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Commodity outlook and financial performance of key agricultural industries in the Darling Downs region of QueenslandToowoomba, Queensland

Peter Martin, Haydn Valle and ABARES commodity analysts

Research by the Australian Bureau of Agriculturaland Resource Economics and Sciences

Conference paper 12.14October 2012

© Commonwealth of Australia 2012

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This publication (and any material sourced from it) should be attributed as Martin, P, Valle, H & ABARES commodity analysts 2012, Commodity outlook and financial performance of key agricultural industries in the Darling Downs region of Queensland, ABARES conference paper 12.14, Canberra, October. CC BY 3.0.

Cataloguing dataMartin, P, Valle, H & ABARES commodity analysts 2012, Commodity outlook and financial performance of key agricultural industries in the Darling Downs region of Queensland, ABARES conference paper 12.14, Canberra, October.

ABARES project 43001

InternetCommodity outlook and financial performance of key agricultural industries in the Darling Downs region of Queensland is available at daff.gov.au/abares/publications.

Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES)Postal address GPO Box 1563 Canberra ACT 2601Switchboard +61 2 6272 2010|Facsimile +61 2 6272 2001Email [email protected] daff.gov.au/abares

Inquiries regarding the licence and any use of this document should be sent to [email protected]

The Australian Government acting through the Department of Agriculture, Fisheries and Forestry represented by the Australian Bureau of Agricultural and Resource Economics and Sciences, has exercised due care and skill in the preparation and compilation of the information and data in this publication. Notwithstanding, the Department of Agriculture, Fisheries and Forestry, ABARES, its employees and advisers disclaim all liability, including liability for negligence, for any loss, damage, injury, expense or cost incurred by any person as a result of accessing, using or relying upon any of the information or data in this publication to the maximum extent permitted by law.

AcknowledgementsThe commodity notes in this paper are based on forecasts presented in the September 2012 edition of Agricultural commodities by Fiona Crawford (vegetables), James Fell (wheat), David Mobsby (coarse grains), Clay Mifsud (beef and veal), David Barrett (dairy) and Ben Agbenyegah (cotton and sugar).

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ContentsRegional overview.............................................................................................................................................. 1

Agriculture sector profile.................................................................................................................... 1Number and type of farms.................................................................................................................. 2Employment.............................................................................................................................................. 3Farm financial performance—Australia and Queensland....................................................4Performance of broadacre farms—Australia and Queensland...........................................5Performance of grains industry farms—Australia and Queensland................................7Performance of beef industry farms—Australia and Queensland....................................8Performance of dairy industry farms—Australia and Queensland..................................9Performance of broadacre farms—Eastern and Western Darling Down regions of Queensland..............................................................................................................................................11

Outlook for selected commodities............................................................................................................15

Beef and veal...........................................................................................................................................15Cotton.........................................................................................................................................................16Wheat......................................................................................................................................................... 17Coarse grains.......................................................................................................................................... 19Horticulture.............................................................................................................................................21Dairy........................................................................................................................................................... 21Sugar........................................................................................................................................................... 23

TablesTable 1 Number of farms, by industry classification, 2009–10......................................................2

Table 2 Financial performance, broadacre industries.......................................................................6

Table 3 Financial performance, dairy industry..................................................................................10

Table 4 Financial performance for broadacre farms, Darling Downs......................................14

FiguresFigure 1 Value of agricultural production, Darling Downs, Queensland, 2009–10...............2

Figure 2 Distribution of farms by estimated value of agricultural operations, Darling Downs, 2009–10...................................................................................................................................... 3

Figure 3 Employment profile, Darling Downs region, August quarter 2012...........................4

Figure 4 Real farm cash income, broadacre industries......................................................................5

Figure 5 Real farm cash income, grains industry.................................................................................7

Figure 6 Real farm cash income, beef industry.....................................................................................9

Figure 7 Total cash receipts for broadacre farms, Western Darling Downs region...........12

Figure 8 Total cash receipts for broadacre farms, Eastern Darling Downs region.............12

Figure 9 Real farm cash income for broadacre farms, Darling Downs.....................................13

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Figure 10 Australian cattle slaughter and saleyard price..............................................................15

Figure 11 World cotton indicators (annual)........................................................................................16

Figure 12 Australian cotton production, Queensland and New South Wales.......................17

Figure 13 Queensland annual wheat export volumes.....................................................................19

Figure 14 World coarse grains production...........................................................................................19

Figure 15 Australian grain sorghum production and exports.....................................................20

Figure 16 World dairy prices......................................................................................................................22

Figure 17 World sugar indicators (annual)..........................................................................................23

Figure 18 Australian sugar production, Queensland and New South Wales (annual)......24

MapsMap 1 Darling Downs region of Queensland..........................................................................................1

Map 2 Eastern Darling Downs and Western Darling Downs........................................................11

BoxesBox 1 Major financial performance indicators......................................................................................4

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Commodity outlook and financial performance of key agricultural industries in the Darling Downs region of Queensland ABARES

Regional overviewThis paper contains an overview of the recent financial performance of the broadacre and dairy industries in Queensland and a discussion of the outlook for some key commodities. The agricultural sector overview is based on Australian Bureau of Statistics (ABS) data for the Darling Downs region of Queensland (Map 1). The area contains the regional centres of Dalby, Goondiwindi, Toowoomba and Warwick.

Map 1 Darling Downs region of Queensland

Source: Australian Bureau of Statistics

Agriculture sector profileIn 2009–10 the gross value of agricultural production (GVAP) in the Darling Downs region was $1.5 billion, which was 17 per cent of the total gross value of agricultural production in Queensland ($9.1 billion) for 2009–10. This is the most recent year for which data are available from the ABS on GVAP by statistical division.

The Darling Downs has a diverse and important agricultural sector. In 2009–10, the Darling Downs accounted for around 86 per cent of the total value of Queensland egg production, 65 per cent of the total value of cotton, 62 per cent of grain sorghum, 56 per cent of wheat and 54 per cent of pig production.

