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ABARES

Department of Agriculture,
Water and the Environment
        ABARES               Insights      ISSUE 2, 2021

   SNAPSHOT OF

   Australian Agriculture 2021
   This Insights report describes the current
   state of Australian agriculture, with the aim of
   providing key information and statistics in one
   place. It covers eight key aspects of Australian
   agriculture: its role in the broader economy,
   trends in production, industry structure and
   productivity, risk management, agricultural
   employment, government support, trade and
   impacts of the COVID-19 pandemic.
Insights - Analysis & Policy Observatory ...
Agriculture's place in                                                                          FIGURE 1 Selected contributions of agriculture
Australia                                                                                                          Land use

Australian agriculture accounts for:                                                                     Water extractions

ƒ 55% of Australian land use (427 million hectares,                                                                 Exports
  excluding timber production in December 2020) and
  25% of water extractions (3,113 gigalitres used by                                                    Rural employment
  agriculture in 2018–19);
                                                                                                    National employment
ƒ 11% of goods and services exports in 2019–20;
                                                                                                 Gross domestic product
ƒ 1.9% of value added (GDP) and 2.6% of employment
  in 2019–20 (Figure 1).                                                                                                     %         10        20         30     40     50       60
                                                                                                Sources: ABS Water Account (cat. 4610); Catchment scale land use of Australia – update
The mix of Australian agricultural activity is                                                  December 2020, ABARES; ABS Balance of Payments (cat. 5302); ABS Labour Survey
determined by climate, water availability, soil type and                                        (cat. 6291); ABS National Accounts (cat. 5206)

proximity to markets. Livestock grazing is widespread,
occurring in most areas of Australia, while cropping
and horticulture are generally concentrated in areas
relatively close to the coast (Figure 2).

FIGURE 2 Agricultural production zones

                                                                                                                                    Area of agricultural uses
                                                                                                                  Grazing native                                         291.74
                                                                                                                     vegetation

                                                                                                               Grazing modified             39.81
                                                                                                                       pastures

                                                                                                             Cropping including
                                                                                                                  crop/pasture          21.78
                                                                                                                        rotation
                                  0     250   500km
                                                                                                                     Horticulture 0.44

                                                                                                                                   0        50        100    150   200    250     300
                                                                                                                                                       million hectares

   Agricultural land
       Grazing native vegetation                 Cropping including crop/pasture rotation                  Other uses
       Grazing modified pastures                 Horticulture *                                            Wheat–sheep

* Exaggerated to improve visibility.
Sources: Wheat-sheep zone – Agricultural and Grazing industries Survey, 2016, ABARES; Catchment scale land use of Australia - update December 2020, ABARES; ABS Agricultural
Commodities, Australia–2018–19 (cat 7121)

 2      Snapshot of Australian Agriculture 2021
        ABARES insights
Insights - Analysis & Policy Observatory ...
Agricultural production                                                                               FIGURE 3 Agriculture, fisheries and forestry
                                                                                                      value of production, by commodity, 2019–20s
is growing
                                                                                                                             8%
Australia has a diverse agricultural, fisheries and                                                                                                             23%
forestry sector, producing a range of crop and livestock
products (Figure 3). The gross value of agricultural,
fisheries and forestry production has increased
by 7% in the past 20 years in real terms (adjusted
for consumer price inflation), from approximately
$62 billion in 2000–01 to $67 billion in 2019–20                                                                                       2019–20s
(Figure 4).
Drivers of output growth over the past 20 years
vary by sector:
ƒ In cropping, long-term falls in real prices have been                                                51%                                                                       18%
  offset by volume growth, as producers have improved
  productivity by adopting new technologies and
                                                                                                               Wheat                         8%          Cattle & calves        20%
  management practices.                                                                                        Coarse grains                 4%          Sheep & lambs            8%
                                                                                                               Pulses                        2%          Milk                     7%
ƒ In livestock, higher prices have been the main driver                                                        Canola                        2%          Wool                     5%
  of growth (Figure 5), reflecting growing demand                                                              Sugar cane                    2%          Poultry                  4%
  for protein in emerging countries and also some                                                              Wine grapes                   1%          Pigs                     2%
  temporary factors, such as drought in the United                                                             Cotton                        0%          Other livestock products 2%
                                                                                                               Other grains & oilseeds       0%          Other livestock          3%
  States and disease outbreaks such as African Swine
                                                                                                               Other crops                   3%
  Fever in meat importing countries.                                                                           Fruit & nuts                  8%          Fisheries                       4%
                                                                                                               Vegetables                    7%          Forestry                        4%
                                                                                                               Other horticulture            4%
                                                                                                      s ABARES estimate for 2019–20.
                                                                                                      Note: Values are measured at the farm gate (i.e. prior to processing).
                                                                                                      Sources: ABS International Trade in Goods and Services (cat. 5368); ABS Value of
                                                                                                      Agricultural Commodities Produced, Australia (cat 7503)

