Drought Dominates Outlook for Australia’s Farms, Not the Virus

(Bloomberg) -- Drought and last summer’s wildfires are set to dominate the fortunes of Australia’s farm industry in the short term, not the coronavirus pandemic, according to a government report.

“The biggest impact on the agricultural sector over the past three years has been and remains the drought conditions that have affected national production,” according to the report from forecaster the Australian Bureau of Agricultural and Resource Economics and Sciences.

“While recent improvements in seasonal conditions will ease pressures on primary producers, the impact of this summer’s bushfires and Covid-19 will likely compound those of the drought in the short term.”

Read more: Australian Crop Production Outlook Raised on Rain Optimism: IKON

Still, the pandemic is creating great uncertainty in the agriculture, forestry and fisheries industries and is also likely to result in lower prices for Australian products, as global household incomes fall, though they will continue to remain high by historical standards.

Likely Disruptions

With the virus now spreading well beyond China, second and third waves of disruptions are likely in Australia amid supply chain upheaval, which could affect both exports and the import of key farm inputs like crop chemicals. However, early indications suggest that domestic supply chains and those to a number of key markets remain functional in Australia, it said.

The virus will have a significant impact on more discretionary foods, such as high-quality products for cafes and restaurants, as well as manufacturing commodities including cotton and wool, according to the report. Australian food security will not be threatened and exports will continue, it said.

However, some products that are perishable and are yet to hit their peak export period, including citrus and berries, may be hit, depending on the extent and spread of the virus, according to the report. Exports of live cattle to Indonesia may be impacted amid reduced incomes and supply chain disruption.

©2020 Bloomberg L.P.

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