However, the most important commodity in the region, based on the value of agricultural output, is beef cattle (Figure 1). In 2009–10, cattle and calves contributed 21 per cent ($317 million) to the total gross value of agricultural production in the Darling Downs. Cotton accounted for

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13 per cent ($196 million), wheat 11 per cent ($168 million), pigs 8 per cent ($126 million), grain sorghum 7 per cent ($107 million) and eggs 6 per cent ($95 million). Vegetables contributed 6 per cent ($92 million) to the region’s gross value of agricultural production, and milk and fruit each contributed around 5 per cent ($82 million and $73 million, respectively).

Figure 1 Value of agricultural production, Darling Downs, Queensland, 2009–10

Number and type of farmsABS data indicate that in 2009–10 there were 5208 farms in the Darling Downs with an estimated value of agricultural operations of more than $5000 (Table 1). The region contains 21 per cent of all farm businesses in Queensland.

Table 1 Number of farms, by industry classification, 2009–10Industry classification Darling Downs Queensland no. % no. %

Beef cattle 2 381 46 12 619 51

Grain growing 857 16 1 242 5

Mixed grain–livestock 578 11 1 089 4

Other crop growing 318 6 712 3

Dairy 211 4 764 3

Horse, beekeeping & other livestock 195 4 570 2

Vegetable 148 3 952 4

Cotton 117 2 211 1

Other 404 8 6 567 27

Total agriculture 5 208 100 24 727 100

Note: Where the estimated value of agricultural operations is more than $5000.Source: Australian Bureau of Statistics

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Farms are classified in Table 1 according to the activities that generate most of their value of production. Beef cattle (2381 farms) were the most common, accounting for 46 per cent of all farms in the Darling Downs, and 19 per cent of all beef cattle farms in Queensland.

A large proportion of farms in the region are small in terms of their business size. Estimated value of agricultural operations (EVAO) is a measure of the value of production from farms and a measure of their business size, and is somewhat similar to turnover. Around 50 per cent of farms in the Darling Downs region had an EVAO of less than $50 000 (Figure 2). These farms accounted for only 6 per cent of the total value of agricultural operations in 2009–10. In comparison, 14 per cent of farms in the region had an EVAO of more than $350 000 and accounted for an estimated 64 per cent of the total value of agricultural operations in the region in 2009–10.

Figure 2 Distribution of farms by estimated value of agricultural operations, Darling Downs, 2009–10

EmploymentABS quarterly data from August 2012 indicate that around 147 600 people were employed in the Darling Downs – South West statistical region. This region extends beyond the Darling Downs to the South Australian border in the south-west including towns such as Quilpie, Cunnamulla, Charleville, St George and Roma. This larger regional grouping is the only one for which current employment data are available for the Darling Downs.

The Darling Downs – South West statistical region accounts for 6 per cent of total employment in Queensland and 25 per cent of all people employed in the Queensland agriculture, forestry and fishing sector.

Health care and social assistance (21 800 people) is the largest sector in terms of employment, followed by agriculture, fisheries and forestry (16 100 people) (Figure 3). The next three largest employment sectors are retail trade (15 500 people), education and training (14 100 people) and construction (9100 people). Altogether, these five sectors employ more than half (55 per cent) of all people that work in the region.

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Figure 3 Employment profile, Darling Downs region, August quarter 2012

Farm financial performance—Australia and QueenslandEach year, ABARES interviews Australian broadacre and dairy producers as part of its annual survey program. Broadacre industries covered in this survey include the grains, grains–livestock, sheep, beef and sheep–beef industries. The information collected is a basis for analysing the current financial position of farmers in these industries and expected changes in the short term. This paper uses data from the ABARES Australian agriculture and grazing industries survey (AAGIS) and Australian dairy industry survey (ADIS) to compare estimates of financial performance indicators (Box 1) for farms in Australia and Queensland. Financial performance is also analysed for broadacre farms in the Eastern and Western Darling Down regions of Queensland.

Box 1 Major financial performance indicators

Total cash receipts: total revenues received by the business during the financial year.

Total cash costs: payments made by the business for materials and services and for permanent and casual hired labour (excluding owner manager, partner and family labour).

Farm cash income: total cash receipts – total cash costs

Farm business profit: farm cash income + changes in trading stocks – depreciation – imputed labour costs

Profit at full equity: return produced by all the resources used in the business.

Rate of return: return to all capital used, profit at full equity * 100 / total opening capital

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Performance of broadacre farms—Australia and QueenslandNationally, average farm cash income for broadacre farms increased from $59 400 in 2009–10 to $117 300 in 2010–11. It is projected to have declined to $116 000 in 2011–12, which is still 39 per cent above the average of $83 200 in real terms (in 2011–12 dollars) for the 10 years to 2010–11 (Figure 4, Table 2). In 2011–12, average to above average seasonal conditions for most Australian broadacre farms sustained high grain and livestock production and, as a result, average farm cash income is projected to be among the highest recorded (in real terms) since 2001–02 (Figure 4).

Figure 4 Real farm cash income, broadacre industries

average per farm

Farm cash income is estimated to have increased for Queensland broadacre farms in 2010–11 to average $89 100 per farm, up by 68 per cent from the average farm cash income of $52 950 per farm recorded in 2009–10. Increased production of grain, particularly wheat and barley, as well as an increase in numbers of beef cattle sold pushed total cash receipts higher, offsetting a small increase in total cash costs.

Compared with the situation nationally, farm cash income is estimated to have increased for Queensland broadacre farms in 2011–12 to an average of $103 000 per farm.

The result is driven mostly by higher crop receipts due to increased production of grain crops and cotton, together with a decline in expenditure on beef cattle purchases. Beef cattle receipts are estimated to have declined slightly with reduced turn-off, despite a small increase in average cattle prices received due mainly to the sale of heavier cattle in 2011–12.

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Commodity

outlook and

financial

performanc

e of key

agricultural

industries

in the

Darling

Downs

region of

Queensland

ABARES

Table 2 Financial performance, broadacre industries

average per farmQueensland Australia2009–10 2010–11 p 2011–12 y 2009–10 2010–11 p 2011–12 y

ReceiptsCrops $ 62 010 60 700 (15) 78 000 136 320 177 700 (5) 184 000Beef cattle sales $ 208 800 232 200 (7) 224 000 89 010 96 500 (7) 94 000Sheep and lambs $ 7 640 7 900 (24) 7 000 46 520 56 200 (5) 57 000Wool $ 7 720 7 500 (23) 9 000 27 590 35 400 (6) 36 000Total cash receipts $ 348 800 379 900 (8) 363 000 342 160 409 200 (4) 407 000CostsSheep and lamb purchases $ 1 210 1 300 (38) 1 000 7 660 10 200 (8) 7 000Beef cattle purchases $ 38 410 43 600 (22) 25 000 17 310 20 000 (17) 14 000Fodder $ 25 350 15 200 (37) 9 000 9 250 6 900 (55) 4 000Fertiliser $ 4 770 5 600 (14) 6 000 28 490 29 700 (5) 32 000Sprays $ 9 130 9 400 (16) 9 000 22 180 22 400 (6) 24 000Fuel, oil and lubricants $ 18 940 17 900 (5) 18 000 21 340 21 800 (3) 24 000Repairs and maintenance $ 25 960 25 400 (5) 26 000 25 260 25 600 (4) 29 000Interest payments $ 41 070 41 600 (8) 40 000 33 260 34 100 (8) 32 000Hired labour $ 13 880 12 100 (11) 11 000 11 190 10 800 (9) 11 000Total cash costs $ 295 850 290 900 (10) 261 000 282 760 291 900 (5) 291 000Financial performanceFarm cash income $ 52 950 89 100 (16) 103 000 59 400 117 300 (5) 116 000Farms with negative farm cash income % 26 27 (14) 21 30 23 (7) 25Farm business profit $ –6 450 33 000 (31) 54 000 –16 460 57 500 (18) 48 000Farms with negative farm business profit % 74 63 (6) 51 69 54 (4) 53Rate of return– excluding capital appreciation % 0.7 1.6 (13) 2.1 0.6 2.5 (6) 2.3– including capital appreciation % –1.4 –1.8 (45) na 0.1 1.5 (28) naFarm capital, debt and equityFarm capital at 30 June a $ 5 492 750 4 995 000 (3) na 4 010 550 3 919 500 (4) naFarm debt at 30 June b $ 602 710 557 600 (9) 541 000 492 540 460 400 (8) 435 000Equity ratio at 30 June bc % 88 88 (1) na 87 88 (1) na

a Excludes leased plant and equipment. b Average per responding farm. c Equity expressed as a percentage of farm capital. p Preliminary estimate. y Provisional estimate. na Not available. Note: Figures in parentheses are standard errors expressed as a percentage of the estimate provided


Performance of grains industry farms—Australia and QueenslandAverage farm cash income for Australian grains industry farms—defined as farms in the grains and grains–livestock industries—improved significantly in 2010–11 compared with 2009–10. This improvement was because of large increases in grain and oilseed production in New South Wales, Victoria and South Australia, combined with higher grain and oilseed prices (Figure 5). At the same time, there was only a relatively small rise in total cash costs resulting mainly from higher expenditure on fertiliser, fuel, crop chemicals, interest payments and costs associated with harvesting a larger crop than in 2009–10.

After declining in the previous two financial years, farm cash income increased for Queensland grain industry farms in 2010–11 to an average of $91 400 per farm, or around 12 per cent higher than the 10-year average to 2009–10 (in real terms) (Figure 5). Overall, crop receipts increased as production rose despite very wet seasonal conditions and widespread flooding. In addition, beef cattle receipts increased on mixed grains–beef farms as abundant grazing resulted in heavier turn-off weights for cattle and higher average sale prices, and fodder costs were much reduced.

Although Australian grain and oilseed production reached a record high in 2011–12, lower prices for most grains and oilseeds, together with increases in farm cash costs, are estimated to have resulted in a fall in overall average farm cash income for grains industry farms. Nationally, farm cash income is estimated to have averaged $151 000 per farm in 2011–12. This is significantly below the average farm cash income for 2010–11, but still around 31 per cent above the industry average for the previous 10 years (Figure 5).

Figure 5 Real farm cash income, grains industry

average per farm

Farm cash income for Queensland grain farms is estimated to have increased further in 2011–12 to average $111 000 per farm, which is around 30 per cent higher than the 10-year average to 2010–11 (in real terms). Despite lower prices for grains and cotton, increased production of wheat, grain sorghum and cotton resulted in higher crop receipts, which offset a small increase in total cash costs.

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Performance of beef industry farms—Australia and QueenslandIn 2010–11, beef cattle turn-off slowed in the eastern states and beef cattle numbers increased. In the Northern Territory herd numbers remained relatively stable despite an increase in turn-off, and in Western Australia cattle numbers decreased as dry conditions resulted in higher turn-off. Overall, the average number of cattle that beef industry farms sold was similar to 2009–10, but increases in average prices received for cattle resulted in total cash receipts for beef industry farms rising by around 8 per cent. Although expenditure on beef cattle purchases increased, total cash costs were reduced on average, mainly as a result of improved seasonal conditions leading to a reduction in expenditure on fodder. Overall, with total cash receipts increasing and total cash costs decreasing, farm cash income increased to average $59 100 per farm for beef industry farms.

Similarly, total cash receipts increased for beef industry farms in Queensland due to a small increase in the number of beef cattle sold, combined with higher cattle prices and the sale of heavier cattle compared with 2009–10. This was complemented by reduced expenditure on purchased fodder due to the good seasonal conditions. Average farm cash income increased to average $87 300 per farm in 2010–11, compared with $42 470 per farm in 2009–10.

