Potential economic impacts of the wheat stem rust strain Ug99 in Australia

Overview

Wheat stem rust has been present in Australia for over a century. The most recent and severe outbreak in Australia was the 1973 epidemic. However, a potentially damaging strain of the disease, Ug99, which was detected in Uganda in 1999 and currently not present in Australia, is a major concern as around 30 per cent of Australian current wheat varieties show moderate to high susceptibility to the Ug99 strain.

ABARES estimated the potential economic impact of a Ug99 outbreak on the Australian wheat industry for three wheat growing areas. An outbreak in Western Australia is estimated to cost the wheat industry over a 10-year period a total of $567 million, an outbreak in south-eastern Australia $803 million and an Australia-wide outbreak $1,362 million. These costs were based on the assumption that Ug99 has entered, established and spread to the full extent for each outbreak scenario, and did not lead to trade bans by wheat importers.

The study estimated significant benefits in continuing to invest in biosecurity prevention, ranging from $28 million to $70 million a year, depending on the extent of spread and whether or not trade bans were imposed by wheat importers.

Ongoing research and development (R&D) to secure seed stocks of Ug99 resistant varieties plays an important role in reducing potential future industry losses. The wheat industry losses avoided by securing seed stocks of Ug99 resistant varieties, and switching to these varieties immediately following any future entry, is one example of the benefits that can be derived from past biosecurity R&D.

Key Issues • Wheat stem rust has been present in Australia for over a century. • The most recent and severe outbreak of the disease in Australia was the 1973 epidemic. • Ug99 is a particularly damaging strain of the disease not present in Australia, but is a concern. • The severity of an outbreak depends largely on the extent of susceptible wheat varieties grown and suitability of climate to the fungal disease. • Around 30 per cent of Australian current wheat varieties show moderate to high susceptibility to the Ug99 strain. • Wheat varietal improvement has resulted in fewer wheat stem rust incidences since the major outbreak. • Governments and the industry should continue to invest in varietal improvements which provide resistance to emerging strains.

Agricultural Statistics of Australia

Overview
The September edition of Agricultural commodities contains ABARES latest outlook for Australia’s key agricultural commodities in 2018-19, which updates the outlook released in June 2018.

Key Issues • In 2018-19 the value of farm production is forecast to be relatively unchanged at $60 billion. • Dry conditions are affecting agricultural production in eastern Australia, but strong forecast production in Western Australia, rising grain prices, high livestock prices and a lower Australian dollar are providing support to farm incomes. • Export prices are forecast to increase by around 3% in 2018-19, driven by a decline in the global supply of grains and strong demand for meat products. • Downside risks to Australian agriculture include uncertainty around the duration of the drought in impacted areas, the timing and amount of rain in other regions, and possible disruption to world agricultural markets stemming from protectionist trade measures. Commodity production forecasts
• The value of crop production is forecast to decrease by 3 per cent to $30 billion in 2018-19. ◦ The decline is expected to be driven by a forecast decline in area planted in the eastern states. Drought conditions across eastern Australia restricted planting opportunities for crops, such as barley, canola and wheat. ◦ Higher forecast prices for canola, coarse grains, cotton and wheat are expected to mitigate the impact of lower crop volumes on the value of production. ◦ Wine grape and sugar production are forecast to rise as producing areas have been less affected by drought. The value of sugar production is nevertheless forecast to decline due to weak international prices. ◦ Horticultural production has increased following a warm winter, boosting production of a range of fruits and vegetables

• The value of livestock production is forecast to increase by 2 per cent to $30 billion in 2018-19. ◦ Drought in the eastern states has increased cattle and sheep turn-off, lifting meat production and leading to a forecast reduction in herd size. ◦ Dairy production is forecast to increase, as processors continue to offer relatively high milk prices. However, the production response is likely to be dampened by increasing feed and fodder costs. ◦ Wool production is forecast to be lower, constrained by lower flock numbers and poor grazing conditions.

