Agribusiness

Increased yields and higher prices for horticulture producers

Australian horticulture producers have started 2017 on the back of a positive 2016, which saw increased yields and higher prices, according to Rural Bank and Rural Finance’s new Australian Horticulture Report.

The inaugural report, launched by Rural Bank and Rural Finance’s specialist insights team Ag Answers, includes information about national and international production, seasonal conditions, prices, demand and the financial performance of Australia’s horticulture sector.

Vegetable and fruit prices trended higher in 2016 on the back of increased domestic consumption and tight supply towards the end of 2016. Export demand continued to improve particularly for wine, citrus and nuts.

The new report found that while total horticulture production for the 2014/15 financial year only increased by a modest two per cent year-on-year to 5.7 million tonnes, the value of Australian horticulture production increased by an impressive eight per cent year-on-year to more than $10.5 billion.

In some product categories, the sector really shone – for example, nut production increased by 19 per cent and its value by a staggering 35 per cent, to transform it into an industry now valued at more than $1 billion.

Andrew Smith, General Manager Agribusiness for Rural Bank and Rural Finance, said the Australian horticulture industry is in a good position to build on the successes achieved in 2016 and to increase production to meet the ever-increasing demand from Asian markets for Australian grown fruit, vegetables and wine.

“With higher prices achieved by farmers for their produce in 2016, the challenge now for the industry will be to sustain these prices and increase production to meet the demand.

“The six per cent increase in fruit consumption recorded in 2014/15 is further evidence of this increasing demand. As a result, it’s absolutely crucial Australian horticulture producers find solutions to the dwindling availability of seasonal workers. This is the single biggest issue facing the industry at present as it has the potential to stymie the future growth of the sector and its ability to adequately supply domestic and international markets.

“The future of Australian horticulture is bright but producers must continue to closely monitor the trends so it can prepare and counter any attempts to substitute local produce for cheaper foreign frozen alternatives,” Mr Smith said.

From a business perspective, the report revealed that Australian vegetable farmers have rarely had it so good.

Income has increased significantly over the last three years with the average income of Australian vegetable farms now $1.1 million – a 5.2 per cent increase on 2014/15 income levels.

This dramatic increase in income is primarily due to higher yields in most crops and price improvements particularly in potatoes and tomatoes. However, with forecasts predicting warmer and drier conditions over winter and spring 2017, this could lead to lower yields and reduced incomes for horticulture producers 2017.

On the demand side, the report discovered that domestic consumption of fruit is growing at or above the rate of production for a range of varieties, with avocados, blueberries, raspberries, oranges lemons and limes all imported to meet seasonal demand throughout 2017.

With a six per cent increase in fruit consumption recorded in 2014/15, the seasonal nature of these fruits coupled with increased export volumes suggests demand is likely to outpace supply in 2017.

According to the Australian Horticulture Report, the total value of Australian horticulture exports was $2.1 billion in 2015/16, a 37 per cent increase on 2014/15 figures.

Nuts were the highest value segment at $902 million – an increase of 27 per cent – but fruit and vegetable exports also rose by an incredible 46 and 31 per cent respectively.

This significant increase in the value of horticulture exports has come largely from increased demand for Australian produce from Asian countries such as China, Singapore, Japan, Malaysia and South Korea.

Finally, the new report also revealed that EU wine production declined by almost 10 per cent in 2016 due to extensive frost damage to vines throughout France, Spain and Italy.

Vine growing area is declining as a result of voluntary withdrawal and shrinking profit margin, this could increase the price of European wine.

This is favourable news for Australian wine producers especially in light of the 9.3 per cent increase in the value of Australian wine exported in 2015/16.

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