Agriculture sector profile -...

Commodity outlook and financial performance of key agricultural industries in South Eastern New South Wales

Bega, New South WalesPeter Martin, Haydn Valle, Maggie Skirtun, Mihir Gupta, Kah Low and

ABARES commodity analysts

Research by the Australian Bureau of Agriculturaland Resource Economics and Sciences

Conference paper 12.12August 2012

© Commonwealth of Australia 2012

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This publication (and any material sourced from it) should be attributed as: Martin, P, Valle, H, Skirtun, M, Gupta, M, Low, K & ABARES commodity analysts 2012, Commodity outlook and financial performance of key agricultural industries in South Eastern New South Wales, ABARES conference paper 12.12, Canberra, August. CC BY 3.0.

Cataloguing dataMartin, P, Valle, H, Skirtun, M, Gupta, M, Low, K & ABARES commodity analysts 2012, Commodity outlook and financial performance of key agricultural industries in South Eastern New South Wales, ABARES conference paper 12.12, Canberra, August.

ABARES project 43001

InternetCommodity outlook and financial performance of key agricultural industries in South Eastern New South Wales is available at daff.gov.au/abares/publications.

Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES)Postal address GPO Box 1563 Canberra ACT 2601Switchboard +61 2 6272 2010|Facsimile +61 2 6272 2001Email [email protected] daff.gov.au/abares

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The Australian Government acting through the Department of Agriculture, Fisheries and Forestry represented by the Australian Bureau of Agricultural and Resource Economics and Sciences, has exercised due care and skill in the preparation and compilation of the information and data in this publication. Notwithstanding, the Department of Agriculture, Fisheries and Forestry, ABARES, its employees and advisers disclaim all liability, including liability for negligence, for any loss, damage, injury, expense or cost incurred by any person as a result of accessing, using or relying upon any of the information or data in this publication to the maximum extent permitted by law.

AcknowledgementsThe commodity notes in this paper are based on forecasts presented in the June 2012 edition of Agricultural commodities, prepared by Patrick Hamshere and Neil Thompson (economic overview and sheep meat), Fiona Crawford, Beth Deards, James Fell and David Mobsby (grains), Kelly Chow (wool), Clay Mifsud (beef and veal) and David Barrett (dairy).

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Commodity outlook and financial performance of key agricultural industries in South Eastern New South Wales ABARES

ContentsRegional overview.............................................................................................................................................. 1

Agriculture sector profile.................................................................................................................... 1

Number and type of farms.................................................................................................................. 2

Employment.............................................................................................................................................. 4

Farm financial performance—Australia and New South Wales.........................................4

Performance of broadacre farms—Australia and New South Wales...............................5

Performance of grains industry farms—Australia and New South Wales....................6

Performance of sheep industry farms—Australia and New South Wales.....................8

Performance of beef industry farms—Australia and New South Wales.........................9

Performance of dairy industry farms—Australia and New South Wales....................10

Performance of dairy industry farms—South Eastern New South Wales and Illawarra................................................................................................................................................... 12

Forestry in South Eastern New South Wales – Eastern Victoria.................................................14

Fisheries in New South Wales....................................................................................................................16

Outlook for selected commodities............................................................................................................20

Economic overview............................................................................................................................. 20

Wheat......................................................................................................................................................... 21

Coarse grains.......................................................................................................................................... 22

Oilseeds..................................................................................................................................................... 23

Wool........................................................................................................................................................... 24

Sheep meat.............................................................................................................................................. 25

Beef and veal...........................................................................................................................................27

Dairy........................................................................................................................................................... 28

TablesTable 1 Number of farms, by industry classification a, 2009–10..................................................2

Table 2 Financial performance, broadacre industries.......................................................................6

Table 3 Financial performance, dairy industry..................................................................................12

Table 4 Financial performance, South Eastern NSW dairy industry farms............................13

Table 5 South Eastern NSW – Eastern Victoria log harvest, volume and value, 2009–1015

Table 6 Key macroeconomic assumptions............................................................................................21

iii


FiguresFigure 1 Value of agricultural production, South Eastern New South Wales, 2009–10......2

Figure 2 Distribution of farms by estimated value of agricultural operations, South Eastern New South Wales, 2009–10...............................................................................................3

Figure 3 Employment profile, South Eastern New South Wales, May quarter 2012............4

Figure 4 Real farm cash income, broadacre industries......................................................................5

Figure 5 Real farm cash income, grains industry.................................................................................7

Figure 6 Real farm cash income, sheep industry..................................................................................9

Figure 7 Real farm cash income, beef industry...................................................................................10

Figure 8 Real farm cash income, dairy industry.................................................................................11

Figure 9 Forest potentially available for timber production, South Eastern New South Wales – Eastern Victoria study region, 2009–10...................................................................14

Figure 10 Real value of New South Wales fisheries production.................................................16

Figure 11 Real value of New South Wales fisheries production, by key species group....17

Figure 12 Real values of New South Wales fisheries exports, by key species group.........18

Figure 13 Value of New South Wales exports in 2010–11, by destination............................18

Figure 14 Regional economic growth.....................................................................................................20

Figure 15 Australian winter crop production.....................................................................................22

Figure 16 World oilseeds production.....................................................................................................23

Figure 17 Australian Eastern Market Indicator wool price..........................................................24

Figure 18 Australian lamb flock and lamb slaughter.......................................................................26

Figure 19 Australian cattle slaughter and prices...............................................................................27

Figure 20 Australian milk production and price................................................................................29

MapsMap 1 South Eastern region of New South Wales................................................................................1

BoxesBox 1 Major financial performance indicators......................................................................................5

iv


Regional overviewThis paper contains an overview of the agriculture, fishing and forestry sectors in South Eastern New South Wales, recent financial performance of the broadacre and dairy industries in NSW and discussion of the outlook for some key commodities.

The agricultural sector overview is based on Australian Bureau of Statistics (ABS) data for the South Eastern region of NSW (Map 1). The area contains the regional centres of Bega, Braidwood, Cooma, Goulbourn, Narooma and Yass.

Map 1 South Eastern region of New South Wales

Source: Australian Bureau of Statistics

Agriculture sector profileIn 2009–10 the total value of agricultural production in South Eastern NSW was $601 million. This was 7 per cent of the total value of agricultural production in NSW ($8359 million) for 2009–10.

Livestock and livestock products are the major contributors to total value of agricultural production in South Eastern NSW. Combined, wool ($133 million), sheep and lambs ($122 million) and cattle and calves ($110 million) contribute 60 per cent to the total value of agricultural production in the region. Almost 20 per cent of NSW total value of wool production and sheep and lambs production is concentrated in this region.

1


Figure 1 Value of agricultural production, South Eastern New South Wales, 2009–10

Other

Oilseeds

Eggs

Poultry

Hay

Milk

Fruit

Pigs

Cereals

Cattle and calves

Sheep and lambs

Wool

0 20 40 60 80 100 120 140$m

Source: Australian Bureau of Statistics

Other products that contributed significantly to the gross value of agricultural production in the region include: cereals ($46 million); pigs and fruit ($35 million and $34 million, respectively); milk ($27 million); hay ($26 million); and poultry ($24 million).

Number and type of farmsAustralian Bureau of Statistics data indicate that in 2009–10 there were 4167 farms in South Eastern NSW with an estimated value of agricultural operations of more than $5000 (Table 1). The region contains 11 per cent of all farm businesses in NSW.

