justfood.com | February 19, 2002 | By David Robertson
The bumper prices and production enjoyed by the Australia agricultural sector during 2001 should be a cause for celebration, but in the face of an uncertain future, farmers are expressing concern over what 2002 might bring. David Robertson highlights threats as diverse as adverse weather conditions and US political wrangling as he finds out what the future holds.
Australian farmers enjoyed a bumper year in 2001 as the low value of their dollar and high demand for exports pushed income to record levels. Early forecasts are suggesting that farmers will enjoy a similar level of success this year but dark clouds are already on the horizon and some analysts are predicting the future may not be as enriching as previously thought.
Australia is a major producer of wheat, barley, beef, lamb and wool; so its performance is a significant factor in determining world prices for these products. But Australia is also hostage to a number of international factors that, in turn, affect the competitiveness of its agricultural products.
All time highs
According to the Australian Bureau of Agriculture and Resource Economics, primary exports should rise to A$92.6bn (US$47.84bn) in 2001-2002, up from A$88.6bn the year before. The farm sector should contribute A$30.9bn of that, up from A$29.4bn. Furthermore, "in addition to the support of the competitive Australian dollar, we forecast an increase in agricultural exports helped by a tighter global supply for a number of products including wheat, barley, rice, wine, meat, lamb and dairy," said ABARE executive director Dr Brian Fisher.
Lamb is currently at an all-time high price, wheat is near its highest ever prices and cattle prices reached their highest levels last year before the Japanese BSE scare caused a drop in demand in Australia's largest beef market -- but cattle prices have still doubled in the last five years.
Sounds good, but
That all sounds excellent, but Australian farmers are not celebrating just yet. The struggling global economy is bound to have an impact on some of Australia's farm exports with wool, cotton and dairy seen as particularly threatened markets. Analysts expect the grain and beef market to remain strong in the face of a global economic downturn -- although this largely remains dependent on the Australian dollar staying at rock bottom prices (the dollar has fallen 24% over the past two years from US$0.64 in early 2000 to US$0.51).
The real threats to Australia's agricultural strength in 2002 come from the weather, however, and how much protection President Bush offers to US farmers.
Weather worries
An important area of concern for Australian farmers is in the possible return of El Nino weather conditions. Half of the leading global climate models predict that El Nino will return sometime between March and July this year.
El Nino is the effect created by a warming of the eastern Pacific causing rain-bearing eastern trade winds to disappear. This brings massive flooding to South America and drought to Australia.
The last El Nino event was in 1997-98 although its impact was minimal on the Australian side of the Pacific. But the previous episode in 1994-95 knocked 10% off rural exports from Australia and wiped nearly a percentage point off Australia's gross domestic product.
Farmers are being encouraged to consider drought-prevention strategies including shifting geographical production away from the vulnerable east coast. Some economists also propose creating joint ventures with South American farmers to balance the effects of El Nino. But so far little progress has been made in these strategies and if there is a severe El Nino this year it will cause significant damage to the largely unprepared farming community in Australia.
"My guess is we will find reasonably robust performance continuing for agriculture in 2002-2003, depending critically again on the weather," said Dr Fisher.
"The real question is whether the production is going to be there."
US trade concerns
Meanwhile, Australia has been pushing for years for a free trade agreement with the US; but access to the lucrative American market has been blocked as successive presidents have sought to protect domestic farmers.
Despite President Bush being an ardent supporter of lowering barriers to trade that policy measure, apparently, does not seem to extend to the food sector. Australia's calls for free trade have so far fallen on deaf ears and, in fact, the US is planning even greater protection for its farmers with a US$74bn subsidy bill being debated by the senate this week. Such a massive backhander to US farmers will severely threaten Australian farmers abilities to compete effectively in the global market, claim economists. Some reports have suggested that the Farm Bill could reduce income for Australian farmers in some areas by 40%. Australia will continue to lobby for reductions in the size of the bill and for greater access to the US market but few analysts expect much progress.
Australian farmers are enjoying a boom period as their disease free and cheap products dominate the world export market but any complacency this year could be punished by factors out of their control -- namely the equally unpredictable weather and US politics.justfood.com:
