Despite significant challenges from the global economic downturn and downward pressure on commodity prices, Australia’s agricultural sector is in a good position to “weather the COVID-19 storm”, Rabobank says in its just-released April Agribusiness Monthly.

The report says the nation’s farm sector has a number of factors in its favour which will help cushion the negative economic impacts of the coronavirus pandemic in coming months.
 
These include the low Australian dollar, local farmgate prices supported by limited Australian supply and positive seasonal expectations.
 
Rabobank Head of Food & Agribusiness Research Tim Hunt says while it will undoubtedly be a difficult season ahead, with a number of potential risks – primarily from COVID-19 impacts – Australia’s agricultural sector is overall positioned for a profitable year.
 
Local positives
 
Importantly, Mr Hunt says, the lower Australian dollar will provide some shelter from falling prices for Australian producers.
 
“The worse the pandemic gets, the lower the Australian dollar will fall as capital gets reinvested in lower risk financial markets like the US and Japan,” he says. “Significantly, the AUD is likely to be lower for longer than it was during the global financial crisis, which was the last time we saw a large global economic shock.  This will ensure the contraction in farmgate prices in local currency terms is less than seen on world markets.”
 
Local farmgate prices will also be supported by low local grain stocks as well as diminished sheep flock and cattle herd numbers after several years of drought, the report says.
 
“This is ensuring strong competition for product in the local market from processors downstream,” Mr Hunt says.
 
In addition, the report says, recent rainfall and the current weather outlook suggest Australian farmers will overall have a decent production season this year.
 
“After a wet February, more significant rainfall was recorded across the eastern states in March, including in many drought-affected regions,” Mr Hunt says.  “On top of this, the next three months are likely to be wetter than average in the west and the south, according to Bureau of Meteorology forecasts.”
 
‘Downside’ risks
 
The report says the outlook for Australian agriculture does come with “downside risks on many fronts” as a result of COVID-19 disruption.
 
“Beyond demand and pricing, the sector faces material risks on several other fronts. Locally, these include availability of agri chemicals and farm labour as well as the continuation of operation of packing houses and processing plants,” Mr Hunt says.

Find the full report at Rabobank’s website here. 

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