The strong season for farmers was reflected in a recent ANZ Roy Morgan Financial Wellbeing Indicator which found, in the midst of the COVID-19 pandemic lockdowns, the financial wellbeing of farmers and farm managers improved 4.3 per cent to 62.8 (as a score out of 100) compared with the national average which declined 6.4 per cent to 56.8. The report also found regional Australians experienced a much smaller decline (0.7 per cent) in their ability to meet financial commitments compared with a decline of 8.6 per cent experienced by those living in capital cities.
On the downside, the escalation of China-Australia trade tensions continues to make many in the industry nervous. Developments in this key market are likely to remain unpredictable. The message being heard at the farm-gate is far more straightforward however with some in the industry now questioning the long-term value of some markets and certainly the concentration risk that has emerged.
Australian agricultural exports will always be closely tied to export markets across Asia and China remains one of the most important of those markets. But it makes sense to pursue opportunities for expansion and to diversify into new markets through additional trade relationships. The China demand story will continue to be an enormous influence on global demand and represents a net positive opportunity for Australian agriculture. However, we do need stability in order to maintain confidence and investment at the production level.
The current Australian wheat harvest is shaping up very well, with prices holding firm despite strong domestic and global supply. Livestock prices are also strong with cattle prices continuing their rise despite queries of ‘how high can they go’ and sheep prices recovering to sit above levels at the same time last year despite falls earlier in the year. Global dairy prices are up on last year across most commodity sectors except butter and even the struggling wool sector is showing solid signs and after finding its floor level, now appears to steadily improving.
Looking forward to 2021, there are clearly a number of hurdles for both the agriculture industry and the global economy as a whole to clear. First among them are the continuing waves of COVID-19 outbreaks and the impact on global economic growth and confidence. Second is the impact of the new Biden administration on global trading systems and stability. As Australia continues to navigate through trade with China, the overarching influence of a more moderate US administration is likely to set the scene for ongoing negotiations.
Having said all that, Australian farmers can look to 2021 with a strong sense of optimism and with a generally strong 2020 under their belt. This marks a monumental shift from the world this time last year.
Mark Bennett is Head of Australian Agribusiness and Madeleine Swan is Associate Director, Agri Research Australia at ANZ
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