FIGURE 4 Agricultural, fisheries and forestry production, 2000–2001 to 2019–20s
           80                                                                                                     20 years to 2019–20
           70                                                                                                Production           Exports
                                                                                                                                                             Meat & live animals
           60                                                                                                        36%                  14%                Livestock products
           50
                                                                                                                                                             Grains & oilseeds
           40                                                                                                        28%                  17%                All other crops
           30                                                                                                                                                Fruit & vegetables
           20
                                                                                                                     24%                  64%                All other horticulture
           10                                                                                                                                                Forests products
                                                                                                                     11%                  25%                Fisheries
     2020–21
            $b
                   2001 2003 2005 2007 2009 2011 2013 2015 2017 2019
                   –02 –04 –06 –08 –10 –12 –14 –16 –18 –20s
s ABARES estimate for 2019–20.
Note: Values are measured at the farm gate (i.e. prior to processing). Percentage changes compare levels in 2000–01 and 2019–20.
Sources: ABS International Trade in Goods and Services (cat. 5368); ABS Value of Agricultural Commodities Produced, Australia (cat. 7503)

FIGURE 5 Volume driving increased cropping value and price driving increased livestock value,
2000–01 to 2019–20s
    40
                                                                                                                                                                               Volume
    30                                                                                                                                                                         Price
                                                                                                                                                                               Value
    20
     10

     %
   –10
   –20
                        Crops (including horticulture)                      Livestock & livestock products                                  Total

