Drought to limit export growth for agricultural commodities

AGRICULTURAL exports have increased in value for the ninth consecutive year to a record high of $50.7 billion in 2018-19.

But this growth is not expected to continue this financial year due to the drought.

Rural Bank's latest Australian Agriculture Trade report shows the cattle industry experienced the largest increase in export value growth in 2018-19, up by $1.9 billion to a massive $12.3 billion.

Unfortunately, the cattle record was a bittersweet result for producers, as it was due to increased volumes hitting the market due to drought-induced destocking.

Export volumes are expected to decline in 2019-20.

"Even if it rains, we won't see a huge supply increase this coming year," Rural Bank chief operating officer Will Rayner said.

"People will be retaining their females to breed from and it's going to take two to three years to see any increase, at best."

The export value of Australian sheep hit a record high of $4.3 billion in 2018-19, with China overtaking the Middle East and North Africa as our largest export market.

However, there is expected to be a decline in sheepmeat export volumes in 2019-20 due to a smaller sheep flock.

Mr Rayner said demand for Australian red meat was set to remain high this coming year, especially with African Swine Fever wiping out masses of China's pig population.

"African Swine Fever is going to have a significant effect on the global price dynamics for animal protein," he said.

The value of wool exports to China declined by $113.1 million in 2018-19 and the value of wool exports is expected to continue dropping.

"The US tariff on Chinese textiles is having an effect on the demand for wool from China," Mr Rayner said.

"We also know that the supply of wool in Australia is not going to rebound in any meaningful way anytime soon because of the drought."

The cropping sector is also on shaky ground, with the value of exports to China falling a massive 47.8 per cent, mainly due to a $621 million drop in barley export value due to reduced supply and uncertainty over China's anti-dumping investigation.

"The next three to four weeks will be critical for the grains sector," Mr Rayner said.

"Even in areas of South Australia, Victoria and Western Australia where the potential is good, they still need good rain in spring."

The major good news story for agricultural exports last financial year was Australian nuts becoming a billion-dollar export commodity for the first time.

"A change in global diets and the health benefits of nuts is driving a growth in demand," Mr Rayner said.

Wine exports reached a record high of $2.96 billion in 2018-19.