In 2011–12, lower expenditure on beef cattle purchases, together with reduced expenditure on fodder and interest payments, is projected to have resulted in average total cash costs for beef industry farms in Australia declining by around 10 per cent. With only a small reduction in cash receipts and much larger reduction in cash costs, average farm cash income is projected to increase to average $67 000 per farm in 2011–12. If this has been achieved, it would be around 6 per cent above the average for the previous 10 years (in real terms) (Figure 6).

Average farm cash income is estimated to have improved slightly for Queensland beef industry farms in 2011–12. Overall, beef cattle receipts are estimated to have fallen slightly due to a small decline in the number of beef cattle sold, despite slightly higher cattle prices and a further increase in the average sale weight of cattle. However, the small reduction in beef cattle receipts is estimated to have been more than offset by a marked reduction in the number of beef cattle purchased and together with lower fodder purchase costs resulted in lower average total cash costs. As a result, farm cash income is estimated to have increased to average $97 000 per farm in 2011–12, slightly above the 10-year average to 2010–11 (in real terms) (Figure 6).

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Figure 6 Real farm cash income, beef industry

average per farm

Performance of dairy industry farms—Australia and QueenslandNationally, average farm cash income for dairy industry farms increased from $75 110 per farm in 2009–10 to $141 000 per farm in 2010–11, the highest since 2007–08, in real terms. The increase in average farm cash income was mainly because of higher prices paid for milk in regions producing manufacturing milk. Milk production remained similar to 2009–10 despite improved grazing conditions and increased availability of irrigation water.

Average dairy farm cash income for Queensland increased slightly from an average of $114 060 per farm in 2009–10 to $115 400 per farm 2010–11. Milk production declined in 2010–11, resulting in lower milk receipts. However, this reduction was offset by a fall in average total cash costs resulting mainly from decreased expenditure on purchased fodder (Table 3).

In 2011–12, despite a small increase in national milk production, lower milk prices are projected to result in reduced average financial performance of dairy farms in all states except Tasmania. Farm cash income for Australian dairy farms is projected to decline slightly to average $136 000 per farm in 2011–12, which is still around 30 per cent above the average for the 10 years to 2010–11.

Farm cash income is estimated to have declined for Queensland dairy farms in 2011–12. Milk production and prices were lower. The reduction in total cash receipts is estimated to have been partly offset by lower total cash costs, particularly due to a further reduction in fodder expenditure. Nevertheless, average farm cash income is projected to have fallen to $89 000 per farm in 2011–12, which is around the 10-year average to 2010–11 for Queensland dairy farms (in real terms).

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10Commodit

y outlook

and

financial

performa

nce of key

agricultur

al

industries

in the

Darling

Downs

region of

Queenslan

d

ABARES

Table 3 Financial performance, dairy industry Queensland Australia 2009–10 2010–11 p 2011–12 y 2009–10 2010–11 p 2011–12 y

Receipts

Milk – net of freight $ 452 000 424 300 (5) 377 000 442 140 510 900 (4) 498 000

Dairy cattle $ 22 610 32 600 (22) 19 000 34 190 39 400 (7) 37 000

Total cash receipts $ 492 800 476 700 (5) 414 000 508 490 575 700 (4) 563 000

Costs

Dairy cattle purchases $ 6 330 9 500 (38) 3 000 6 070 7 700 (14) 4 000

Fodder $ 151 090 139 500 (9) 121 000 129 650 119 400 (5) 108 000

Fertilizer $ 19 390 17 900 (14) 19 000 30 260 29 900 (8) 36 000

Fuel, oil and lubricants $ 15 550 14 400 (8) 16 000 14 290 13 600 (5) 16 000

Repairs and maintenance $ 37 570 31 800 (10) 27 000 33 860 34 700 (7) 38 000

Interest payments $ 17 670 16 200 (19) 14 000 47 090 52 100 (8) 50 000

Hired labour $ 29 000 35 500 (18) 34 000 25 040 26 600 (10) 29 000

Total cash costs $ 378 740 361 400 (6) 325 000 433 380 434 700 (4) 427 000

Financial performance

Farm cash income $ 114 060 115 400 (14) 89 000 75 110 141 000 (9) 136 000

Farms with negative farm cash income % 17 5 (87) 18 24 11 (42) 12

Farm business profit $ 30 680 15 300 (138) –26 000 –3 660 69 200 (17) 44 000

Farms with negative farm business profit % 62 54 (20) 73 59 34 (17) 38

Rate of return

– excluding capital appreciation % 1.6 1.1 (57) –0.2 1.6 3.9 (8) 3.1

– including capital appreciation % 1.9 –2.7 (132) na 0.2 0.9 (106)

na

Farm capital, debt and equity

Farm capital at 30 June a $ 3 453 430 3 308 000 (10) na 3 614 800 3 428 700 (0) na

Farm debt at 30 June b $ 269 050 220 300 (20) 204 000 666 390 663 800 (10) 660 000

Equity ratio at 30 June bc % 92 93 (1) na 82 81 (2) na

a Excludes leased plant and equipment. b Average per responding farm. c Equity expressed as a percentage of farm capital. p Preliminary estimate. y Provisional estimate. na Not available. Note: Figures in parentheses are standard errors expressed as a percentage of the estimate provided.


Performance of broadacre farms—Eastern and Western Darling Down regions of QueenslandThe Eastern Darling Downs region (Map 2) contains farms that, on average, have smaller scales of operations than farms in the Western Darling Downs.

Map 2 Eastern Darling Downs and Western Darling Downs

Broadacre farming in both the Eastern Darling Downs region and the Western Darling Downs region of Queensland (Map 2) is dominated by beef cattle and cropping enterprises. For the 10 years ending 2010–11, beef cattle and broadacre cropping accounted for 82 per cent of average total cash receipts for Eastern Darling Downs farms and 80 per cent of average total cash receipts in the Western Darling Downs. However, the reliance on summer cropping activities has differed significantly between the two regions during this period. In the Western Darling Downs a much higher proportion of cropping receipts have been derived from winter crops (such as wheat and barley) (Figure 7) compared with the Eastern region, which has had a higher proportion of summer crops (such as grain sorghum and sunflowers) (Figure 8). Specialist cotton farms are excluded from the ABARES definition of the broadacre industry. However, in both 2010–11 and 2011–12, wet seasonal conditions and favourable cotton prices resulted in increased cotton production and cotton receipts for broadacre farms in both regions.