s ABARES estimate for 2019–20.
Note: Estimates relate to the agricultural sector only (they do not include fisheries and forestry). Crops include horticulture. Values represent the growth in each variable over the past
20 years (not the proportion of growth that can be attributed to each factor). Values are smoothed using a 5-year moving average. Prices and values are in real terms (adjusted to remove
the effects of inflation).
Source: ABARES
The farm population is                                                             Economic performance
diverse and constantly                                                             is driven by the most
changing                                                                           productive farms
In 2018–19, there were 89,400 agricultural businesses                              Australian farmers have historically achieved strong
with an Estimated Value of Agricultural Operations                                 productivity growth, increasing the volume of output
(EVAO) of $40,000 or greater in Australia (ABS 2020a).                             produced from a given set of inputs. Agricultural
There were an estimated 57,300 broadacre and dairy                                 productivity growth has been stronger over the long
farm businesses in 2018–19. Of these, 36% were                                     term than what has been seen in most other sectors of
classified as beef industry farms, 19% sheep industry                              the Australian economy. It has also been comparable to
farms, 14% wheat and other crops industry farms,                                   farmers in other high income countries. This growth
14% mixed livestock-crops industry farms, 10% dairy                                has been driven by improvements in technology and
industry farms, and 8% sheep-beef industry farms.                                  structural change.
For broadacre farms, the biggest changes to the farm
                                                                                   Industry-level trends in performance are driven by
population since 1978–79 have been a decline in the
                                                                                   the largest and most productive farms. For example,
total number of farms, a decline in the share of mixed
                                                                                   indicative analysis suggests that if all broadacre
livestock-crops farm businesses and an increase in the
                                                                                   farms had the same output per hectare as the highest
share of beef industry farm businesses (Figure 6).
                                                                                   performing 20% of farms, the total value of broadacre
                                                                                   agricultural output would be around 24% above
FIGURE 6 Number and share of broadacre                                             current levels, and farm cash income would be around
and dairy farm businesses, by industry, 1978–79                                    46% above current levels1. Smaller farms are less
to 2018–19                                                                         profitable on average than their larger counterparts
 140                                  Number of farms                              but they compare favourably with the average
                                                                                   Australian household, with comparable income, lower
 120
                                                                                   debt and greater net wealth.
 100
                                                                                   A range of factors has supported the growth of large
  80
                                                                                   farms (those with receipts above $1 million per year
  60                                                                               in real terms) from around 3% to 14% of the farm
  40                                                                               population over the past 4 decades. Their share of total
  20
                                                                                   output value has increased markedly, from 25% to
                                                                                   around 59% (Figure 7).
’000
          1978
           –79
                 1982
                  –83
                        1986
                         –87
                               1990
                                –91
                                      1994
                                       –95
                                             1998 2002 2006 2010
                                             –99 –03 –07     –11
                                                                   2014
                                                                    –15
                                                                            2018
                                                                             –19
                                                                                   The structure of Australian farms reflects market
                                                                                   conditions, which tend to see the best managers
  40                                   Share of farms                              operating the largest farms. As the number of farms
   35                                                                              has decreased, farm sizes have increased in terms of
  30
                                                                                   both total receipts and land area. Increased farm size
                                                                                   has also supported improved productivity through
  25
                                                                                   several channels: access to better technology; better
  20
                                                                                   and more flexible labour management (which supports
   15                                                                              higher labour productivity); better knowledge
   10                                                                              management; diffusion of better farm management
     5                                                                             practices; and access to positive economies of
   %                                                                               scale. All these changes have been enabled by the
           1978–79        1988–89         1998–99       2008–09    2018–19
                                                                                   deregulation of most agricultural markets and
                 Beef        Sheep-beef               Dairy         Sheep
                                                                                   economy-wide microeconomic reforms.
                  Wheat & other crops               Mixed livestock-crops
Source: ABARES

                                                                                   1 Estimates of output by farm size were constructed separately for livestock and
                                                                                     cropping farms in individual ABARES regions and aggregated to the national level
                                                                                     using ABARES survey weights. Comparing farms within particular regions and
                                                                                     industries helps to control for differences in land quality and climate conditions
                                                                                     which cause significant variations in farm performance across Australia.
                                                                                     Because of these differences the estimates presented here should be viewed as
                                                                                     illustrative only, since the increases in production and profitability that are feasible
                                                                                     from an agronomic perspective will be different.

 4       Snapshot of Australian Agriculture 2021
         ABARES insights
Productivity growth plays a crucial role in offsetting
FIGURE 7 High-revenue farms now account for
                                                                                       the impacts on farm profit from ongoing declines in
one fifth of the broadacre population but two
                                                                                       output prices relative to input prices – known as farm
thirds of land, income and output
                                                                                       terms of trade. Prices for Australian producers are set
      Shares of broadacre farm population                                              on international markets, meaning Australian farmers
100                                                                                    must produce an internationally competitive product
                                                          Farms with receipts
                                                          greater than $1 million      to be profitable. Maintaining productivity growth and
 80                                                       Farms with receipts          continued innovation is therefore required if Australia
                                                          between $200K and            is to remain internationally competitive.
                                                          $1 million
 60
                                                          Farms with receipts          In recent years, agricultural productivity growth has
                                                          less than $200K              slowed for several reasons. These include deteriorating
 40
                                                                                       seasonal conditions and less intense research and
                                                                                       development efforts. While there is evidence that crop
 20
                                                                                       producers are adapting to changing climate conditions,
  %
                                                                                       and in so doing have partly restored productivity
           1978–79               2019–20p                                              growth, this has not been enough. Further adaptation
                                                                                       efforts will be required to restore productivity growth
      Shares of total area operated
100                                                                                    to past levels.
                                                          Farms with receipts
                                                          greater than $1 million
 80                                                       Farms with receipts
                                                          between $200K and
                                                                                       Employment on Australian
 60
                                                          $1 million
                                                          Farms with receipts
                                                                                       farms is significant and
 40
                                                          less than $200K
                                                                                       varies throughout the year
 20                                                                                    Labour is a key input to Australian agriculture. On-farm
                                                                                       employment, including work by farm owners, has
  %                                                                                    fallen by 25% over the past 3 decades (ABS 2020b).
           1978–79               2019–20p                                              Australian farms employed 326,000 workers
      Shares of farm cash income                                                       on average during 2018–19, including full-time,
100
                                                          Farms with receipts          part-time, casual and contract employees (Figure 8).
                                                          greater than $1 million      Broadacre farms are the largest employers in
 80                                                       Farms with receipts          Australian agriculture, followed by fruit, grape and
                                                          between $200K and
                                                          $1 million                   nut farms, vegetable farms and dairy farms (Martin,
 60
                                                          Farms with receipts          Randall & Jackson 2020).
                                                          less than $200K
 40
                                                                                       FIGURE 8 Peak workforce, nature of agricultural
 20                                                                                    employment, 2018–19
                                                                                           100
  %
           1978–79               2019–20p
                                                                                            80
      Shares of total output
100                                                                                         60
                                                          Farms with receipts
                                                          greater than $1 million
 80                                                       Farms with receipts               40
                                                          between $200K and
                                                          $1 million
 60                                                                                         20
                                                          Farms with receipts
                                                          less than $200K                   %
 40                                                                                              Broadacre farms   Dairy farms   Fruit, grape   Vegetable farms
                                                                                                                                 & nut farms

