This sunny outlook for agriculture comes in the second year of improved production in Australia's eastern states and remarkable changes in certain key indicators which point strongly to the benefits of a period of exceptional cash flow and industry growth.
Neil Clark, of Bendigo-based market analyst Neil Clark & Associates, has identified five critical benchmarks which, he says, clearly demonstrate that agriculture has made great
headway already into a new era of prosperity.
Clark's company has been providing market analysis and insights to Australian businesses for the past 25 years. He says this renewed vigour in agriculture's cash flow is expected to boost spending on machinery and new technology, encourage land purchases, top up farmers' bank accounts and stimulate spending in local towns.
"The size of the opportunity we have here is far greater than most imagine," Clark says. "There are five key benchmarks our company has identified to support this scenario.
First is improved farm production.
"In 2010-11, we saw farm production of $49.3 billion, with a net value of a massive $12.7 billion – and this coming year sees a forecast production figure of $50 billion.
"Two years of healthy farm profits is great news for manufacturers and suppliers of farm inputs and services.
"But more good news is still to come, with land values tipped to take off and new investment opportunities emerging."
Clark says the second indicator lies in the fact that, while farmer numbers are declining, the number of larger producers is rising.
"Farm enterprise numbers have, in fact, fallen by 14% in the 10 years to 2010 – a loss of 18,800 enterprises," he says. "On the other hand, there are now 6782 high-production farms in Australia with incomes greater than $1 million and their numbers have increased by 74% during this same period.
"These large producers generate 48% of total farm production in Australia."
The third indicator is seen in the banks' strong lending to agriculture.
"Bank lending to agriculture reached a record $60 billion at June, 2011," Clark adds.
"Annual growth in farm lending in the June quarter sat at 2.2% and agriculture and mining are the only two industries showing growth in borrowing.
He says the fourth factor is that Farm Management Deposits are strong.
"FMDs hit a record level at June, 2011, of $3.2 billion – an increase of 16% over the previous June. Furthermore, the mixed farming industry (grain, beef and sheep) topped the list at $771 million, or 24% of the total deposited."
Lastly, Clark says, water storage levels are high.
"Good rains have fallen in most parts of Australia and soil moisture levels in the eastern states are very healthy. Most dams are full – to an average of 85% in eastern Australia – so irrigation water is guaranteed and water allocations are at 100% in most systems.
"All in all, we are looking at a period of renewed prosperity for farmers and rural communities.
He believes these improved conditions will encourage small or retiring farmers to sell and allow others to grow their businesses.
"For farmers staying on their properties, these conditions bring an incentive to undertake further investment in their land, livestock and environment. This is a time of new market opportunities – and this is the time to take them up."