Table 1 Number of farms, by industry classification a, 2009–10 South Eastern New South Wales New South Wales

no. % no. %

Beef cattle 1 500 36 4 144 11

Mixed grain–livestock 1 173 28 14 324 37

Sheep 689 17 2 838 7

Grain growing 184 4 4 971 13

Sheep–beef 124 3 1 611 4

Fruit and nut growing 112 3 1 113 3

Dairy 109 3 831 2

Grape 101 2 3 190 8

Vegetable 88 2 1 425 4

Other 86 2 4 107 11

Total agriculture 4 167 100 38 554 100

a Where the estimated value of agricultural operations is more than $5000. Source: Australian Bureau of Statistics

2


Farms are classified in Table 1 according to the activities that generate most of their value of production. Beef cattle farms were the most common in the South Eastern region accounting for 36 per cent (1500 farms) of all farms, followed by mixed–grain and livestock farms with 28 per cent (1173 farms) and sheep farms with 17 per cent (689 farms). Grain growers accounted for 4 per cent of farms (184 farms); sheep–beef (124 farms), fruit and nut growers (112 farms) and dairy farms (109 farms) each accounted for 3 per cent

Approximately 36 per cent of NSW beef cattle farms and 24 per cent of NSW sheep farms are located in the South Eastern region. The region also accounted for 13 per cent of dairy farms, with farms concentrated in the coastal hinterland.

A large proportion of farms in the region are small in terms of their business size. Estimated value of agricultural operations (EVAO) is a measure of the value of production from farms and a measure of their business size, and is somewhat similar to turnover. Around 80 per cent of farms in South Eastern NSW had an EVAO of less than $150 000 (Figure 2). These farms accounted for 31 per cent of the total value of agricultural operations in 2009–10. In comparison, 7 per cent of farms in the region had an EVAO of more than $350 000 and accounted for an estimated 43 per cent of the total value of agricultural operations in the region in 2009–10.

Figure 2 Distribution of farms by estimated value of agricultural operations, South Eastern New South Wales, 2009–10

< $50k $50k to $150k $150k to $350k $350k to $500k $500k to $1 m > $1 m0

10

20

30

40

50

60

share of farms share of value of agricultural operations

%

Source: Australian Bureau of Statistics.

3


EmploymentAustralian Bureau of Statistics quarterly data from May 2012 indicate that around 120 700 people were employed in South Eastern New South Wales (Figure 3). The region accounts for 3 per cent of the total number of people employed in New South Wales and 10 per cent of all people employed in the agriculture, forestry and fishing sector.

In the South Eastern region, the public administration and safety sector is the largest employer (21 800 people), followed by health care and social assistance (15 500 people), construction (11 900 people) and retail trade (11 700). Agriculture, forestry and fishing employs 8600 people, accounting for 7 per cent of total regional employment.

Figure 3 Employment profile, South Eastern New South Wales, May quarter 2012

Other

Information media and telecommunications

Mining

Arts and recreation services

Transport, postal and warehousing

Administrative and support services

Manufacturing

Accommodation and food services

Agriculture, forestry and fishing

Education and training

Professional, scientific and technical services

Retail trade

Construction

Health care and social assistance

Public administration and safety

0 5 10 15 20 25'000 employed total

Source: Australian Bureau of Statistics.

Farm financial performance—Australia and New South WalesEach year, ABARES interviews Australian broadacre and dairy producers as part of its annual survey program. Broadacre industries covered in this survey include the grains, grains–livestock, sheep, beef and sheep–beef industries. The information collected provides a basis for analysing the current financial position of farmers in these industries and expected changes in the short term. This paper uses data from the ABARES Australian agriculture and grazing industries survey (AAGIS) and Australian dairy industry survey (ADIS) to provide a comparison of estimates of financial performance indicators (Box 1) for farms in Australia and New South Wales. Financial performance is also analysed for the dairy sector of the south coast and Illawarra region of New South Wales, the South Eastern New South Wales – Eastern Victoria forestry sector, and the fisheries sector of New South Wales.

4


Box 1 Major financial performance indicators

Total cash receipts: total revenues received by the business during the financial year.

Total cash costs: payments made by the business for materials and services and for permanent and casual hired labour (excluding owner manager, partner and family labour).

Farm cash income: total cash receipts – total cash costs

Farm business profit: farm cash income + changes in trading stocks – depreciation – imputed labour costs

Profit at full equity: return produced by all the resources used in the business.

farm business profit + rent + interest + finance lease payments – depreciation on leased items

Rate of return: return to all capital used

Performance of broadacre farms—Australia and New South WalesNationally, average farm cash income for broadacre farms increased from $59 400 in 2009–10 to $117 300 in 2010–11. It is projected to decline to $116 000 in 2011–12, which is still 39 per cent above the average of $83 200 in real terms (in 2011–12 dollars) for the 10 years to 2010–11 (Figure 4, Table 2). In 2011–12, average to above average seasonal conditions for most Australian broadacre farms sustained high grain and livestock production and as a result average farm cash income is projected to be among the highest recorded (in real terms) since 2001–02 (Figure 4).

Well above average rainfall resulted in record crop production and good pasture growth for NSW broadacre farms in 2010–11. Farm cash income averaged $100 500 per farm, up from $45 750 per farm in 2009–10. Farm cash income is expected to remain similar in 2011–12, projected to be $100 000 per farm. This slight decline is a consequence of lower grain and oilseed prices and reduced crop production from the record achieved in 2010–11 offsetting improved incomes for livestock producers. The projected farm cash income is still 67 per cent above the average farm cash income in the 10 years to 2010–11 (in real terms).

Figure 4 Real farm cash income, broadacre industries

average per farm

5


p Preliminary estimate. y Provisional estimate.

Table 2 Financial performance, broadacre industries

average per farm New South Wales Australia

2009–10

2010–11p

2011–12y

2009–10

2009–11p

2010–12y

Receipts

Crops $ 98 440 159 400 (7) 147 000 136 320 177 700 (5) 184 000

Beef cattle sales $ 88 860 73 100 (15) 73 000 89 010 96 500 (7) 94 000

Sheep and lambs $ 57 350 59 700 (8) 64 000 46 520 56 200 (5) 57 000

Wool $ 29 910 36 700 (9) 37 000 27 590 35 400 (6) 36 000

Total cash receipts $ 311 800 364 400 (7) 349 000 342 160 409 200 (4) 407 000

Costs

Sheep and lamb purchases

$ 9 910 12 400 (14) 8 000 7 660 10 200 (8) 7 000

Beef cattle purchases

$ 19 240 16 700 (19) 11 000 17 310 20 000 (17)

14 000

Fodder $ 7 070 4 600 (236) 3 000 9 250 6 900 (55)

4 000

Fertiliser $ 19 930 21 200 (8) 23 000 28 490 29 700 (5) 32 000

Sprays $ 19 780 18 900 (9) 19 000 22 180 22 400 (6) 24 000

Fuel, oil and lubricants

$ 19 740 19 700 (7) 21 000 21 340 21 800 (3) 24 000

Repairs and maintenance

$ 24 600 24 800 (6) 28 000 25 260 25 600 (4) 29 000

Interest payments $ 35 400 32 800 (12) 29 000 33 260 34 100 (8) 32 000

Hired labour $ 9 710 8 900 (20) 9 000 11 190 10 800 (9) 11 000

Total cash costs $ 266 040 263 900 (8) 250 000 282 760 291 900 (5) 291 000

Financial

performance

Farm cash income $ 45 750 100 500 (9) 100 000 59 400 117 300 (5) 116 000

Farm business profit

$ –41 170 63 400 (15) 43 000 –16 460 57 500 (18)

