Farm profits to dive by 70 per cent as drought and costs bite

Australian farmers are bracing for a significant downturn, with profits expected to plummet by 70% this year due to persistent drought conditions and escalating input costs. The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) forecasts that farm-business profits will drop to approximately $65,000 per farm, with some areas in New South Wales experiencing even larger profit reductions.

The latest ABARES quarterly report indicates a 21% decrease in winter crop production across the nation. This decline is projected to shrink the value of agricultural exports by $7 billion. ABARES executive director David Galeano highlighted the impact of cost pressures on farm businesses. "Due to cost pressures, [broadacre] farm-business profits will be down 70 per cent on last year to about $65,000 per farm, and in parts of NSW those falls in profit will be even larger," he said.

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Due to cost pressures, [broadacre] farm-business profits will be down 70 per cent on last year to about $65,000 per farm, and in parts of NSW those falls in profit will be even larger.

While recent rainfall has improved conditions in parts of New South Wales, it arrived too late for many growers to plant winter crops. The forecast for winter suggests drier-than-average conditions. Queensland's crop yield could fall by as much as 35%. In contrast, Western Australia and South Australia have benefited from late summer and early autumn rainfall, showing better prospects for crops like canola and wheat.

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That area of farms sown to crop in NSW looks like being down by a third.

Despite a 5% drop in overall farm production to $98 billion, largely attributed to cropping issues stemming from poor seasonal conditions, Mr. Galeano noted the resilience of the sector. "But despite the very high fertiliser and fuel prices and a fall in production due to a lack of rain, it is pretty amazing that farm production, although down five per cent, has held up pretty well," he commented.

The area planted with wheat, Australia's primary grain export, is expected to decrease by 12% to 10.9 million hectares, the smallest area since 2019-20. This reduction reflects diminishing profit margins for wheat compared to other crops and severe dry conditions in northern cropping regions. Barley plantings, however, are forecast to increase by 4% due to higher prices and lower fertilizer requirements. Canola plantings are predicted to fall by 6%, with chickpea plantings down by 35% due to unfavorable conditions in northern New South Wales and Queensland.

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But despite the very high fertiliser and fuel prices and a fall in production due to a lack of rain, it is pretty amazing that farm production, although down five per cent, has held up pretty well.