it drew in a value of $A4.3 billion. The cattle herds sit at around 1.1 million head or 4 per cent of the national herd while the sheep flock sits at approximately 11 million head, producing 57 million kilograms of wool.
In viticulture, South Australia has an estimated 76,000 hectares under vine, dominated by Shiraz and Cabernet Sauvignon, producing 750,000 tonnes of grapes with a farm gate value of $A590 million. In contrast, for the 2017-18 year Australia’s wine industry generated $A2.15 billion, producing 529 million litres with top three export destinations of China, UK and USA. South Australia’s wine industry represents around half of the nation’s vineyards and wine production.
South Australia also leads the way in potato and onion production. Approximately 380,000 tonnes of potatoes are produced from 100 farms. The total fruit, nut and vegetable production in the state sits at 960,000 tonnes. Stone fruit and apples around the Adelaide Hills region is complemented by citrus in the Riverland and vegetable production in the Mallee and Virginia regions. Underpinning the industry is a focus on investment in agtech and water efficiency. A significant increase in permanent plantings, particularly almonds, will throw up challenges for water access over the next five years as they reach full production.
South Australia is considered one of the most sustainable fisheries in Australia with a focus on the two gulfs, Spencer and St Vincent - particularly via Port Lincoln. Wild catch dominates the industry which, in 2017-18, was worth around $A455 million with the single largest product being Southern Bluefin tuna (which produced 9,000 tonnes) and supplemented by prawns, oysters, rock lobster and abalone. Exports centre on Asia, particularly China, Japan and Hong Kong.
Steve Radeski is State Agribusiness Manager for South Australia and Cherelle Murphy is Senior Economist at ANZ
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
30 May 2018
10 Sep 2019