48 000

6


Rate of return

– excluding capital appreciation

% 0 3.1 (9) 2.4 0.6 2.5 (6) 2.3

– including capital appreciation

% –1.6 2.6 (45) na 0.1 1.5 (28)

na

Farm capital, debt

and equity

Farm capital at 30 June a

$ 3 504 710 3 328 000 (5) na 4 010 550 3 919 500 (4) na

Farm debt at 30 June b

$ 511 430 438 600 (12) 388 000 492 540 460 400 (8) 435 000

Equity ratio at 30 June bc

% 85.1 86.4 (1) na 87.1 87.7 (1) na

Note: Figures in parentheses are standard errors expressed as a percentage of the estimate provided. a Excludes leased plant and equipment. b Average per responding farm. c Equity expressed as a percentage of farm capital. p Preliminary estimate. y Provisional estimate. na Not available.

Performance of grains industry farms—Australia and New South WalesAverage farm cash income for Australian grains industry farms—defined as farms in the grains and grains–livestock industries—improved significantly in 2010–11 compared with 2009–10. This improvement was because of large increases in grain and oilseed production in New South Wales, Victoria, Queensland and South Australia, combined with higher grain and oilseed prices (Figure 5). At the same time, there was only a relatively small rise in total cash costs resulting mainly from higher expenditure on fertiliser, fuel, crop chemicals, interest payments and costs associated with harvesting a larger crop than in 2009–10.

In 2010–11, improved seasonal conditions in New South Wales resulted in a doubling of winter grain and oilseed production compared with 2009–10. Grain prices received remained strong despite significant downgrading of crop quality because of wet conditions around harvest time. Farm cash income increased from an average of $33 820 per farm in 2009–10 to average $151 200 per farm in 2010–11. This estimate of average farm cash income is the largest for NSW grain farms since 2001–02, and 84 per cent higher than the 10-year average to 2009–10 (in real terms).

Although Australian grain and oilseed production is forecast to reach a record high in 2011–12, lower prices for most grains and oilseeds, together with increases in farm cash costs, are projected to result in a fall in overall average farm cash income for grains industry farms. Nationally, farm cash income is projected to average $151 000 per farm in 2011–12, significantly below the average farm cash income for 2010–11, but still around 31 per cent above the industry average for the previous 10 years (Figure 5).

Figure 5 Real farm cash income, grains industry

average per farm

7



Farm cash income is projected to have declined in New South Wales to an average of $129 000 per farm in 2011–12. Crop production declined from the record achieved in 2010–11 and, in combination with lower prices for grain, is projected to have resulted in farm cash receipts declining by around $49 000 per farm. This decline is expected to be partly offset by a fall in total cash costs of around $26 000 per farm because of reduced interest repayments and payments to sharefarmers.

Performance of sheep industry farms—Australia and New South WalesIn 2010–11, improved seasonal conditions in the eastern states and higher sheep, lamb and wool prices led to a sharp increase in the average farm cash income for Australian sheep industry farms to $97 800 (Figure 6). Higher total cash receipts more than offset an increase in cash costs that was driven by increased sheep purchases and higher expenditure on repairs.

Average farm cash income for New South Wales sheep farms increased from $82 690 per farm in 2009–10 to $95 400 in 2010–11. Well above average rainfall boosted pasture growth and led to a sharp reduction in expenditure on fodder. Expenditure on sheep purchases increased but, overall, total farm cash costs declined. Lower cash costs and higher receipts from wool due to increased prices more than offset lower receipts from sheep and lambs as turn-off was reduced to rebuild flocks.

In 2011–12, farm cash income for Australian sheep industry farms is projected to increase further to average $113 000 per farm, mainly because of higher wool prices and a small increase in lamb and sheep receipts. This is expected to more than offset a rise in farm expenditure from increased sheep purchases and higher expenditure on repairs and maintenance.

Similarly, average farm cash income for New South Wales sheep industry farms is estimated to have risen to $109 000 per farm in 2011–12. Total cash receipts are estimated to have increased as a result of higher wool prices and an increase in the number of lambs sold, combined with

8


higher sale weights. This increase is estimated to have more than offset a small increase in total cash costs mainly due to increased expenditure on fertiliser, chemicals, repairs and hired labour. Expenditure on sheep purchases is estimated to have remained relatively high, but to have declined from near record levels in 2009–10 and 2010–11.

If achieved, the farm cash income projected for both Australian and NSW sheep industry farms in 2011–12 will be the highest in over 20 years (in real terms) (Figure 6).

9


Figure 6 Real farm cash income, sheep industry

average per farm


Performance of beef industry farms—Australia and New South WalesIn 2010–11, beef cattle turn-off slowed in the eastern states and beef cattle numbers increased. In the Northern Territory herd numbers remained relatively stable despite an increase in turn-off, and in Western Australia cattle numbers decreased as dry conditions resulted in higher turn-off. Overall, the average number of cattle that beef industry farms sold remained similar to 2009–10, but increases in average prices received for cattle resulted in total cash receipts for beef industry farms rising by around 8 per cent. Although expenditure on beef cattle purchases increased, total cash costs were reduced on average, mainly as a result of improved seasonal conditions leading to a reduction in expenditure on fodder. Overall, with total cash receipts increasing and total cash costs decreasing, farm cash income increased to average $59 100 per farm for beef industry farms.

In New South Wales, the marked improvement in pasture availability in 2010–11 resulted in a sharp reduction in the number of beef cattle sold and a fall in total farm cash receipts as farmers started to rebuild herds. Expenditure on fodder was sharply reduced; however, with expenditure on cattle purchases increasing, it was not enough to prevent a decline in farm cash income from an average of $41 990 per farm in 2009–10 to $35 600 per farm in 2010–11.

Lower expenditure on beef cattle purchases, together with reduced expenditure on fodder and interest payments, is projected to result in average total cash costs for beef industry farms in Australia declining by around 10 per cent in 2011–12. With only a small reduction in cash receipts and much larger reduction in cash costs, average farm cash income is projected to increase to average $67 000 per farm in 2011–12 (Figure 7). If achieved, this would be around 6 per cent above the average for the previous 10 years (in real terms).

10


Figure 7 Real farm cash income, beef industry

average per farm

1992-93

1993-94

1994-95

1995-96

1996-97

1997-98

1998-99

1999-00

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11p

2011-12y 0

20 000

40 000

60 000

80 000

100 000

120 000

Australia New South Wales

2011-12

$'000


In New South Wales, higher beef prices and increased sale weights for beef cattle, combined with a decrease in total cash costs, are estimated to result in farm cash income for beef industry farms rising to average $42 000 per farm in 2011–12. Overall, total cash costs for NSW beef industry farms are estimated to have declined as beef cattle purchases were reduced from the historical highs recorded in 2009–10 and 2010–11.

