BMI View: Australia's agribusiness sector will see its exports grow in the coming years, driven by the rise in production, its reputation as a reliabl e exporter of saf e 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 that are weighing on the production outlook . Moreover, the country's vulnerability to extreme weather events will grow in the coming years with climate change, making agricultural production even more volatile. Australia has to face rising competition coming from lower-cost producers that aim at supplying the attractive markets in Asia and the Middle East. Australia has signed a number of trade deals with key importing countries, including the Trans Pacific Partnership, which will help its competitiveness remain satisfactory. 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.
|Growing Exportable Supply Ahead|
|Australia - Select Commodities Production Balance|
|f = BMI forecast. Source: BMI calculation, USDA|
Beef production growth to 2019/20: -9.9% to 2.3mn 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 2015-2017 as farmers rebuild their herds. Beef production will reaccelerate beyond 2018.
Milk production growth to 2019/20: 7.4% to 10.4mn 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 2020: 19.3% to 1.27mn 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 50kg in 2020, compared with 39kg back in 2010.
2016 BMI universe agr ibusiness market value: USD40.92 bn, up from USD41.31bn in 2015; growth expected to average 2.2% annually between 2016 and 2020.
2016 real GDP growth: 2.1%, down from 2.5% in 2015. Forecast to average 2.2% from 2016 to 2020.
2016 consumer price inflation : 1.0% y-o-y ave, down from 1.5% in 2015. Forecast to average 2.0% from 2016 to 2020.
2016 central bank policy rate : 1.50% eop, down from 2.00% in 2015. Forecast to average 2.30% from 2016 to 2020.
Latest Updates & Industry Developments
Amidst growing competition from lower-cost exporters in the global agribusiness sector, the various trade deals signed by Australia will prove beneficial. Australia signed three free-trade agreements in 2014 and 2015, with South Korea, Japan and China. Australia is also part of the Trans-Pacific Partnership (TPP) trade deal, which we see coming into force in late 2017. 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, predominantly 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 and 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.
Harvesting of the 2015/16 winter grains crop (wheat and barley) has been completed. Production grew strongly, in spite of concerns over the development of El Nino in 2015. Looking at the 2016/17 winter crop, for which plantings will start in April-May 2016, we expect grains production to expand, but at a slower pace than in 2015/16.
Australia's beef sector is in a middle of a boom, as production is at historical levels and exports are soaring. After recording very strong growth in 2013 and 2014, beef output is now on a temporary decline as farmers have started rebuilding their herds. However, we forecast beef production to reaccelerate beyond 2018, driven by robust demand from importing countries. Live cattle exports also soared in 2015, reaching a record level of 1.2mn tonnes, close to the 1.3mn tonnes of beef meat exports. Indonesia's need for beef cattle and Vietnam's booming dairy industry have been fuelling this market. Live cattle exports are likely to remain strong in the coming years.
Australia's largest grain exporter, Cooperative Bulk Handling (CBH) received - and rejected - a buyout proposal by Australian Grains Champion (AGC), a consortium backed by GrainCorp, over February-March 2016. This comes as competition in the local grains handling business is rising, with Bunge making inroads into CBH's traditional markets. This change of structure away from the traditional cooperative model is a sign of the ongoing debates within Australia's agribusiness sector. The country has been deregulating this sector over recent years, a move that is sometimes rejected by farmers, such as in the case of the sugarcane industry.
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.