A return to making money is in store for many Australian farmers this year after two indifferent years; but it still depends on the winter and spring rains happening according to plan.
The forecast, from the Australian Bureau of Agricultural and Resource Economics, says in some cases farm incomes will double or triple.
But we must remember what the Australian Bureau of Meteorology says: rain hasn’t been uniform so far this year and more is needed this winter and spring (and especially in the next six weeks).
The Bureau said on Monday that despite recent rain in some areas, the drought has not come to an end – and it will take years of above-average rainfall to return the country to normality.
The southern part of the Northern Territory, parts of far western Queensland, and areas around Marree in South Australia were suffering from serious rainfall deficiencies.
Long-term rainfall deficiencies persisted from the coast of South Australia across much of Victoria and into south-west NSW, and also covered south-east Queensland and northern South Australia.
"The pattern is very similar to that observed at the end of March, but as April 2008 was drier than April 2006 in most areas, there was a slight increase of these two-year deficits."
South-west Western Australia was a bright spot with a wet April (Perth had its highest April rainfall ever).
"The worst of the long-term deficiencies are likely to remain for some time," the Bureau warned.
"The deficiencies have occurred against a backdrop of decade-long rainfall deficits and record high temperatures that have severely stressed water supplies in the east and south-west of the country."
"Several years of above average rainfall are required to remove the very long-term deficits."
And it also has to be pointed out that we have been in this situation in 2006 and last year where promising early year rains were not followed by more rain during crucial growing months. That’s why winter grain grip production last year was below trend, but above the miserable year that was 2006.
In both years the outlook for the most important crop, wheat, was solid to brilliant (2007). 2006 saw just under 10 million tonnes of wheat harvested and 2007 saw just over 13 million, against a forecast of more than 25 million tonnes.
So far this year the forecasters are saying (fingers crossed) 25-26 million tonnes for wheat, and solid crops of barley and canola.
With all that in mind, ABARE’s confidence about farm incomes is welcome, but it will worry the Reserve Bank at a time when it is trying to slow demand and is concerned about a surge in our terms of trade from higher returns for exports of coal, iron ore and oil and gas.
The bank is expecting an improvement in the rural terms of trade from higher prices and production.
ABARE said yesterday that the financial performance of broadacre and dairy farms is expected to strengthen in 2007-08 following the lowest incomes since 1992-93 in the previous year.
Increased grain and livestock, and milk production, combined with higher commodity prices, are projected to boost farm cash incomes in 2007-08.
Incomes in the wool industry are projected to increase threefold to more than $93,000 in 2007-08, the highest income recorded in real terms since 1987-88.
"Strong cash flows leading into 2007-08, combined with a recovery in grains receipts, are expected to enable most producers to rebuild livestock numbers and reduce debt."
The recent report on business conditions and confidence in rural Australia showed many farmers were more upbeat about the future for themselves and their crops and products, but in the broader rural economy (the so-called ‘outside the farm gate’) confidence levels were lower and expectations more circumspect.
ABARE said that across the rural sector, farm cash income is expected to almost double in 2007-08 to an average $78,200 per farm and returns will be positive with an average $11,900 profit against an average loss of almost $50,000 last year.
"Farm financial performance is projected to strengthen markedly in 2007-08,” the ABARE forecast said.
Cash incomes for sheep farmers will rise 300% to more than $93,000 per farm, the survey found with better weather and pastures producing higher quality wool at a time when wool prices are strong.
"In 2007-08, farm cash incomes in the sheep industry are projected to increase threefold to more than $93 000 per farm, the highest income recorded in real terms since 1987-88.
"Total cash receipts are projected to rise, on average, by around 22% as improved seasonal conditions boost cropping and livestock production. In addition, improved pasture production is expected to contribute to improved product quality, enabling producers to target higher value markets and achieve higher average prices.
"Wool receipts are also projected to rise as a result of higher wool prices. Improved seasonal conditions are also expected to enable some sheep industry producers to increase plantings of winter crops such as wheat, barley and oats. Increased production and higher prices are projected to boost cropping receipts on sheep industry farms by around 47%.”
Dairy incomes will recover strongly this year due to relatively high milk prices, with cash receipts to increase by 26% (allowing farmers to at last take advantage of the high prices the Australian drought helped bring about).
Dairy herds have shrunk, less milk is being produced because of the drought, but the milk is worth more.
"The continuation of poor seasonal conditions in some dairy regions is projected to reduce the average Australian dairy herd by around 20 head per farm in 2007-08, wi