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Figure 7 Total cash receipts for broadacre farms, Western Darling Downs region

Figure 8 Total cash receipts for broadacre farms, Eastern Darling Downs region

Eastern Darling DownsIn 2010–11, average farm cash income for broadacre farms decreased for the Eastern Darling Downs because of the effects of wet seasonal conditions and flooding on crop production. Farm cash income for broadacre farms averaged $44 500 per farm in 2010–11, compared with $75 280 per farm in 2009–10 (Table 4).

In 2011–12, farm cash income is estimated to have rebounded to average $99 000 per farm (Table 4). Receipts from beef cattle sales are estimated to have been higher, mainly due to an increase in the number of beef cattle sold. Receipts from cropping are also estimated to have increased because of increased crop production and some carry forward of payments on summer crops, particularly cotton, produced in 2010–11. Overall, farm cash income in the Eastern Darling Downs is estimated to have been around 65 per cent higher than the 10-year average to 2010–11 (in real terms) (Figure 9).

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Western Darling DownsIn the Western Darling Downs region, farm cash income increased in 2010–11, from an average of $43 100 per farm in 2009–10 to an average of $88 700 per farm (Table 4). Total cash receipts from both cropping and beef cattle sales increased, although this was partly offset by higher total cash costs from beef cattle purchases and expenditure on crop inputs.

In 2011–12, farm cash income in the Western Darling Downs is estimated to have increased further to average $98 000 per farm (Table 4). Beef cattle receipts are estimated to have been higher because of increased sale numbers and higher sale prices, but this was mostly offset by lower total crop receipts resulting from lower grain prices. However, total cash costs are projected to have decreased more than total cash receipts, as farms saved by reducing the number of cattle purchased and lowering crop production. Average farm cash income estimated for 2011–12 is around double the 10-year average to 2010–11 (in real terms) (Figure 9).

Figure 9 Real farm cash income for broadacre farms, Darling Downs

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Table 4 Financial performance for broadacre farms, Darling Downs2009–10 2010–11 p 2011–12 y

Eastern Darling Downs a

Receipts

Crops $ 156 650 91 200 (29) 173 000

Beef cattle sales $ 98 000 77 300 (19) 105 000

Sheep and lambs $ 4 130 7 300 (50) 5 000

Wool $ 2 510 6 400 (45) 5 000

Total cash receipts $ 293 020 224 600 (16) 314 000

Total cash costs $ 217 740 180 100 (20) 216 000


Farm cash income $ 75 280 44 500 (46) 99 000

Farms with negative farm cash income % 18 21 (27) 19

Farm business profit $ –7 190 –6 000 (54) 32 000

Rate of return

– excluding capital appreciation % 0.7 0.8 (83) 2.1

Western Darling Downs a

Receipts

Crops $ 133 730 205 100 (35) 177 000

Beef cattle sales $ 131 910 160 400 (19) 181 000

Sheep and lambs $ 20 080 17 700 (47) 16 000

Wool $ 7 980 7 300 (57) 7 000

Total cash receipts $ 324 610 448 400 (15) 418 000

Total cash costs $ 281 510 359 700 (14) 319 000


Farm cash income $ 43 100 88 700 (44) 98 000

Farms with negative farm cash income % 32 51 (17) 9

Farm business profit $ –28 150 20 500 (133) 28 000

Rate of return

– excluding capital appreciation % 0.4 1.8 (55) 2.1

a Excludes feedlot farms. p Preliminary estimate. y Provisional estimate. Note: Figures in parentheses are standard errors expressed as a percentage of the estimate provided.

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Outlook for selected commoditiesBeef and vealThe Australian weighted average saleyard price of beef cattle is forecast to fall by 4 per cent in 2012–13 to 315 cents a kilogram (dressed weight) (Figure 10). Domestically, demand for restocker cattle is expected to continue, although at a pace slower than the previous two seasons when favourable conditions encouraged producers to expand herds. Herd sizes are now the largest in over 30 years and supplies of cattle suitable for slaughter are forecast to increase in the coming year.

Figure 10 Australian cattle slaughter and saleyard price

Lower demand for restocker cattle, compared with the previous two years, is expected to contribute to national cattle herd growth slowing to 2 per cent in 2012–13 to 30.5 million head. This compares with an estimated growth rate of 5 per cent in 2011–12, when favourable seasonal conditions led to significant pasture growth in many cattle producing regions. Producers responded to favourable seasonal conditions by purchasing restocker cattle and retaining breeding stock.

In 2012–13 Australian cattle slaughter is forecast to increase by 3 per cent to 8.1 million head, underpinning an increase in beef production to around 2.2 million tonnes (Figure 10). After more than two years of herd rebuilding, supplies of cattle suitable for slaughter are expected to increase.

In 2011–12 Australian cattle slaughter fell by 3 per cent to 7.9 million head, its lowest since 1985–86. However, beef production declined less than 1 per cent from the previous year, largely as a result of increased slaughter of heavier male cattle, which contributed to an increase in average carcass weights.

Queensland cattle slaughter fell by 1 per cent in 2011–12 to around 3.6 million head. However, Queensland beef and veal production increased by 1 per cent to 1.05 million tonnes, underpinned by an increase in average carcass weights to 297 kilograms. Queensland accounted for 50 per cent of Australian beef and veal production in 2011–12.

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The volume of Australian beef and veal exports is forecast to increase by 1 per cent in 2012–13 to 955 000 tonnes (shipped weight). This reflects increased exports to the United States and many smaller markets more than offsetting lower exports to Japan and the Republic of Korea. With the Australian dollar assumed to remain relatively high in 2012–13, strong competition is likely to continue in the traditional markets of Japan and the Republic of Korea, especially from imported US beef.

