Drought to Drain on Queensland’s Economy in 2020 as Water Shortages Bite

Wednesday 8 January, 2020 | By: Dr Marcus Smith

Queensland’s agricultural sectors are expected to record falling production and export values following sustained drought in the year ahead according to the latest analysis by the Chamber of Commerce and Industry Queensland (CCIQ).

Agriculture remains the economic core of regional communities across the State generating substantial income for local economies as well as significant rural employment opportunities.

Queensland is home to 40,500 businesses involved in agriculture, forestry and fishing activities, accounting for 9.2% of the State’s businesses in 2018 according to data compiled from the Australian Bureau of Statistics (ABS).

ABS data shows Queensland’s largest agricultural production is concentrated in the ‘food bowl’ located in the Granite belt regions of the Darling Downs and Maranoa, beef production across the Outback and Central Queensland followed by the key sugarcane growing regions of Mackay, Cairns and Townsville. 

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Queensland’s largest producing regions in the Darling and Southern Downs have been heavily impacted by drought with local dam levels critically low despite receiving relieving rainfalls on Christmas Day.

Lower business confidence levels reflect weaker household incomes and subdued hiring intentions, which continue to weigh on the near-term outlook for the state.

Labour force data compiled by Conus/CBC Staff Selection indicate that there were 76,500 persons employed on a trend basis across Queensland’s agriculture, forestry and fisheries industries at August 2019, while the beef processing sector is the State’s largest manufacturing industry employing around 18,000 workers.  

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The current prolonged period of drought across Queensland continues to put the viability of regional communities in the spotlight and has highlighted the State’s water security problems.

Nationally, the Commonwealth Bank estimates that the current drought could trim Australia’s annual gross domestic product by between 0.5% and 0.75%, or $9.5 billion and $14 billion, respectively.

Queensland’s Treasury will inevitably have to adjust its economic forecasts to account for the lower levels of domestic economic activity as well as the fall in overall export volumes in the coming 12 months.

According to the Granite Belt Growers Association, a poll of members in July found most respondents expect the current drought to cut approximately $100 million in spending and wages from within their local economies.

Conditions for future beef production in the State remain challenging following an escalation in slaughter rates for cattle and calves during 2018-19 according to the latest AgTrends report produced by the Department of Agriculture and Fisheries Queensland.

An estimated 3.77 million head of cattle and calves were processed in the State, representing a 7% increase year on year with anecdotal evidence suggesting slaughter was a more viable option for producers contending with elevated costs of acquiring and sourcing feed and water supplies.  

The report forecasts that the total value of Queensland’s primary industry commodities, measured as the combined Gross Value of Production (GVP) as well as first-stage processing, to be around $17.80 billion for 2019–20 which is 5% down on the previous year and 6% less than the average over the past 5 years.

The narrower measure of GVP at the ‘farm gate’ is forecast to drop from $14.67 billion to $13.94 billion for 2019-20, down 5% year on year and 7% below than the average for the past 5 years. 

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Of the key commodities, the GVP of cattle and calves is forecast to fall during 2019-20 by 6% to $5.14 billion.

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The value of milk production is also forecast to decline substantially by 15% to $170 million, which QDAF noted is 26% lower than the 5-year average.

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 Vegetables are forecast to fall 4% to $1.222 billion, with a decline in production value for lettuce, watermelons, potatoes, carrots and onions. 

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Fruit and nuts are expected to see an increase in production value of 1% to $1.927 billion, with a good season expected for major fruits including mandarins, strawberries and macadamias offsetting a 10% decline in the value of apple production from the Granite Belt.

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Field crops are forecast to fall significantly in 2019-20 with substantial declines in GVP for sugarcane, cotton and peanuts as well as cereal crops including chickpeas, barley and mung beans. Sorghum and wheat forecasts should perform solidly in the coming 12 months. 

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The production value of the State’s fisheries is forecast to be 3% higher at $405 million including an 8% increase in Queensland’s aquaculture industry, which predominantly consists of prawn and barramundi farming, while the GVP of the forestry sector is forecast to grow 1% to $283 million.

 

Queensland agricultural exports

Merchandise export values compiled by the Department of Foreign Affairs and Trade (DFAT) shows that outbound exports for agriculture, forestry and fisheries excluding confidential items such as sugar contributed $8.739 billion (approx. 10%) to Queensland’s $87.298 billion in total annual merchandise exports to June 2018-19. 

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The State’s agricultural exports grew by just 0.2% over 2018-19 following a substantial fall in 2017-18 of 11.2%, driven largely by falls to wheat exports after a bumper 2016-17 year, as well as vegetables.

Queensland is Australia’s largest beef producer and exporter with close to three-quarters destined for Asian markets. While cattle are produced across most of Queensland, major regions include the Fitzroy region in Central Queensland, the Desert Channels and the Murray Darling Basin, and the North Queensland Dry Tropics region.

Sugar export values are difficult to obtain due to its classification as a confidential item. Nevertheless, data compiled from Australian Sugar Milling Australia (ASMC) shows that Australia typically exports around $1.5 billion worth of sugar, with Queensland producing around 95% of the nation’s sugar and 85% of that is exported. 

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The value of Queensland’s fisheries exports came in relatively unchanged over 2018-19 at $174.37 million, which is 2% lower than the 5-year average. 

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Forestry exports out of Queensland has increased substantially over recent years totalling $242.167 million during 2018-19. 

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