Performance of dairy industry farms—Australia and New South WalesNationally, average farm cash income for dairy industry farms increased from $75 110 per farm in 2009–10 to $141 000 per farm in 2010–11, the highest since 2007–08, in real terms (Figure 8). The increase in average farm cash income was mainly because of higher prices paid for milk in regions producing manufacturing milk. Milk production remained similar to 2009–10 despite improved grazing conditions and increased availability of irrigation water.

11


Figure 8 Real farm cash income, dairy industry

average per farm

1992-93

1993-94

1994-95

1995-96

1996-97

1997-98

1998-99

1999-00

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11p

2011-12y 0

20 000

40 000

60 000

80 000

100 000

120 000

140 000

160 000

180 000

200 000

Australia New South Wales

2011-12

$'000


In contrast, overall milk prices received were lower for New South Wales in 2010–11 resulting in average farm cash income for New South Wales dairy farms declining by 22 per cent, from an average of $173 330 per farm in 2009–10 to $137 700 per farm in 2010–11 (Table 3).

However, in southern dairying regions of New South Wales producing mainly milk for manufacturing, average prices received for milk increased and, in combination with a rise in milk production, resulted in higher average farm cash income in 2010–11.

In 2011–12, despite a small increase in national milk production, lower milk prices are projected to result in reduced average financial performance of dairy farms in all states except Tasmania. Farm cash income for Australian dairy farms is projected to decline slightly to average $136 000 per farm in 2011–12, which is still around 30 per cent above the average for the 10 years to 2010–11 (Table 3, Figure 8).

In New South Wales, increased milk production is projected to have largely offset the effect of lower milk prices, resulting in only a small reduction in farm receipts in 2011–12. Total cash costs are projected to have decreased slightly as further reductions in expenditure on fodder purchases offset increases in other cash costs. Farm cash income for NSW dairy farms in 2011–12 is projected to average $137 000 per farm, which is similar to that recorded in 2010–11. Average farm cash income for NSW dairy farms is projected to remain high in historical terms, around 34 per cent above the 10-year average to 2010–11, in real terms (Figure 8).

In southern New South Wales, the increase in milk production is estimated to have been larger and average farm cash income is estimated to have increased slightly in 2011–12.

12


Table 3 Financial performance, dairy industry

average per farmNew South Wales Australia

2009–10

2010–11p

2011–12y

2009–10

2010–11p

2011–12y

Receipts

Milk – net of freight $ 631 570 609 600 (3) 587 000 442 140 510 900 (4) 498 000

Total cash receipts $ 699 710 679 300 (4) 660 000 508 490 575 700 (4) 563 000

CostsFodder $ 180 830 165 400 (6) 148 000 129 650 119 400 (5) 108 000

Fertilizer $ 31 670 30 900 (10) 33 000 30 260 29 900 (8) 36 000

Fuel, oil and lubricants

$ 16 130 17 000 (6) 20 000 14 290 13 600 (5) 16 000

Repairs and maintenance

$ 39 440 45 400 (9) 49 000 33 860 34 700 (7) 38 000

Interest payments $ 33 700 53 500 (21) 54 000 47 090 52 100 (8) 50 000

Hired labour $ 39 220 45 200 (11) 46 000 25 040 26 600 (10)

29 000

Total cash costs $ 526 380 541 600 (6) 523 000 433 380 434 700 (4) 427 000

Financial performanceFarm cash income $ 173 330 137 700 (13) 137 000 75 110 141 000 (9) 136 000

Farms with negative farm cash income

% 8 10 (42) 10 24 11 (42)

12

Farm business profit $ 85 660 52 800 (36) 21 000 –3 660 69 200 (17)

44 000

Rate of return

– excluding capital appreciation

% 3.3 3.0 (11) 2.4 1.6 3.9 (8) 3.1

Farm capital and debt Farm capital at 30 June a

$ 4 163 070 3 964 900 (0) na 3 614 800 3 428 700 (0) na

Farm debt at 30 June b

$ 525 390 602 700 (10) 560 000 666 390 663 800 (10)

660 000

Equity ratio at 30 June bc

% 87 85 (2) na 82 81 (2) na

Note: Figures in parentheses are standard errors expressed as a percentage of the estimate provided. a Excludes leased plant and equipment. b Average per responding farm. c Equity expressed as a percentage of farm capital. p Preliminary estimate. y Provisional estimate. na Not available.

Performance of dairy industry farms—South Eastern New South Wales and IllawarraThe South Eastern region accounts for around 11 per cent of dairy cattle in New South Wales and around 80 per cent of these cattle are located in the Bega Valley Shire.

Average farm cash incomes for South Eastern region dairy industry farms were significantly higher than the average for New South Wales as a whole in both 2009–10 and 2010–11 (Table 4).

In 2010–11, average farm cash incomes increased for South Eastern region dairy farms. Higher milk prices increased milk receipts and improved seasonal conditions resulted in reduced expenditure on fodder and lower average total farm cash costs.

13


In 2011–12, increases in milk production are projected to have resulted in a further small improvement in total cash receipts. However, increases in farm cash costs including increased expenditure on dairy cattle and fodder, fertiliser and electricity are projected to result in farm cash income falling slightly to an average of $238 000 per farm.

Table 4 Financial performance, South Eastern NSW dairy industry farms

2009–10 2010–11p 2011–12y

Physical

Dairy cows no. 408 429 (4) 437

Milk production L 2 439 000 2 489 400 (9) 2 619 000

Receipts

Milk – net of freight $ 1 103 400 1 192 200 (8) 1 235 000

Total cash receipts $ 1 278 100 1 283 100 (8) 1 317 000

Costs

Fodder $ 479 000 382 100 (6) 403 000

Hired labour $ 101 500 116 800 (19) 127 000

Repairs and maintenance $ 66 200 78 000 (16) 85 000

Fertiliser $ 52 300 58 900 (24) 71 000

Interest payments $ 51 500 55 800 (27) 55 000

Electricity $ 29 600 39 200 (27) 43 000

Total cash costs $ 1 082 300 1 030 900 (8) 1 078 000

Financial performance

Farm cash income $ 195 800 252 200 (26) 238 000

Farm business profit $ 101 100 128 500 (44) 122 000

Rate of return excluding capital appreciation % 2.4 2.9 (26) 2.8

Farm capital and debt

Farm capital at 30 June a $ 6 878 800 6 964 200 (12) 6 964 000

Farm debt at 30 June bc $ 841 200 731 800 (28) 721 000

Equity ratio at 30 June bd % 88 89 (3) na

Note: Figures in parentheses are standard errors expressed as a percentage of the estimate provided. a Excludes leased plant and equipment. b Average per responding farm. c Harvest loans are not included in farm debt. d Equity expressed as a percentage of farm capital. p Preliminary estimates. y Provisional estimates. na Not available.

14


Forestry in South Eastern New South Wales – Eastern VictoriaIn 2012, ABARES examined the effects of climate change across six study regions including South Eastern New South Wales – Eastern Victoria (ABARES 2012). This area contains the regional centres of Bega, Braidwood, Cooma, Goulbourn, Narooma and Yass.

In 2009–10, the total forest area potentially available for timber production in this region was 6.6 million hectares (Figure 9). Of this, 421 000 hectares was plantation forests. Total logs harvested in this region were 9.7 million cubic metres, which accounted for nearly 39 per cent of total logs harvested in Australia. The total value of logs harvested in the region was estimated to be around $615 million.

