Improvement for SA producers

South Australia’s primary producers and horticulturalists have enjoyed a boost in the second half of the year on the back of improved prices, better growing conditions, and a lower Australian dollar.

The latest BankSA Rural Price Index results released today shows livestock and livestock products were initially impacted by Covid-19 and a high Australian dollar, but a declining dollar and record meat prices in the latter half of the year have benefited farmers.

Winemakers have enjoyed a record crush and exceptional growing conditions, while the crops and grains index fell slightly despite favourable winter crop conditions.

BankSA Agribusiness Regional General Manager, Mr Les Ryan, said the December Rural Price Index showed livestock and livestock products were initially hit hard by the pandemic, with wool in particular sensitive to economic conditions.

“When disposable incomes are low, demand for wool garments generally falls. However, economic activity picked up in late 2020, which has seen increased demand for wool,” said Mr Ryan.

“We’ve also seen meat prices increase as a result of reduced meat production globally.

In Australia, the number of animals being sent for processing is at historic lows.

As a result, meat processors are paying record prices, with the Eastern States Young Cattle Indicator recently reaching 1,000 cents a kilogram for the first time ever.

“The national sheep flock is similarly in a rebuilding phase following the 2020 drought.”

The crops and grain index has fallen slightly after remaining flat during 2019-20.

However, Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) has revised its production estimates significantly upwards, forecasting the gross value of national production to reach a record $73 billion in 2021-22, of which $39.5 billion is crops – a 7 per cent increase.

“Winter crop conditions were extremely favourable, resulting in high yield. We have experienced better conditions than originally forecast,” he said.

“Around 70 per cent of South Australia’s winter crop was sown dry, and fortunately June rainfall was above average, supporting crop establishment, however yields are still expected to be affected.

“The horticultural index has experienced some volatility and fell sharply at the beginning of the pandemic, in line with global food prices.

The index reached a low point in April, before recovering as demand returned.

“Labour shortages have continued to pose challenges for many horticultural producers, with domestic and international border restrictions disrupting much of the flow of migrant and backpacker workers.

However, growers have adapted quickly to the changed conditions and made more effective use of available resources by pulling labour from other parts of their business and innovating their harvest processes.”

Mr Ryan said that after several challenging years of bushfire, low yields and trade disputes, this year has delivered a welcome reprieve for winemakers.

“The industry recorded its largest wine grape crush ever, picking 2.03 million tonnes of fruit nationally, 31 per cent higher than in 2020. South Australia accounted for 52 per cent of total

production,” he said.

“In addition to quantity there was quality.

Exceptional growing and ripening conditions were recorded across all regions which has led to Wine Australia declare a ‘unicorn’ season.

“However, this has been tempered by more challenging export conditions, in particular to our largest wine export market, China.

Growth in other markets has partially offset this loss.”

Export competitiveness generally was hampered in the first half of 2021 by the strong Australian dollar, which reached a peak of almost 80 US cents in February this year driven largely by record iron ore prices and depreciation of the US dollar due to Covid-19.

Mr Ryan said the Australian dollar had since softened, dropping below 75 US cents on the back of a subsequent fall in iron ore prices and Australia’s own issues with Covid -19.

“While the lower dollar should be helping exporters, new challenges have arisen.

For example, the price of a standard 40-foot shipping container, which was less than $2000 before the pandemic, now costs more than $10,000,” he said.