 20                                                                                               Full-time          Part-time         Casual          Contract
                                                                                       Source: ABARES 2020
  %
           1978–79               2019–20p
p ABARES estimate for 2019–20.
Note: Farm size categories are defined in real terms (adjusted for inflation).
Income is measured as farm cash income (total cash receipts minus total cash costs).
Source: ABARES

                                                                                                                     Snapshot of Australian Agriculture 2021
                                                                                                                                            ABARES insights       5
Variation in total employment on farms is the result
                                                                                                   FIGURE 10 Agricultural, fisheries and forestry
of changes in the use of casual and contract labour
                                                                                                   exports by destination
throughout the year. In 2019 the total number of casual
and contract workers employed on farms peaked in                                                         60
February and was at its lowest in June, reflecting the
                                                                                                         50
timing of relatively labour-intensive operations, such as
planting and harvest. Horticultural farms tend to use                                                    40
relatively large amounts of casual and contract labour
                                                                                                         30
at key times of the year, while broadacre and dairy
farms tend to use this kind of labour more consistently                                                  20
through the year.
                                                                                                          10

Around 70% of                                                                                      2020–21
                                                                                                          $b
                                                                                                               1998   2001        2004    2007       2010      2013      2016      2019

agricultural output
                                                                                                               –99    –02          –05    –08         –11      –14        –17      –20s

                                                                                                               40%                                 62%
is exported                                                                                            Exports to other markets              Exports to top 8 markets in Asia

                                                                                                           All others                            Singapore            Korea, Rep. of
Australia exports around 70% of the total value                                                            New Zealand                           Hong Kong            Indonesia
                                                                                                           United States                         Vietnam              Japan
of agricultural, fisheries and forestry production.                                                                                              India                China
Export orientation of each industry can vary
                                                                                                   s ABARES estimate for 2019–20.
by commodity type. Wheat and beef, which are                                                       Note: Export values are measured at the border and so include processing of some
large sectors, are more export-focused than dairy,                                                 commodities beyond the farm gate (for example, wine from grapes and cheese from
                                                                                                   milk). For this reason production and export values are not directly comparable.
horticulture and pork (Figure 9).                                                                  Sources: ABARES; ABS International Trade in Goods and Services, Australia (cat. 5368)

In real terms the value of agricultural exports has
fluctuated between $40 billion and $60 billion since
2000–01 (Figure 10). Meat and live animals has been
the fastest-growing export segment, growing 86% over
the period, followed by horticulture up 64% and forest
products up 16%.