Figure 9 Forest potentially available for timber production, South Eastern New South Wales – Eastern Victoria study region, 2009–10

Source: ABARES 2012

Most of the volume of logs harvested was sourced from softwood and hardwood plantations (7.1 million cubic metres of sawlogs and pulplogs) with a total value of $424 million. Approximately 6.5 million cubic metres of logs were harvested from softwood plantations, valued at $389 million, while 543 000 cubic metres of logs were harvested from hardwood plantations, valued at $35 million (Table 5). Logs harvested from native forests accounted for 2.6 million cubic metres of sawlogs and pulplogs in this region, with a total value of $191 million (Table 5).

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Both native and plantation forests in this region provide a significant portion of total sawlogs and pulplogs produced in Australia. In 2009–10, 0.9 million cubic metres of native forest sawlogs (34 per cent of the total native sawlogs harvest in Australia) and 1.8 million cubic metres of native pulplogs (46 per cent of the total native pulplogs harvest in Australia) were harvested in the study region shown in Figure 9. Similarly, 3.9 million cubic metres of softwood plantation sawlogs (41 per cent of the total softwood plantation sawlogs harvest in Australia) and 2.7 million cubic metres of softwood plantation pulplogs (60 per cent of the total softwood plantation pulplogs harvest in Australia) were harvested in this region.

Table 5 South Eastern NSW – Eastern Victoria log harvest, volume and value, 2009–10Volume Value

‘000 m3 $m

Sawlogs

Softwood plantation 3 881 286

Hardwood plantation 44 3

Native forest 853 84

Pulplogs

Softwood plantation 2 650 103

Hardwood plantation 499 32

Native forest 1 796 107

Total 9 749 615

Note: Volume and value does not include minor log products and cypress pine sawlogs harvested from native forests.Source: ABARES 2012

The ABARES (2012) assessment of the potential effects of climate change on forests and forestry for the study region estimated the projected changes in the median supply of logs from native and plantation forests in 2030 and 2050. Two greenhouse gas emission scenarios developed by the Intergovernmental Panel on Climate Change, referred to as A1B and A2, were selected for this study. To provide a reference for comparison, the baseline estimate assumed no effects of climate change on future log supply. The baseline and scenario log supply projections estimated the actual log capacity from native and plantation forests rather than volumes harvested.

ABARES baseline projections (no effects of climate change) for the study region estimated the annual supply of logs to increase to 14.8 million cubic metres in 2030 and 15.2 million cubic metres in 2050 as a result of increased availability from native and plantation forests as forests mature. Under the median estimates of both emission scenarios, the annual supply of logs is projected to be lower in 2030 and 2050 than the baseline projection for the study region. The median estimates under the two emissions scenarios suggest that log supply from the study region is 14–16 per cent lower in 2030 and 21–22 per cent lower in 2050 than the baseline log supply projection. The projected effects on log supply do not take into account any adaptation measures that could be adopted. However, these estimates are still well above the 2009–10 total log production of 9.7 million cubic metres for the study region.

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Fisheries in New South WalesIn 2010–11, the gross value of New South Wales fisheries production is estimated to be around $124 million, a decrease of 7 per cent ($9.6 million) from 2009–10. New South Wales is estimated to account for 5.6 per cent of the total value of Australian fisheries production in 2010–11. Its contribution has remained relatively stable over the past 10 years.

The importance of wild catch fisheries production in New South Wales has decreased substantially over the past decade (Figure 10). In 2000–01, the value of wild catch production (in 2010–11 terms) was $139 million, representing around 71 per cent of total NSW fisheries production. By 2010–11, the value of wild catch is estimated to have dropped to $75 million, representing around 61 per cent of the state’s total value of fisheries output. Most of the reduction in wild catch production is attributed to the decrease in output of prawns, abalone and other crustaceans and molluscs such as pipis, octopus, crabs and squid.

Figure 10 Real value of New South Wales fisheries production

2000-012001-02

2002-032003-04

2004-052005-06

2006-072007-08

2008-092009-10

2010-11p

50

100

150

200

wild catch aquaculture

2010-11 A$m

p Preliminary estimates.

In 2010–11, the volume of New South Wales wild catch production is estimated to have reduced by 14 per cent (2252 tonnes) to 13 479 tonnes, compared with 2009–10. The key wild caught species were prawns, rock lobster, crabs and sea mullet. Together, these species accounted for 36 per cent of total volume and 45 per cent of the total value of NSW wild catch production in 2010–11.

In the future, wild catch production in New South Wales is likely to be affected by the final Temperate East Commonwealth Marine Reserves Network proposal (announced by the Australian Government on 14 June 2012). However, the potential effect is estimated to be small relative to the gross value of production of fisheries in the region affected. In recent analysis by ABARES it was estimated that the proposed Temperate East Commonwealth Marine Reserves Network would lead to a potential displacement of commercial catch of 89.1 tonnes with an annual average gross value of production of $0.56 million (0.7 per cent of the value of NSW wild caught fisheries). The NSW towns that are estimated to face most of the potential displacement

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of gross value of production from fishing by the final proposed network are Forster and Coffs Harbour ($0.074 and $0.054 million, respectively).

Figure 11 Real value of New South Wales fisheries production, by key species group

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rock lobster

crabs

sea mullet

abalone

oysters

prawns

2010-11 A$m

Note: Production value includes both wild catch and aquaculture. p Preliminary estimates.

In the New South Wales aquaculture sector, oyster production remains the dominant fishery commodity in 2010–11. It accounted for 80 per cent of the total value and 83 per cent of the total volume of NSW total aquaculture production in 2010–11. In contrast to the substantial decline in the New South Wales wild catch sector, the real value of New South Wales aquaculture products has remained relatively constant over the past decade. In 2000–01, the real value of NSW aquaculture production was $59 million (in 2010–11 terms), compared with $54 million in 2009–10 (in 2010–11 terms). However, in 2010–11 the real value of NSW aquaculture production fell by 11 per cent to $48 million, which is the lowest in the past 10 years.

Values of prawn (both wild caught and aquaculture) and abalone production have declined substantially since 2000–01 (Figure 11). The value of aquaculture and wild caught prawn production fell by $31 million (in 2010–11 terms) from $47 million in 2000–01 to an estimated $16 million in 2010–11. This was the result of a 49 per cent (1480 tonnes) reduction in the volume of production and a 39 per cent decline in the real unit price. The value of abalone production fell by $18 million (in 2010–11 terms) over the same period, from $21 million in 2000–01 to $3 million in 2010–11. This was also attributable to falls in both volume of production (70 per cent decline; 217 tonnes) and the real unit rice of abalone (55 per cent decline). Most New South Wales prawn production supplies the domestic market, while a large proportion of abalone is exported to Japan and Hong Kong.

In 2010–11, New South Wales fisheries product exports were valued at $16 million, representing a 30 per cent decline in real value compared with 2009–10. A key driver of this decline was a reduction in prawn exports, which fell by 98 per cent in both volume and value—reductions of 307 tonnes and $4.6 million, respectively (Figure 12). Overall, the real value of New South Wales fisheries product exports has continually declined since 2003–04, reflecting falls in the production values of key fishery products including abalone, prawns, jack mackerel, school whiting and silver trevally.

