Global meat price rise to offset lower world grain price and impact of COVID-19 on farmers
Tuesday, 2 June 2020
A rise in global meat prices is helping South Australian farmers as they contend with a relatively low world grain price and the impacts of COVID-19, according to the latest BankSA Rural Price Index.
South Australian livestock producers have benefitted from higher export prices, as African swine fever pushed up beef prices in global markets. With most Australian-produced beef bound for overseas, the increasing export price has had a flow on effect in domestic markets. There have also been shortages of pork products both internationally and domestically, with prices also higher.
As COVID-19 affects global supply chains, demand is changing across sectors as consumption patterns alter, with restaurants and cafes closed in many countries, and more meals prepared at home. Social distancing patterns and lockdowns have also impacted food processing in many countries.
BankSA Head of Agribusiness, Les Ryan, said exports were likely to be affected by lower household incomes in the emerging middle class across key Asian markets.
“Coronavirus has had an impact on demand, and it will have an ongoing impact on markets, with export prices for some products likely to fall,” Mr Ryan said.
“However, whilst we continue to enjoy a lower Australian dollar compared to six and 12 months ago, this will mitigate the impact for many South Australian farmers and boost their competitiveness at the same time.”
Overall, the Rural Price Index across South Australia’s three commodity groups rose slightly for crops and grains, recorded a slight fall for livestock and livestock products, and decreased for horticulture in the six months to March.
The Australian Bureau of Agricultural and Resource Economics (ABARES) February Crop Report found South Australian winter crop production for 2019-20 increased by 12 per cent compared to 2018-19, with wheat increasing by 8.5 per cent, barley by 21 per cent and canola by 15 per cent. Despite good production growth, the 2019-20 figures are still well below their 10-year average.
South Australia grows close to 25 per cent of the nation’s barley, and farmers have been encouraged by the growth in winter crops. Despite China’s decision to introduce an 80 per cent tariff on Australian barley, Mr Ryan did not believe it would have a significant impact on South Australian farmers and the state’s agricultural sector.
“While it may reduce demand for Australian barley on a national scale and cause market pricing adjustments, most of our barley exports originate in Western Australia. South Australian farmers are not as reliant on barley exports with their cropping programs generally being more diversified.”
Despite the overall grains index decreasing since January due to the fall in world prices, drought conditions have resulted in a greater proportion of Australian wheat being consumed domestically.
The Rural Price Index also found the gap between the price South Australian farmers receive compared to what foreign buyers pay was reducing, which could be attributed to the lower Australian dollar. From January to March, the price received by South Australian farmers for grains fell by 1.5 per cent, compared to an 8.9 per cent decrease in foreign prices paid.
The South Australian wine industry took a significant hit over the six months to March, with challenges including extreme heat, early frosts, wind around flowering time, bushfires and smoke taint. The South Australian Wine Industry Association has anticipated a 50 per cent reduction in this year’s yields in the Adelaide Hills and on Kangaroo Island, and up to 80 per cent in the Barossa and Clare valleys. The Riverland has fared better, with an estimated reduction of only 16 per cent.
Positive signs in the wine industry include a vintage spread across a longer timeframe, meaning fruit had time to ripen well, with hopes quality will be high.
The wine industry has also faced further challenges wrought by COVID-19, with social distancing enacted in production facilities, and tourism and travel restrictions forcing many cellar doors and restaurants to close.
The industry’s peak national body, Australian Grape and Wine Inc, has estimated that up to 30 per cent of wineries could go out of business because of COVID-19, with the impact to be felt across the supply chain and the distribution network, causing flow-on effects to the restaurant and catering industries.
Locally, it is hoped that a proposed 12-storey hotel and day spa proposed for Seppeltsfield will proceed as planned to bring a welcome boost to that region.
The BankSA Rural Price Index has been tracking farm prices for South Australian farmers since 2000 and is a measure of prices received for grains, livestock, and horticulture. It aggregates price movements across 17 products, which make up more than 80 per cent of the state’s farm output and informs South Australian farmers and farm industries how local farm product prices are faring.