FIGURE 9 Australian agriculture is export orientated

                                                                                                 Sugar                       Beef & veal                    Mutton & lamb
                                                                                                 86%                              75%                           73%

                                                                                                 Canola                           Wheat                            Rice
                                                                                                 72%                              71%                           52%

                               70%
        of agricultural production is exported
                                                                                         Dairy products
                                                                                                 40%
                                                                                                                             Fruit & nuts
                                                                                                                                  31%
                                                                                                                                                            Pig & poultry
                                                                                                                                                                  5%
Note: Share of agricultural production exported by sector, 3 year average, 2015–16 to 2017–18.
Source: ABARES, following method outlined in Cameron (2017)

 6       Snapshot of Australian Agriculture 2021
         ABARES insights
Global agricultural demand is growing very
strongly, reflecting rising per capita incomes as well    Australian farmers
as population growth, but export competition is
also increasing. Asia is the fastest growing export
                                                          receive low levels of
region for the Australian agriculture, fisheries and      government support
forestry sectors.
ƒ Exports to Australia’s eight largest markets in Asia    Government support of Australia's agricultural sector
  increased by 62% to $33 billion over the 20 years       is very low compared to the 37 member countries
  to 2019–20 and accounted for 62% of the total           of the Organisation for Economic Co-operation and
  value of agricultural, fisheries and forestry exports   Development (OECD) and other major emerging
  in 2019–20.                                             agricultural producers (Greenville 2020). The average
                                                          level of support (as a share of gross farm receipts)
ƒ China is Australia’s largest export market for          for all countries was 11.7% between 2017 and 2019,
  agricultural, fisheries and forestry products, at       compared to Australia at just 2.3% (Figure 11).
  $16 billion in 2019–20. Exports to China are about
  5 times larger than they were in 2000–2001.             Australia's national competition policy and
                                                          pro‑competitive reforms have resulted in lower
ƒ Asian demand is projected to double between 2007        agricultural support over time. These reforms have
  and 2050, providing opportunities for exporters         been consistent with Australia's obligations to the
  of high-value, high-quality agricultural and            World Trade Organization. Government support for
  food products.                                          agriculture is primarily via investments in sector
                                                          capacity, such as research and development. Tools
Australian farmers                                        such as farm management deposits and income tax
                                                          smoothing help farms manage risks that can arise from
manage significant risk                                   Australia's variable climate.
and variability                                           Keeping subsidies low is important for both
                                                          Australian producers and international markets.
Australian agricultural producers manage significant
                                                          Australia’s reform experience shows that deregulating
variability, including a highly variable climate and
                                                          the agriculture sector and removing distorting
volatile commodity prices. These factors generate
                                                          forms of support spurs overall sector growth,
substantial variation in farm output, greater than that
                                                          increasing participation in global markets and the
experienced by farmers in most other countries and
                                                          contribution that agriculture makes to the rural and
greater than that experienced by business owners in
                                                          national economy.
other sectors of the Australian economy (Keogh 2012).
Australian farmers have a number of effective
strategies for managing risk, including maintaining
relatively high levels of equity, liquid assets and
borrowing capacity, using inputs conservatively,
diversifying across enterprises and locations and
earning off-farm income. Well-managed farms are
better prepared for droughts and other risks, such
as global price shocks, and not all farmers in regions
affected by drought experience economic or financial
hardship. For example, over the past 20 years an
average of 50% of broadacre farms generated more
than $50,000 (in real terms) in farm cash income in
a given year. But this proportion varied substantially
with seasonal conditions and prices. In the 2006–07
drought year, just 33% of farms generated more than
$50,000 income, whereas 52% of farms managed to do
so in the 2019–20 drought year.