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Figure 12 Real values of New South Wales fisheries exports, by key species group

2000-01

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2002-03

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2010-11

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fish abalone rock lobster prawns other

2010-11 A$m

Japan and Hong Kong are the major destinations for New South Wales fisheries exports, accounting for 43 per cent and 28 per cent of the total value of exports in 2010–11, respectively (Figure 13). Other major export destinations include Chinese Taipei (8 per cent), Italy (5 per cent), China (4 per cent) and New Zealand (4 per cent).

Figure 13 Value of New South Wales exports in 2010–11, by destination

Japan 43%

Hong Kong (SAR of China) 28%

Chinese Taipei8%

Italy 5%

China 4%

New Zealand 3%

other8%

Recreational gamefishing is a significant recreational activity in New South Wales. ABARES has recently investigated the social and economic value of recreational gamefishing in key gamefishing areas of New South Wales and Queensland. For New South Wales, the analysis was conducted via surveys to gamefishers, local businesses and community members in Port Stephens and Bermagui. The results revealed that gamefishing activities are responsible for considerable economic activity in both these regions, although activity levels fluctuate markedly within fishing seasons and from year-to-year. Boat equipment and fishing gear dominated expenditure during gamefishing trips. Many gamefishers also spend considerable amounts on

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travel and accommodation, travelling large distances to areas where gamefish are traditionally abundant or where catch rates are currently high. Tournament gamefishers in Port Stephens and Bermagui spent an estimated $20 million and $7 million per year, respectively, on gamefishing trips. Individual expenditure on tournament trips was also highest in Port Stephens.

Small regional centres like Bermagui, which have relatively low economic diversity, were found to depend more on large gamefishing tournaments than businesses in larger regional centres such as Port Stephens. This is because small regional centres do not have a diverse customer base and gamefishing events can attract large numbers of participants, along with their friends and families. The importance of gamefishing to local communities goes beyond the generation of income and employment. The survey results showed that gamefishing also contributes socially by bringing people together and enhancing community identity.

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Outlook for selected commoditiesEconomic overview The pace of global economic growth has weakened since the beginning of 2012. Although activity in emerging economies, particularly in Asia, continues to underpin world economic growth, considerable uncertainty remains in the OECD economic outlook, especially over implementation and likely impact of austerity measures in the euro area (Figure 14).

Figure 14 Regional economic growth

OECD non-OECD Asia Latin America Russia, Ukraine, Eastern Europe

World%123456789

10

2011 2012a 2013a

a ABARES assumption.

Private sector demand across the OECD is assumed to remain weak in the short term. Continued weakness in regional housing and labour markets is expected to be a key constraint to any significant recovery in consumer spending. For emerging economies, particularly China and India, the short-term outlook remains positive, although an easing of economic growth is expected.

The Australian dollar has remained strong against the US dollar, trading around US105c in early August. The value of the Australian dollar is assumed to remain relatively high in the remainder of 2012–13. An assumed gradual strengthening in world economic growth will help support the Australian dollar as world demand for commodities improves. In addition, interest rate differentials, relative to the United States and other major OECD countries, will provide support for the Australian exchange rate (Table 6).

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Table 6 Key macroeconomic assumptionsWorld 2011 2012 a 2013

Economic growth

OECD % 1.6 1.6 2.1

Non-OECD Asia % 7.8 7.2 7.9

Latin America % 4.5 3.7 4.0

Russian Federation, Ukraine, Eastern Europe % 4.9 3.0 3.5

World b % 3.9 3.5 4.0

Australia 2010–11 2011–12 a 2012–13

Economic growth % 1.9 3.0 3.25

Inflation % 3.1 2.4 2.5

Interest rates c % 6.6 6.2 5.6

Australian exchange rates

US$/A$ 0.99 1.03 1.00

TWI for A$ d 74 76 74

a ABARES assumption. b Weighted using 2011 purchasing power parity (PPP) valuation of country gross domestic product by the International Monetary Fund. c Large business weighted average variable rate on credit outstanding. d Base: May 1970 = 100.Sources: ABARES; Australian Bureau of Statistics; International Monetary Fund; Organisation for Economic Co–operation and Development; Reserve Bank of Australia

WheatThe world wheat indicator price (US no. 2 hard red winter, fob Gulf) is forecast to remain favourable in 2012–13. This forecast reflects the effects of the dry conditions presently being experienced in the United States, which have adversely affected US grain production and placed upward pressure on world prices.

Following record production in the previous season, world wheat production is forecast to fall by 2 per cent in 2012–13 to around 678 million tonnes.

World wheat consumption is forecast to fall by 1 per cent in 2012–13 to around 679 million tonnes. World food use is forecast to rise by 1 per cent to around 464 million tonnes, reflecting population growth. Human consumption of wheat for food accounts for a little less than 70 per cent of world wheat consumption. World feed use of wheat is forecast to fall by around 10 per cent in 2012–13 to around 127 million tonnes in response to an expected fall in world supplies of feed wheat.

World trade in wheat is forecast to fall by 5 per cent in 2012–13 to around 136 million tonnes; an anticipated increase in exports of milling wheat is expected to be more than offset by a fall in exports of feed wheat. Wheat exports from the Black Sea region and the European Union are forecast to fall as a result of forecast falls in production.

For Australia, wheat production is forecast to fall by 18 per cent in 2012–13 to around 24 million tonnes. This reflects a forecast fall in planted area and an assumed return of yields to historical averages from the highs of last season. The area planted to wheat is estimated to have fallen by 5 per cent in 2012–13.

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Figure 15 Australian winter crop production

f ABARES forecast.

In New South Wales, the area planted to wheat is estimated to have decreased by around 5 per cent in 2012–13 to just over 3.8 million hectares. A decline in wheat prices around the time of sowing contributed to this estimated decline. Assuming average seasonal conditions, total wheat production is forecast to fall by 13 per cent to around 6.9 million tonnes.

Australian wheat exports are forecast to be largely unchanged in 2012–13 at around 21 million tonnes. This reflects a forecast drawdown in existing stocks and the large harvest of 2011–12, which will contribute to export shipments in the first six months of the July to June year.

Coarse grainsWorld coarse grain prices are forecast to be relatively high in 2012–13. This follows the world indicator price averaging $281 a tonne in 2011–12. This assessment reflects mainly the effect of current dry conditions in the United States, which are expected to lead to lower US corn production.

Given the effect of adverse seasonal conditions in the United States, world coarse grains production is unlikely to increase markedly in 2012–13, largely as a result of an expected fall in US corn production. World barley production is forecast to increase in 2012–13, reflecting an expected increase in harvested area in major producing nations and replanting of failed 2012–13 winter crops with spring barley in the European Union. However, adverse conditions in the Ukraine and the Russian Federation present a downside risk to this forecast.

In Australia, the area planted to barley in 2012–13 is estimated to have fallen by 4 per cent to around 3.9 million hectares. Total barley production is forecast to fall by 15 per cent to around 7.3 million tonnes. The total volume of barley exports in 2012–13 is forecast to fall by 27 per cent to 4.7 million tonnes.

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Mt

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QueenslandVictoria

South Aus-tralia

Western AustraliaNew South

Wales

Australia


In New South Wales, the area planted to barley is estimated to have decreased by around 5 per cent in 2012–13 to 840 000 hectares. Lower barley prices at the time of sowing are estimated to have resulted in growers favouring production alternatives. Assuming average seasonal conditions, barley production is forecast to fall by 12 per cent to around 1.5 million tonnes.

