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Rains bring drought relief and hope to Australian farmers

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Via Financial Times

Two months ago Ian Clifton was unsure whether his family’s century-old cattle farm would survive a three-year drought that killed one in 10 of his herd. But when the rains finally arrived in late January, it turned his barren paddocks into a sea of lush, green grass that is transforming his business.

“The drought has finally broken for us,” said Mr Clifton, who runs a herd of almost 2,000 cattle at his farm near Coonabarabran in New South Wales and is optimistic for the year ahead. 

“We spent about A$750,000 buying feed when the rains failed and lost a lot of animals. But cattle prices are surging and demand for protein is exceptionally strong in Asia due to the impact of swine flu in China. We are well placed,” Mr Clifton said. 

Farmer confidence has surged after the end of one of the worst droughts in the continent’s history. Almost half of farmers expect conditions to improve this year against 13 per cent last year, one of the largest upswings in sentiment since Rabobank began collecting that data two decades ago.

With panic buying boosting demand for food, there are also hopes that coronavirus will, in the short-term at least, help farmers get back on their feet. But in the medium term, a fall in incomes will probably weigh on commodity prices.

“There is huge relief and excitement due to the rains and we are seeing an increase in on-farm investment as farmers buy machinery, livestock and fencing in anticipation of a better season,” said Tim Hunt, head of research at Rabobank Australia.

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Cattle prices have rocketed 45 per cent since January 2, as farmers have rushed to begin restocking in anticipation of plentiful grass to feed their animals and demand for red meat from Asia surges.

A 14 per cent decline in the Australian dollar against the greenback this year is also energising the A$59bn ($36bn) agriculture industry, which exports three-quarters of annual production.

The number of cattle in Australia has fallen to a 30-year low after farmers were forced to slaughter animals during the drought
The number of cattle in Australia has fallen to a 30-year low after farmers were forced to slaughter animals during the drought © Graham Jepson

“As a result of recent rainfall, many grain-growing regions are now in a position to sow a winter crop and livestock producers are starting to see good pasture growth. Dams have been replenished and some rivers have seen their first flows in years,” said Tony Maher, chief executive of the National Farmers Federation.

The federation plans to transform agriculture into a A$100bn industry by 2030, in part by turning Australia into a “food bowl” for Asia. It aims to increase exports to the region under a network of bilateral free-trade deals and the 11-member Trans-Pacific Partnership, which are slashing tariffs on everything from beef to wheat and barley.

The positive sentiment in rural Australia stands in stark contrast to the mood in cities, where more than 200,000 people have been stood down from their jobs owing to coronavirus. The optimism among farmers though is tempered by concerns about the longer term impact on the agricultural sector. 

“The depreciation of the Australian dollar and strong protein demand in Asia is good news. But we still need to see follow-up rain to get a good winter crop and coronavirus poses a risk to pricing of commodities,” said Rabobank Australia’s Mr Hunt. 

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The NFF has warned that the horticultural sector, which relies on seasonal workers from overseas to pick and pack produce, faces difficulties. This week Canberra eased visa conditions for backpackers and other seasonal workers to help during the harvest and prevent food shortages.

Some farmers will also struggle to restock after the financial devastation of recent years. Many farmers were forced to slaughter or sell animals they could not feed during the drought, pushing the nation’s cattle herd down to a 30-year low of 25m and the sheep flock down to 100-year lows of 65m.

Overall farm profits fell A$88,000 per farm over the past two years, according to Abares, Australia’s agricultural research agency.

“Farmers have been pushed to the limit in terms of cash reserves and access to capital. Many livestock producers have also almost entirely destocked. Restocking will be challenging with supply pushing the price of cattle in particular sky high,” says Mr Maher.

More rain is needed if farmlands are to continue their recovery from the drought. For now at least, the forecast is good.

In Coonabarabran Mr Clifton voices little concern about coronavirus. People, he said, still need to eat during a crisis. But the devastating impact of the recent drought has caused him to worry more about how climate change will have an effect on farmers on the driest continent on earth.

“In the past I was hesitant about calling out the dangers posed by climate change to agriculture. But with the extreme temperatures and lack of rainfall we experienced over the past three years, I think there is no doubt we face huge challenges.”

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