In 2011–12, Australian beef and veal exports increased by 1 per cent to 948 000 tonnes (shipped weight). Exports of Queensland produced beef increased by 3 per cent to 567 000 tonnes (shipped weight). The largest export destinations of Queensland produced beef were Japan, the United States, the Republic of Korea and the Russian Federation.

CottonThe world indicator price for cotton (Cotlook ‘A’ index) is forecast to fall by 14 per cent in2012–13 (August to July) to average US86 cents a pound (Figure 11). This forecast decline reflects the effects on world prices of large world cotton stocks carried over from 2011–12 and world cotton production being forecast to exceed consumption for the third consecutive year in 2012–13.

On the demand side, an assumed recovery of world income growth in 2013 is expected to lead to a modest increase in world demand for cotton in the latter half of 2012–13. For 2012–13 as a whole, world cotton consumption is forecast to grow by 3 per cent to 23.6 million tonnes, compared with a decline of 7.5 per cent in 2011–12 (Figure 11).

World cotton production is forecast to decline to 24.9 million tonnes in 2012–13, 6.7 per cent down from the record harvest of 2011–12 (Figure 11). This reflects an expected 7 per cent fall in the area planted to cotton in response to falling cotton prices and increases in the prices of alternatives crops, particularly corn, soybeans and grain sorghum.

Figure 11 World cotton indicators (annual)

Global closing stocks of cotton are forecast to increase by 9 per cent in 2012–13 to a record 16.1 million tonnes, lifting the world cotton stocks-to-use ratio to a record high of 68.2 per cent.

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Australian cotton production is forecast to be 991 400 tonnes in 2012–13; 7 per cent lower than the record harvest of 1.07 million tonnes in 2011–12 (Figure 12). This forecast is supported by the availability of plentiful supplies of irrigation water in cotton-growing regions. The area planted to cotton is forecast to decline by 14 per cent in 2012–13 to 515 000 hectares. While irrigated plantings are forecast to decline by only 4 per cent, dryland plantings are forecast to be down 44 per cent. Average yields are forecast to be 8 per cent higher in 2012–13 due to a higher proportion of higher yielding irrigated cotton in the total area planted to cotton.

Cotton production in Queensland is forecast to decline by 10 per cent in 2012–13 to around 368 000 tonnes. A forecast 17 per cent decline in the area planted to cotton is expected to be partially offset by an assumed 8 per cent increase in the average yield to 1.8 tonnes per hectare. Although the area planted to irrigated cotton is forecast to decline by 2 per cent to 160 000 hectares, the area planted to dryland cotton is forecast to decrease by 48 per cent to around 40 000 hectares.

The return to Australian cotton growers at the gin-gate is forecast to decrease by 11.7 per cent in 2012–13 to $477 a bale (227 kilograms) of lint (including the value of cottonseed and net of ginning costs), in line with the forecast decline in world cotton prices (Figure 12). This is the lowest return to Australian cotton growers since 2006–07, when growers received $481 a bale, and lower than the 10-year average to 2010–11 of around $545 a bale (in 2012–13 dollars).

Australian cotton exports are forecast to increase by 4 per cent in 2012–13 to a record 1.04 million tonnes. If this forecast is realised, Australia would surpass India to become the second largest exporter of cotton in the world; second to the United States. In 2011–12, Queensland exported around 526 000 tonnes of raw cotton, accounting for 39 per cent of total Australian cotton exports.

Figure 12 Australian cotton production, Queensland and New South Wales

WheatThe world wheat indicator price (US no. 2 hard red winter, fob Gulf) is forecast to rise by 17 per cent in 2012–13 to around US$350 a tonne. This forecast rise in price reflects an expected fall in the supply of wheat in major exporting countries, particularly in the Black Sea region, and expected strong demand for feed wheat in the United States and China.

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World wheat production is forecast to fall by around 4 per cent in 2012–13 to around 665 million tonnes, mainly because of an expected fall in production in the Black Sea exporting countries of the Russian Federation, Ukraine and Kazakhstan.

World wheat consumption is forecast to remain largely unchanged in 2012–13 at around 693 million tonnes. World food use is forecast to rise by less than 1 per cent to around 464 million tonnes. Human consumption of wheat for food accounts for less than 70 per cent of world wheat consumption.

World feed use of wheat is forecast to increase in 2012–13. This reflects an expected increase in demand as a result of forecast higher prices of substitute feed grains such as corn.

World closing stocks of wheat are forecast to fall by 14 per cent in 2012–13 to around 169 million tonnes, reflecting lower production and continued high consumption. Despite the forecast fall in closing stocks of wheat, the world closing stocks-to-use ratio is forecast to remain relatively high at 24 per cent.

Australian wheat production is forecast to fall by 24 per cent in 2012–13 to around 23 million tonnes. This reflects an estimated decline in planted area and a forecast fall in average yields from the highs of last season. Rainfall over winter in Australia’s major growing regions was mixed; sufficient and timely rainfall will still be needed over the important spring growing period to achieve prospective yields.

In Queensland, wheat production is forecast to be largely unchanged in 2012–13 at around 1.8 million tonnes, which reflects the offsetting effects of an estimated fall in planted area and forecast above average yields. The area planted to wheat is estimated to have fallen by 5 per cent in 2012–13 to around 950 000 hectares, largely in response to lower prices at the time of planting.

Across the state, conditions were favourable for crop development over winter and rainfall was above average. August was dry but this helped reduce waterlogging in some regions. Heading into the important spring period, lower layer soil moisture was above average and the Bureau of Meteorology’s seasonal outlook, issued on 22 August 2012, points to an approximately 50 per cent chance of exceeding average rainfall in Queensland’s cropping regions over spring.