Total grain sorghum production in Australia is estimated to have risen by 13 per cent in 2011–12 to around 2.3 million tonnes. This production increase mainly reflects an increase in yields as a result of favourable seasonal conditions.

However, in New South Wales grain sorghum production is estimated to have decreased by 17 per cent in 2011–12 to around 680 000 tonnes, mainly reflecting a 13 per cent fall in planted area. Seasonal conditions were generally favourable and yields are estimated to have been above average in most regions, particularly for early sown crops.

OilseedsThe world oilseeds indicator price (soybeans, cif, Rotterdam) is forecast to remain relatively high in 2012–13. This forecast reflects adverse seasonal conditions in the United States, which has led to a decline in the condition of the soybean crop. However, soybean production is forecast to increase in the other two main producing countries, Brazil and Argentina.

World oilseeds production is forecast to increase by 9 per cent in 2012–13 to a record 473 million tonnes (Figure 16). This forecast increase is driven by a forecast rise in production of all major oilseeds in 2012–13, with the most significant increases being forecast for soybeans and canola.

World oilseeds consumption is forecast to rise by 3 per cent in 2012–13 to around 466 million tonnes, with world vegetable oil consumption forecast to increase by 3 per cent to 157 million tonnes. The forecast increase in world oilseeds consumption mainly reflects the effect of consumption growth in developing countries and continued strong demand for biodiesel.

Figure 16 World oilseeds production

f ABARES forecast.

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Protein meal consumption is forecast to increase by 4 per cent in 2012–13 to 263 million tonnes, driven primarily by feed requirements in China, Brazil and India. China remains the world’s largest consumer of protein meal and is forecast to increase consumption by 6 per cent in 2012–13 to 69 million tonnes, supported by higher demand from livestock and aquaculture production.

The volume of world oilseeds trade is forecast to rise by 8 per cent in 2012–13 to around 113 million tonnes, driven by increased production of all major oilseeds. World trade in soybeans is forecast to rise by 9 per cent to a record 96 million tonnes in 2012–13, supported by higher Chinese imports as a result of lower domestic production. World canola trade is forecast to rise by 2 per cent to almost 12 million tonnes, reflecting increased European imports. World trade in sunflower seeds is forecast to rise by 5 per cent in 2012–13 to 2.3 million tonnes.

World closing oilseeds stocks are forecast to rise by 9 per cent in 2012–13 to around 72 million tonnes as a result of expected higher world production. Soybean and sunflower seed closing stocks in 2012–13 are forecast to increase by 10 per cent and 6 per cent to 59 million tonnes and 2.1 million tonnes, respectively. Conversely, canola closing stocks are forecast to decline by 20 per cent to 4.5 million tonnes, reflecting continued high demand for canola in 2012–13.

The area planted to canola in New South Wales is estimated to have risen by 39 per cent in 2012–13 to around 550 000 hectares. Timely rainfall and favourable prices at the time of sowing made canola production more attractive than production alternatives. Assuming sufficient and timely rainfall over the growing season, canola production is forecast to rise by 15 per cent in New South Wales to around 825 000 tonnes.

WoolThe Australian Eastern Market Indicator (EMI) price for wool is forecast to fall 11 per cent to average 1070 cents a kilogram clean in 2012–13 (Figure 17). The forecast decline in the EMI price in 2012–13 reflects higher supplies of wool and the effect on retail demand for wool textiles and apparel of an assumed economic slowdown in Europe and weak growth in consumer demand in the United States.

Figure 17 Australian Eastern Market Indicator wool price

weekly, ended 28 June 2012

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At the start of 2011–12 the EMI was at 1409 cents a kilogram clean but by the end of 2011–12 had fallen to 1076 cents a kilogram clean. Despite this fall, the year average EMI for 2011–12 is estimated to have been around 6 per cent higher than the previous year.

An assumed slowdown in economic activity in many European countries and slow growth in consumer demand in the United States are expected to dampen demand for wool in 2012–13. However, while demand for wool apparel in China softened in the first half of 2012, a gradual recovery is expected during 2012–13.

Australian shorn wool production is forecast to increase by 4 per cent to 385 000 tonnes in 2012–13. Reflecting continuing flock rebuilding, the Australian sheep flock is forecast to increase by 4 per cent to 81 million head in 2012–13, with sheep shorn numbers to increase by around 4 per cent to 89.4 million head. Assuming favourable seasonal conditions in primary wool growing areas, the average wool cut per head is expected to remain similar to 2011–12 at 4.3 kilograms.

Wool production in New South Wales is estimated to have fallen slightly in 2011–12, reflecting a lower average fleece weight and a fall in the number of sheep shorn. In 2012–13, wool production in New South Wales is expected to remain largely unchanged.

With favourable prices for sheep meat expected in 2012–13, the shift toward sheep meat production is likely to continue. This trend has been reflected in changes in the micron composition of the Australian wool clip toward coarser wool. For example, the volume of wool that is 32.6 microns and greater, tested by the Australian Wool Testing Authority in the 10 months ending April 2012, increased by 9 per cent, year-on-year.

An assumed improvement in economic activity in some export markets, particularly China, is expected to increase Australian wool exports by 3 per cent to 420 000 tonnes greasy in 2012–13.

Despite an expected increase in the volume of wool exports, forecast lower prices are expected to result in the value of Australian wool exports falling by around 10 per cent to $2.7 billion in 2012–13.

While there was rebuilding of wool stocks during 2011–12, stocks held on farm and in broker stores were relatively low as at June 2012. An increase in stocks is expected to occur over 2012–13 in response to higher wool production.

Sheep meatThe Australian weighted average saleyard price for lambs is forecast to increase by 1 per cent in 2012–13 to 485 cents a kilogram as higher export and domestic demand offset the effect of an expected rise in lambs offered for sale. This forecast marginal price rise comes after an estimated 12 per cent fall in 2011–12, largely as a result of increased lamb yardings and a significant decline in prices for lambskin.

The weighted average saleyard price for sheep is forecast to increase by 3 per cent to 340 cents a kilogram in 2012–13, following an estimated decline of 20 per cent to 330 cents a kilogram. The forecast increase largely reflects strong demand growth in export markets for live sheep and mutton more than offsetting an expected increase in sheep availability.

Reflecting a significant increase in ewe numbers in 2011–12, lamb markings are forecast to rise by 8 per cent to just over 35 million head in 2012–13, the highest lamb markings since 2004–05

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(Figure 18). Increased lamb availability and continued strong demand is forecast to lead to lamb slaughter rising by 5 per cent to 19.6 million head in 2012–13.

In New South Wales, lamb slaughter and production are expected to increase in the short term, following a contraction in 2010–11. In the first 11 months of 2011–12, lamb slaughter in New South Wales was around 4.3 million head, an increase of 10 per cent from the same period in 2010–11. Higher slaughter numbers and carcass weights has resulted in lamb production reaching 98 000 tonnes in the 11 months to May 2012, 16 per cent higher than the same period in 2010–11.

Figure 18 Australian lamb flock and lamb slaughter

2000-01

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opening lambs lambs marked lamb slaughter (right axis)

million head

f ABARES forecast.

Sheep slaughter rates are also forecast to rise in 2012–13 as producers turn off older ewes previously held for flock rebuilding. Sheep slaughter is forecast to increase by 24 per cent to 6.4 million head in 2012–13, compared with an estimated 5.2 million head in 2011–12.

