BMI View: Australia's agribusiness sector enjoys great characteristics and will see its exports grow in the coming years, driven by the rise in production, its reputation as a reliable exporter of sage and quality products and strong external demand. However, the sector's future success will be somewhat held back by rising production costs and profitability issues which are weighting on the outlook for production, in the upstream dairy sector for example. Moreover, the country's vulnerability to extreme weather events will grow in the coming years with climate change, making agricultural production even more volatile. Finally, Australia has to face rising competition coming from lower-cost producers which aim at supplying the attractive markets in Asia and the Middle East.
Australia signed a number of trade deals with key importing countries, including the Trans Pacific Partnership, which will help its competitiveness remain satisfactory in some markets. Apart from maintaining its efforts to remain competitive in emerging markets, Australia will also need to step up investment in some parts of its supply chain in order to improve its competitiveness and reach a new level of innovation, efficiencies and exports.
|Agribusiness Market Value|
|BMI Market Value By Commodity (% of Total) (2012-2020)|
|e/f = BMI estimate/forecast. Source: FAO, BMI|
Beef production growth to 2018/19: -13.1% to 2.2mn tonnes. The negative growth over our forecast period is mainly due to high base effects (production reached a record in 2013/14) and because output will decrease over the 2015-2017 as farmers rebuild their herds.
Milk production growth to 2018/19: 11.9% to 10.3mn tonnes. Milk production will grow only modestly in the coming years as the sector struggles to expand the herd, while yields are already elevated and will see limited further growth. Meanwhile, the processing sector is very dynamic and will grow strongly in the coming years, requiring more domestic supply.
Poultry consumption growth to 2019: 20.6% to 1.2mn tonnes. Poultry consumption will prove to be the strongest over the coming years, as consumers continue to choose the meat as a healthier alternative to beef. As such, we forecast consumption per capita to rise to 48kg in 2019, compared with 34kg back in 2005.
2016 BMI universe agribusiness market value: USD44.23bn; up from USD43.87bn in 2015 ; growth expected to average 2.1% annually between 2016 and 2019.
2016 real GDP growth: 2.3%; same than what we expect for 2015. Forecast to average 2.4% from 2016 to 2019.
2016 consumer price index: 2.0% change y-o-y ave; up from 1.6% expected in 2015. Forecast to average 2.5% from 2016 to 2019.
2016 central bank policy rate (average): 1.50%; down from 2.00% expected in 2015. Forecast to average 2.06% from 2016 to 2019.
Key Industry Developments
Amidst growing competition in the global agribusiness sector from lower-cost exporters, the various trade deals signed by Australia will prove beneficial for the future of its exports. Australia signed three free trade agreements, with South Korea, Japan and China in 2014 and 2015. Regarding the Australia-China FTA, which will come into force once the two countries complete their domestic treaty making processes, it will benefit the most the dairy and beef sectors. Wheat, sugar and rice were left out of the deal.
Australia is also part of the Trans-Pacific Partnership (TPP) trade deal, for which an agreement was found in October 2015. The TPP will have significant implications for the agriculture sector, as the deal will significantly liberalise trade for a number of bulk and value-added commodities that are currently limited by elevated tariffs and non-tariff obstacles. Rather than overall import demand increasing, we believe the TPP will lead to a redistribution of trade, with market share growing for TPP signatories at the expense of non-TPP members.
In terms of the agricultural sector, we believe Australia will be one of the main beneficiaries of the deal, along with the US and Canada. In 2014/15, 35% of Australia's agricultural exports were to TPP countries, with the main markets as the US, Japan, New Zealand and Vietnam. The outcome of the TPP for Australia will be particularly significant for beef and veal (which represented more than a third of TPP-bound trade in value terms for Australia), grains-oilseeds-pulses (13% of TPP-bound exports), sheep meat (7%), dairy products (7%) and wine (6%). The gains for sugar and other commodities will be more moderate.
Harvest of the ongoing 2015/16 grains crop is underway. The outlook for the season has deteriorated as many growing regions recorded drier and warmer weather than usual, probably linked to the re-emergence of El Nino in May 2015. We have revised down our wheat and barley production forecasts, but still expect output to grow on a y-o-y basis.
2014 and 2015 proved to booming years for Australia's livestock and dairy sectors and production reached record highs. The outlook for production in 2016 is less positive. Beef output will decline, as the cattle herd decreased significantly with the elevated slaughter rates and farmers will start rebuilding their herd. Dairy production growth will slow down significantly, due to lower prices and profitability and lower import demand from China and Russia.
The Australia Agribusiness Report features BMI Research's market assessment and independent forecasts for production, consumption and trade across core agricultural commodities.
BMI's Australia Agribusiness Report includes independent commodity price forecasting and analysis for key agricultural outputs, an overview of the agribusiness competitive landscape and a discussion of the downstream context of agricultural production in relation to country food consumption forecasts and composite food and beverage trade forecasts.
- Use BMI's independent industry forecasts to test other views - a key input for successful planning in dynamic agribusiness markets.
- Apply BMI's medium-term commodity price analysis to assist with budgetary planning and the identification of investment opportunities and potential risks.
- Assess the activities and market position of your competitors, partners and clients.
BMI Industry View
Summary of BMI’s key industry forecasts and views, highlighting recent changes and key risks to the industry outlook.
Industry SWOT Analysis
Analysis of the major strengths, weaknesses, opportunities and threats within the wider agricultural industry.
BMI Supply & Demand Forecasts
Divided into sections based on various diverse sectors in the agriculture market, the chapter provides insight into each market’s agricultural industry, centred on sector forecasts to end-2019 for the consumption, production and trade of key commodities.
- Consumption Forecasts: Accompanied by a discussion of the main drivers of consumption growth: macroeconomic factors, food processing trends, price movements and increasingly, demand from the non-food sector.
- Production Forecasts: Examine the trends influencing BMI’s production outlook: global demand, price increases, public and private sector investment and agricultural efficiency improvements.
- Trade Forecasts: Accompanied by a discussion of the factors influencing a country’s trade in agricultural goods, including domestic demand, global prices and government trade policies.
- BMI’s Forecasts: Accompanied by a risks-to-outlook assessment, which examines potential factors that could affect our existing forecast picture and the likelihood of their occurrence.
BMI’s Commodity Price Analysis
Fundamental and technical analysis of the short- and medium-term price outlook for eight agricultural commodities based on globally recognised benchmarks.
Analysis of headline food and drink forecasts, including total food consumption, per capita food consumption and total sector trade, which provide important downstream intelligence for primary agricultural producers.
Includes relevant articles from BMI’s daily analysis service. These can include: long-term projections on agricultural imports and exports; our perceptions of the impacts of economic slowdown on key companies and subsectors within the Agribusiness industry in a given country; our analysis of fertilizer production; as well as other relevant analysis of recent news and events.
The reports contain information on prominent companies operating in each market.
Key Commodities Covered By The Agribusiness Market
Reports Include: Grains, Dairy, Livestock, Rice, Sugar, Palm Oil, Edible Oils, Coffee, Cocoa, Cotton, Soybean
Please note – not all reports cover all commodities.
The Agribusiness reports draw on an extensive network of primary sources, such as multilateral organisations, government departments, industry associations, chambers and company reports.