The volume of Australian wheat exports is forecast to be largely unchanged in 2012–13 at around 23 million tonnes, reflecting high opening stocks. The value of Australian wheat exports is forecast to rise by 15 per cent in 2012–13 to around $7.3 billion, reflecting a forecast rise in world wheat prices.

Queensland produced an estimated 1.8 million tonnes of wheat in 2011–12, which was a 17 per cent rise from the previous year. Production has been above average over the previous two years, resulting in a significant increase in Queensland’s wheat export volumes in 2011–12 (Figure 13).

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Figure 13 Queensland annual wheat export volumes

Coarse grainsThe world coarse grains indicator price (US corn, fob Gulf) is forecast to rise by 13 per cent in 2012–13 to US $318 a tonne and the world indicator price for barley (French Rouen feed) is forecast to rise by 8 per cent to US$292 a tonne. These forecast price increases are driven mainly by severe drought conditions in the United States and dry seasonal conditions in the Black Sea region, leading to a reduction in coarse grains supply in 2012–13.

World coarse grains production is forecast to fall by 3 per cent in 2012–13 to 1.1 billion tonnes, driven mainly by a 4 per cent fall in world corn production to 834 million tonnes (Figure 14), mainly as a result of an expected large decline in US corn production. World barley production is forecast to fall by 2 per cent in 2012–13 to 132 million tonnes largely as a result of a forecast fall in production in the Black Sea region.

Figure 14 World coarse grains production

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World consumption of coarse grains is forecast to decrease by 1 per cent in 2012–13 to around 1.1 billion tonnes in response to high coarse grain prices. World consumption of corn is forecast to decrease by 1 per cent to 856 million tonnes mainly as a result of forecast lower consumption in the United States. World consumption of barley is forecast to decrease by 1 per cent to 135 million tonnes, mainly reflecting forecast lower consumption in Ukraine and the Russian Federation.

In Australia, total coarse grains production is forecast to decline by 13 per cent in 2012–13 to 11.7 million tonnes from a recent high of 13.4 million tonnes in 2011–12. The forecast fall in coarse grains production mainly reflects the effects of a smaller planted area and a decline in the average yield as a result of varied seasonal conditions in major growing regions.

For the major winter coarse grain, barley, production is forecast to decrease by 19 per cent in 2012–13 to 7.0 million tonnes. Queensland’s barley production is forecast to fall by 6 per cent in 2012–13 to around 160 000 tonnes, reflecting a decrease in planted area.

The outlook for summer coarse grains is more positive than winter coarse grains in 2012–13. Favourable soil moisture levels in the key growing regions of southern Queensland and northern New South Wales, together with high grain sorghum prices, are expected to lead to a 24 per cent increase in the area planted to grain sorghum to 782 000 hectares, of which around 550 000 hectares is forecast to be planted in Queensland.

Australian grain sorghum production is forecast to increase by 10 per cent in 2012–13 to 2.6 million tonnes (Figure 15). Assuming average seasonal conditions, Queensland grain sorghum production is forecast to increase by 8 per cent to around 1.8 million tonnes.

Figure 15 Australian grain sorghum production and exports

Total Australian coarse grains exports are forecast to decrease by 21 per cent in 2012–13 to 6.2 million tonnes, largely as a result of a 29 per cent fall in barley exports. However, exports of grain sorghum are forecast to increase by 13 per cent in 2012–13 to 1.3 million tonnes (Figure 15). The forecast increase in the volume of grain sorghum exports, combined with high export prices, is forecast to increase the value of grain sorghum exports by 19 per cent to $356 million.

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HorticultureThe gross value of the Australian horticulture industry (excluding wine grapes) is forecast to increase by 6.7 per cent in 2012–13 to $9.2 billion. The forecast growth largely reflects improved availability of irrigation water and a return to more normal seasonal conditions following the heavy rains and floods in early 2011–12. Water storage in the Murray–Darling Basin was at 97 per cent of capacity as at 13 September 2012, compared with 87 per cent at the same time in 2011. The increase in gross value is forecast to occur despite the strength of the Australian dollar, which is reducing the Australian dollar value of Australian horticulture exports and increasing the price competitiveness of horticulture imports.

Assuming favourable season conditions in major growing regions, the value of Australian vegetable production is forecast to rise by close to 5 per cent in 2012–13 to $3.6 billion. The value of Australian vegetable production increased steadily over the past decade and in 2010–11 was 15 per cent higher in real terms than in 2000–01.

The total value of fruit, nuts and vegetable production in Queensland in 2010–11 was around $2.1 billion, with vegetable production accounting for $1.1 billion and fruit and nuts for just under $1 billion. The climate in Queensland allows most fruit and vegetables to be grown year-round, which allows Queensland producers to supply southern states outside their growing seasons. Queensland is an important producer of fruit and vegetables, mainly tomatoes, capsicum, lettuce, bananas, avocadoes, pineapples and strawberries.

Vegetables are grown in all states of Australia. The Queensland vegetable industry is the largest, accounting for around 32 per cent of total Australian production in gross value terms in2010–11, followed by Victoria (22 per cent) and South Australia (15 per cent).

The Australian tomato industry can be categorised into two distinct markets: tomatoes grown for use in processed foods and tomatoes grown for the fresh market. Queensland is the major producer of tomatoes for the fresh market, accounting for around 60 per cent of production in 2010–11, followed by Victoria (11 per cent), New South Wales (9 per cent) and Western Australia (8 per cent). In 2010–11 Queensland produced around 127 000 tonnes of tomatoes—125 600 tonnes for the fresh market and 1200 for processing.

Queensland is the largest producer of lettuce, capsicums (including chillies), beans (French and runner), mandarins, and lemon and limes in Australia. In 2010–11 Queensland produced around 54 000 tonnes of lettuce, 40 000 tonnes of capsicums, 23 000 tonnes of beans, 70 000 tonnes of mandarins and around 16 000 tonnes of lemon and limes.

Queensland exported more than 9000 tonnes of fresh vegetables in 2011–12, valued at $22 million. The largest exports of fresh vegetables in value terms were tomatoes ($3.8 million) and beans ($3.6 million).