Despite the higher slaughter rates, the Australian sheep flock is expected to continue to expand, albeit at a slower rate. In 2012–13 the flock is forecast to increase by 4 per cent to around 81 million head, following an estimated rise of 5 per cent to 78 million head in 2011–12.

Australian lamb export volumes are forecast to increase by 5 per cent to 180 000 tonnes in 2012–13, following an estimated rise of almost 10 per cent in 2011–12. While demand from developing markets is expected to rise further, the forecast increase in 2012–13 largely reflects an expected rise in exports to the United States, Australia’s largest market. Exports to the United States are forecast to rise by 12 per cent to 38 000 tonnes in 2012–13. Australian mutton exports are expected to reach 106 000 tonnes in 2012–13, a rise of 21 per cent from an estimated 88 000 tonnes in 2011–12.

The value of Australian sheep meat exports is forecast to increase by almost 11 per cent to around $1.6 billion in 2012–13, following an estimated $1.4 billion in 2011–12.

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Live sheep exports are forecast to increase by 16 per cent in 2012–13 to around 2.8 million head, following an estimated 2.4 million head shipped in 2011–12. This compares with an average of 3.6 million head in the five years to 2010–11.

Following several years of declining sheep numbers because of poor seasonal conditions, flock rebuilding in Western Australia is expected to constrain the numbers of sheep available for export from that state in 2012–13. With roughly 75 per cent of Australia’s live exports sourced from Western Australia, a reduction in the availability of sheep suitable for live export will require exporters to source sheep from South Australia and Victoria.

Beef and vealThe Australian weighted average saleyard price of beef cattle is forecast to fall by 3 per cent in 2012–13 to 320 cents a kilogram (dressed weight) (Figure 19). Over the coming year, demand for restocker cattle is expected to fall in response to successful herd rebuilding over the past two years, which has resulted in the national herd increasing to its largest since 1976–77. In addition, shifting international demand for Australian beef, from higher valued chilled and grain fed beef toward lower value frozen and grass fed varieties, is likely to adversely affect export prices. This will place downward pressure on domestic saleyard prices.

The national cattle herd is estimated to increase by 5 per cent in 2011–12 to 30.2 million head. Good rainfall in most cattle producing regions in 2011–12 contributed to continued high pasture growth and fodder production and maintenance of water supplies. In response, producers have continued to purchase young restocker cattle and have held back female cattle and calves for herd rebuilding. In 2012–13 growth in the national cattle herd is forecast to slow to 4 per cent, to around 31.4 million head.

In 2012–13 a forecast 2 per cent increase in cattle slaughter to 8.1 million head will underpin a forecast 3 per cent increase in beef production to 2.2 million tonnes. Average carcass weights in 2012–13 are expected to remain close to the record highs achieved in 2011–12, resulting in beef production growing faster than the number of cattle slaughtered. Increased import demand from the United States and many smaller markets is expected to contribute to increased yardings of older cattle.

Figure 19 Australian cattle slaughter and prices

f ABARES forecast.

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Australian beef and veal production for 2011–12 is estimated to have remained unchanged from 2010–11 at around 2.1 million tonnes. In New South Wales, beef and veal production fell by 1 per cent year-on-year over the first 11 months of 2011–12 to 424 000 tonnes. This was largely the result of a 10 per cent decline in female cattle slaughter to 587 000 head, the lowest since 1983–84. Male cattle slaughter increased by 1 per cent to 826 000 head over the same period, contributing to average slaughter weights increasing by 3 per cent year-on-year to 265 kilograms.

Australian beef and veal exports in 2012–13 are forecast to increase by 2 per cent to 970 000 tonnes (shipped weight). Shipments to the United States and many smaller markets including Chinese Taipei, the Middle East and ASEAN nations (excluding Indonesia) are forecast to rise, but exports to Japan and the Republic of Korea are forecast to decline. In these North Asian markets, ongoing competition from US beef and higher domestic production are likely to result in reduced demand for Australian beef.

Australian exports of live cattle in 2012–13 are forecast to fall by 6 per cent to 500 000 head, reflecting reduced shipments to Indonesia and limited capacity of other markets to accept surplus cattle. If the Indonesian Government leaves its 2012 live cattle import quota of 283 000 head unchanged, only 98 000 head will be exported to Indonesia during the first half of 2012–13, compared with 191 000 head for the same period last year.

DairyWorld prices of dairy products are forecast to fall in 2012–13. The combined effects of high milk production in major producing and exporting countries and an assumed economic slowdown in the European Union are expected to place downward pressure on world prices.

Milk production in most major producing and exporting countries is forecast to increase in 2012–13, albeit at a slower rate than the previous year, leading to an increase in world supplies of dairy products. After rising by 2.3 per cent in 2011–12, milk production in the European Union is expected to grow more moderately in 2012–13 in response to lower farmgate prices. In 2013 US milk production is forecast to rise by only 0.4 per cent, with expected higher milk yields marginally offsetting the effect on milk production of a projected fall in the dairy herd. Assuming average seasonal conditions, milk production in New Zealand is forecast to rise between 1 per cent and 2 per cent in 2012–13 (June to May marketing year) with a forecast 9 per cent fall in farmgate milk prices to constrain production growth.

World trade in dairy products is expected to continue to increase in 2012–13, underpinned by rising demand in Asia, the Middle East and North Africa. China, the Russian Federation and Japan are expected to remain significant importers of dairy products in 2012–13.

While Chinese imports of whole milk powder declined in the first quarter of 2012, China is expected to remain the dominant importer of whole milk powder. China’s imports are forecast to rise by 6 per cent for 2012 as a whole to around 370 000 tonnes. This will be close to double China’s imports of whole milk powder in 2009, driven particularly by growing demand for infant formula.

The Australian farmgate price for milk is forecast to fall by 10 per cent in 2012–13 to average around 37 cents a litre (Figure 20).

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Figure 20 Australian milk production and price

1990-91

1992-93

1994-95

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1998-99

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2012-13fML

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f ABARES forecast.

Assuming favourable seasonal conditions in the main dairying regions, national milk production is forecast to increase by 1.5 per cent in 2012–13 to 9.6 billion litres, following an estimated 4 per cent rise in 2011–12. Such an outcome would be the highest production since 2005–06. The forecast increase in production is expected to follow from the significant improvement in availability of irrigation water in northern Victoria and southern New South Wales.

Milk production in New South Wales, which accounts for around 12 per cent of national production, is estimated to have increased by 5 per cent in 2011–12. Production in southern New South Wales is estimated to have risen by around 8 per cent, compared with an estimated 3 per cent increase in the north coast. Southern New South Wales accounts for around 52 per cent of the state’s production, while the north coast region accounts for 30 per cent. Milk production is estimated to have remained largely unchanged in the central region of New South Wales, which represents 18 per cent of New South Wales production.

The total value of Australian dairy exports is forecast to decline by 4 per cent in 2012–13 to $2.2 billion, reflecting lower average world dairy product prices. However, the volume of cheese exports is forecast to increase by 3 per cent to 274 000 tonnes and account for around 35 per cent of the value of Australian dairy exports. Japan is expected to remain Australia’s largest market, accounting for around half of Australia’s cheese exports.

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2011–12 Ac/L

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