                                                                              Snapshot of Australian Agriculture 2021
                                                                                                     ABARES insights    7
FIGURE 11 Producer support estimates (PSE) as share of gross farm receipts, 2017–2019
       70
                           Emerging economy average
       60
                             OECD average
       50
                               All country average
       40
       30
       20
       10
        %
      –10
      –20
      –30
                               Argentina     India       Ukraine        Australia Kazakhstan Costa Rica          Mexico     United   China            Turkey   Indonesia    Japan   Switzerland   Norway
                                                                                                                            States
                                      Vietnam        New          Brazil          Chile        South        Canada    Russian Colombia       Israel       European Philippines   Korea,    Iceland
                                                    Zealand                                    Africa                federation                            Union                 Rep. of
Note: The all-country average includes all OECD countries, non-OECD EU Member States, and the 13 Emerging Economies. The OECD average does not include the non-OECD EU Member
States. Latvia and Lithuania are included only from 2004. The 13 Emerging Economies include Argentina, Brazil, China, Colombia, Costa Rica, India, Indonesia, Kazakhstan, the Philippines,
Russian Federation, South Africa, Ukraine and Vietnam.
Source: OECD 2020

                                                                                                                            Trade agreements provide options for exporters
Australia has implemented                                                                                                   (Figure 12). An agreement can reduce the
a comprehensive trade                                                                                                       concentration risks associated with supplying a single
                                                                                                                            market by reducing tariffs and making products more
strategy                                                                                                                    competitive. However, some commodity exports
                                                                                                                            remain more concentrated towards a single market.
Over the past 15 years, Australia's trade agreements                                                                        This may be driven by prices or the composition of the
have provided access to new and growing markets,                                                                            global supply chain.
and have supported the competitiveness of our
products abroad (Duver & Qin 2020). There are only
a few of Australia’s major trading partners where
a preferential trade agreement is not yet in place.
These include the European Union, the United Kingdom
and India. Negotiations with these trading partners
are underway. The pursuit of FTAs with new partners
will remain of key importance to Australia's future
trade agenda, as will the ongoing review and upgrade
of existing FTAs to ensure they continue to support
our competitiveness.

FIGURE 12 Indicators of Australia’s export market concentration for key commodities, 2019–20
                         120

                                                                                                                                                               Size of circle shows relative
                         100                                  Wine                                                                                                 trade share in China
     Number of markets

                                             Lamb
                         80 Beef and veal                       Dairy
                               Vegetables
                         60                 Fruit                    Mutton
                                    Wheat                                  Nuts
                         40                          Barley
                                    Sugar                                                                                 Wool
                                                                                                                                                       Skins
                                   Oats
                         20                                                           Canola
                                                Live sheep                 Live cattle
                                                                                                        Cotton
                          0
                               0                          0.2                             0.4                         0.6                      0.8                         1.0                       1.2

                                                                                                          Increasing concentration

Source: ABARES

 8                  Snapshot of Australian Agriculture 2021
                    ABARES insights
Agriculture was resilient                                  One of the lasting challenges of COVID-19-related travel
                                                           restrictions has been the reduced availability of farm
despite COVID‑19                                           workers from overseas and higher airfreight costs for
                                                           exporters of high-value commodities. Horticulture,
uncertainty                                                some intensive production, and meat processing
                                                           industries have been most affected by the reduced
COVID‑19 was a major event for Australia’s agricultural,   number of overseas workers. The result been increased
forestry and fisheries sector in 2019–20, but the sector   costs of production for these industries and potentially
demonstrated an ability to adapt and transition to new     lower horticultural production, as producers find
opportunities (Greenville, McGilvray & Black 2020).        it difficult to harvest. Exports of high-value and
Because food is an essential good, demand does not fall    highly perishable products, such as live seafood and
significantly in times of crisis, although the types of    fresh produce, have also faced cost increases given
goods being demanded through the pandemic shifted          the reduced supply of cargo space on flights to key
away from high-value products consumed typically           export markets.
in the hospitality sector (e.g. wine and seafood) to
foods consumed at home. Disruptions to domestic
and international food supply chains early in 2020
were largely resolved, allowing agricultural trade to
remain resilient through the pandemic. International
food processors continued to operate and demand
Australian products as inputs; and the resurgence of
international textile and wood products manufacturing
strengthened export demand for these products
throughout 2020–21.

                                                                                Snapshot of Australian Agriculture 2021
                                                                                                       ABARES insights    9
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pandemic, Australian Bureau of Agricultural and
Resources Economics and Sciences, Canberra,
accessed 25 January 2021.

10   Snapshot of Australian Agriculture 2021
     ABARES insights
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