Australian agriculture is set to become a $100 billion industry by 2030, though positive conditions will need to be backed up by increased investments.
According to NAB and Agrifutures Final Report on the capital needs of the industry, the $63.3 billion agribusiness sector is on track to meet the $100 billion target set by the National Farmers’ Federation.
Confidence in the industry has also been boosted, thanks to consecutive growing seasons, low interest rates and high prices for major commodities including beef, wheat and lamb.
“It’s a very encouraging picture; the combination of good seasons, good crops and good prices doesn’t happen very often in Australia,” said Phin Ziebell, senior economist for NAB Agribusiness.
Rural land values have increased by an average of 12.9% annually since late 2019, with many properties being bought by local farm businesses who have benefitted from these windfalls, in place of foreign or corporate investors.
Another boost has been the 51.5 million tonne grain winter crop harvest, the second biggest on record after 2016-17’s 56.7 million tonnes, allowing many farms to head back into the green.
Milk prices are also set up to reach record prices this financial year, as major processors compete amongst minimal supply.
“It’s a very good time to be in agriculture and the growth potential of the sector looks promising. But, as always, there are both risks and opportunities ahead,” added Ziebell.
Despite strong cropping conditions, parts of Queensland remain in drought and areas of western Victoria and south east SA are experiencing marginally dry conditions.
“The outlook is positive, but what I would say is, don’t get carried away. As most farmers who have been around for a long time know, the good times can’t last forever,” said Ziebell.
Ziebell pointed to the way those in the industry are reinvesting their returns from these optimal conditions in a fickle market, reinvesting gains into their businesses, writing off assets and investing in new equipment.
Despite the positive outlook, the report found that levels of investment currently being injected into the sector will need to not only diversify, but significantly increase in order to reach the goal.
“Our past reliance on increasing land values to fuel debt as a form of capital is unsustainable. To innovate and grow more productive farm businesses, we need capital investment to drive agtech adoption, and new and smarter ways of doing things,” said Jennifer Medway, senior manager of AgriFutures.
Annual investments will need to reach $8.7 billion up from the current $1.2 billion average for the past 30 years (ABS), enabling farmers to access modern machinery and technologies, as well as buy more land.
“There are alternative farm investment models such as leasing land, share farming, sale and leaseback, and corporate investment. We need to continue development of new models that are accessible to all agricultural enterprises, including family farms, as the link between capital availability and market growth potential is so strong,” concluded Medway.
