Production value strong despite challenges

The value of horticultural production is forecast to reach $12 billion in 2021/22, the second highest on record. So says the Australian Department of Agriculture, Water and the Environment’s latest ‘Agriculture Commodities Report’, released on 1 March 2022, which contains the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) forecast for the value, volume and price of Australia’s agriculture production and exports. Production of most fruit and vegetables over summer and autumn is expected to be plentiful, supported by favourable seasonal conditions and low water prices. However, farm and retail prices are forecast to remain elevated due to the increased costs of getting fresh produce to consumers. This comes as supply chain operations have been challenged by workforce shortages caused by COVID-19. According to the report, while major supermarkets’ distribution networks were disrupted, independent retailers servicing their local communities found efficiencies and savings in shorter chains. By sourcing directly from wholesale markets and multiple suppliers, local fruit and veg shops have seen more consistent product availabilities and offer a more customised shopping experience through speciality products not found in supermarkets. The value of horticultural exports is forecast to increase by 8% to $2.9 billion in 2021–22. Favourable seasonal conditions supporting production and quality attributes are expected to increase exports of almonds, cherries, macadamia nuts, stone fruit, potatoes, and table grapes. However, costs of air and sea freight and shortages of refrigerated containers are expected to continue to constrain exports.

Looking to the future

In 2022–23, the value of horticultural production is expected to rise by 4% to $12.5 billion. This is despite the expectation that horticultural production will fall moderately due to a return to average seasonal conditions. Production of most fresh produce will continue to remain at high levels overall, supported by high water storage levels and low water prices. The moderate fall in supply, along with consistent demand, are expected to support higher farmgate prices. Labour costs are expected to ease but will continue to place upward pressure on farm supply costs. This easing of labour shortages comes as working holiday makers are expected to return in greater numbers than the last two years. However, there remains a risk that a more staggered return of working holiday makers could constrain labour supplies further than anticipated, resulting in a scenario whereby higher labour costs could place greater upward pressure on farmgate prices. Over the medium term to 2026/27, production values are expected to increase and reach above $15 billion in nominal terms and between $12.7 billion to $13.6 billion in real terms by the end of the projection period. Horticultural exports are forecast to increase by 7% to $3.1 billion in 2022/23. Underpinning the export growth is favourable production prospects leading into and during the export period, improved trade access for citrus into the United States, and tariff reductions for Australian exports into the United Kingdom. Over the medium term to 2026/27, export growth will be largely influenced by the speed of the global economic recovery and resolution of supply chain disruptions. If they recover faster, horticultural exports could grow to $4.3 billion by 2026/27. However, if recovery is slow, horticultural exports may only reach $3.3 billion by the end of the projection period.

The value of Australia’s horticulture production is expected to rise to above $15 billion by 2027.