Milltrust Agricultural Investments – Australia Agriculture Commentary Q1 2021
Australia’s agricultural sector is set to enjoy a profitable year ahead – underpinned by high commodity prices, positive seasonal conditions, and low interest rates, despite expected continuing trade tensions with China.
Above-average rainfall in 2020 set up an exceptionally good winter crop with higher-than-usual moisture to open the 2021 cropping season and significantly increased stored volumes of water across the Murray Darling Basin.
Australian barley, wine and timber exports into China remain effectively blocked as the sector enters 2021, while informal impediments appear to be constraining shipments of cotton and lobsters. Reducing the sector’s reliance on the Chinese market is one of three major transitions that will need to be negotiated by Australian agriculture in the year ahead. At the same time, while the La Nina weather conditions have been positive for much of Australia, they have reduced the production prospects of international competitors, with large parts of the US, Latin America, and eastern Europe unusually dry.
2021 will likely mark a watershed year, in which Australia starts to reduce its reliance on China, voluntarily or otherwise. Positively, prevailing global market settings – with strong demand, limited supply, and high prices for agricultural commodities – make this challenge seem less daunting at the current time.
Australian farmland values continue to soar, with an almost 13% increase in 2020 overall, marking the seventh consecutive year of growth. Rural Bank’s 2021 Australian Farmland Values report shows a 12.9% rise nationally in 2020, taking the median price to AUD 5,907 a hectare. Rural Bank found Australian farmland had delivered an average compound annual growth rate of 7.6% over the past 20 years.