The largest exports of fresh fruit from Queensland in 2011–12 were mandarins ($26 million), mangoes ($8.6 million) and avocadoes ($5.8 million).

DairyDespite a forecast slowing in the growth of global milk production in 2012–13, an assumed economic slowdown in the European Union and weaker demand growth in Asia is expected to result in world dairy prices averaging lower in 2012–13 (Figure 16).

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Figure 16 World dairy prices

Forecast lower farmgate milk prices and higher world feed grain prices in 2012–13 are likely to constrain growth in milk production in many major dairy producing countries over the remainder of 2012–13.

EU milk production is expected to rise by around 1 per cent in 2012–13. This follows increases in EU milk production of 2.6 per cent in 2010–11 and 2.3 per cent in 2011–12.

Milk production in the United States is forecast to fall by 1.4 per cent in 2013 to 90.2 million tonnes, following a forecast rise of 2 per cent in 2012. Assuming average seasonal conditions, New Zealand milk production is forecast to remain relatively unchanged in 2012–13 (June to May marketing year) at 19.6 million litres.

While global economic growth is assumed to remain subdued in 2012–13, relatively robust economic activity in the developing countries of Asia, North Africa and Central America is expected to continue to support an increase in world dairy trade, especially milk powders.

China is expected to remain a significant importer of milk powders in 2012–13. Imports of skim milk powder are forecast to increase by nearly 40 per cent to 180 000 tonnes in 2012, double the volume of imports in 2010. Imports of whole milk powder are forecast to rise by 6 per cent in 2012 to around 340 000 tonnes. Imports of milk powders in South-East Asia are also forecast to rise in 2012–13, with Indonesian imports forecast to increase by 10 per cent to 240 000 tonnes.

Algerian imports of whole milk powder are expected to increase by 5 per cent to around 200 000 tonnes in 2012, reflecting the longer-term trend of increased consumption of dairy products.

The Australian farmgate price for milk is forecast to fall by 7 per cent in 2012–13 to average around 39 cents a litre.

Assuming favourable seasonal conditions in the main dairying regions, national milk production is forecast to increase by 1.3 per cent in 2012–13 to 9.6 billion litres, following a 4 per cent rise in 2011–12.

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Following significant improvement in availability of irrigation water in northern Victoria and southern New South Wales, milk production increased strongly in these regions in 2011–12. Milk production in these regions is forecast to rise further in 2012–13.

The Queensland dairy industry accounted for around 5 per cent of national milk production in 2011–12 when its milk production remained relatively unchanged at 465 million litres. This followed an 8 per cent decline in production in the previous year. Nearly all of Queensland’s milk production is used in the fresh milk sector.

The total value of Australian dairy exports is forecast to decline by 2.5 per cent in 2012–13 to $2.2 billion, primarily reflecting the effect of forecast lower average dairy product prices on world markets.

SugarThe world indicator price for raw sugar (Intercontinental Exchange, nearby futures, no. 11 contract) is forecast to decline by around 20 per cent in 2012–13 to average US18 cents a pound (October to September) (Figure 17). The forecast price decline reflects large closing stocks in 2011–12 and production forecast to exceed consumption in 2012–13. If realised, this price forecast will be above the average of US15.5 cents a pound (in 2012–13 dollars) over the 10 years ending 2010–11. A downside risk to this price forecast is the expected record world production leading to higher closing stocks in 2012–13, which has the potential to put further downward pressure on world prices.

World sugar production is forecast to increase by 3.8 million tonnes in 2012–13 to a record of around 178 million tonnes (Figure 17). Increased production is forecast for Brazil, China, Mexico, Thailand, Australia and the United States. In contrast, production of beet sugar in Europe is expected to be lower, reflecting an assumed return to average yields following the above average yields of 2011–12.

World sugar consumption is forecast to grow by 2 per cent in 2012–13 to around 172 million tonnes (Figure 17). The forecast increase is due to falling sugar prices and rising consumer incomes, particularly in developing countries. This forecast consumption growth is lower than the average of 2.4 per cent in the 10 years ending 2010–11.

Figure 17 World sugar indicators (annual)

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With world sugar production forecast to exceed consumption in 2012–13, it is expected that world closing stocks of sugar will increase by nearly 6 million tonnes to 68.8 million tonnes. If realised, this will increase the stocks-to-use ratio by 2.9 percentage points to around 40 per cent, the highest since 2007–08 but still slightly below the average of 41 per cent for the 10 years to 2010–11.

Australian sugar production is forecast to increase by around 788 000 tonnes in 2012–13 to 4.5 million tonnes (Figure 18). This forecast increase is driven by an increase in the area harvested and higher sugar yields aided by hot dry weather in the harvesting period to date. Queensland accounts for around 94 per cent of national raw sugar production and is forecast to produce around 4.2 million tonnes of raw sugar in 2012–13, 21 per cent higher than in 2011–12.

The average mill-gate return for sugar cane to Australian growers is forecast to fall by $7 a tonne in 2012–13 to $35 a tonne, primarily the result of forecast lower world prices (Figure 18). This forecast average mill-gate return is slightly lower than the average of $36 a tonne (in 2012–13 dollars) over the 10 years to 2010–11.

Queensland Sugar Limited (QSL) ended the 2011–12 season with a seasonal pool return of $518 a tonne (International Polarity Scale) up from $444 a tonne in 2010–11. This compares with a 10-year average of $496 a tonne (in 2012–13 dollars). QSL is forecasting its 2012–13 harvest pool return to be $462 a tonne (International Polarity Scale).

Australian sugar exports are forecast to increase by nearly 12 per cent in 2012–13 to 3.4 million tonnes. However, the value of Australian sugar exports is forecast to decrease by 9 per cent in 2012–13 to nearly $1.6 billion, reflecting lower forecast world sugar prices. Queensland accounts for almost all of Australia’s sugar exports.

Figure 18 Australian sugar production, Queensland and New South Wales (annual)

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