Commodity export forecasts
• Export earnings for farm commodities are forecast to be $47 billion in 2018-19, down 5 per cent from $49 billion in 2017-18 • The decline in export earnings is largely due to lower exportable supplies of canola, coarse grains, pulses and wheat and increased domestic demand for grain. Agricultural export prices, measured by the index of unit export returns, are forecast to increase by 3% in 2018-19. ◦ Export earnings are forecast to decline in 2018-19 for canola (down 39 per cent), coarse grains (24 per cent), wheat (10 per cent), sugar (9 per cent), wool (2 per cent) and wine (1 per cent). Export earnings for beef and veal and live feeder/slaughter cattle are unchanged.

• Export earnings are forecast to be supported by strong demand from Asia and advanced economies for Australian livestock and livestock products. Higher prices for wheat, coarse grains and cotton are also expected to support earnings. ◦ In 2018-19 export earnings are forecast to rise for lamb (up 17 per cent), rice (14 per cent), mutton (13 per cent), cotton (9 per cent), cheese (6 per cent) and rock lobster (3 per cent).

• Export earnings for fisheries products are forecast to increase by 2 per cent in 2018-19 to $1.6 billion, after increasing by an estimated 10 per cent in 2017-18.

Assumptions underlying this set of commodity forecasts

Forecasts of commodity production and exports are based on global and domestic demand and supply assumptions.

• On the demand side, stronger world economic growth will translate to higher per person incomes in most of Australia’s export markets, supporting stronger demand. ◦ World economic growth is assumed to be 3.9 per cent in 2018 and 2019. ◦ Economic growth in Australia is assumed to be 3.0 per cent in 2018-19. ◦ The Australian dollar is assumed to average US74 cents in 2018-19, lower than the assumed average of US78 cents in 2017-18.

• On the supply side, Australian agricultural production prospects are assumed to be below average. ◦ Dry conditions are forecast to have significant implications for crop yields and livestock production cycles in the eastern states.

Uncertainties that could affect agricultural commodity production and export growth include supply shocks in Australia or international markets (such as natural disasters, drought and disease outbreaks) or unexpected economic events that affect trade and economic growth.

Boxes on agricultural issues

Evolving EU biodiesel policies

• Proposed changes to the EU renewable fuels policy could increase demand for Australia’s canola exports in the short to medium term. • Since 2010-11 the European Union has been the largest export market for Australian canola. Most canola is imported to produce renewable transport fuel.

Australia: Distribution Of Gross Domestic Product (GDP) Across Economic Sectors From 2009 to 2019

In 2019, agriculture contributed around 2.09 percent to the GDP of Australia, 25.2 percent came from industry, and 66.15 percent from the services sector. The same year, the Australian inflation rate, another important key indicator for its economic situation, amounted to 1.61 percent.


Why is the inflation rate important?


Inflation is the steady increase in price levels for consumer goods and services during a certain timespan. The European Central Bank considers a steady inflation rate of two percent a year beneficial for a stable economy – otherwise a country risks economic hardship. In the worst case, a country can experience either hyperinflation (like Venezuela), which is the rapid increase of prices to a point of economic collapse, or deflation, which is the decrease of prices and devaluation of money that can also lead to economic collapse.


Up and down under

Australia’s inflation has been clawing itself out of a slump in 2016, when it unceremoniously dropped to 1.25 percent due to falling petrol costs and oil prices. The following year, it recovered instantaneously and soared back to just under two percent, and forecasts see it reaching 2.52 percent by 2021. Australians don’t seem too worried about this outlier, and rightly so, since Australia’s economy is still one of the biggest in the Asia-Pacific region and worldwide.

Agriculture Industry In Australia – Statistics & Facts

Agriculture in Australia has historically been one of the most significant industries in the country, both in terms of domestic production as well as in relation to the value of exports. Producing a wide range of primary products such as wheat, milk, fruits, nuts, vegetables, and meat, the sector contributes to a an important share of the country’s GDP. The major export commodities in this sector include beef, wheat, wool, wine, raw cotton, and lamb.

Australia’s key agricultural products
Crop production in Australia is vital in providing food for its local population as well as for livestock feed. Australia supplies a wide variety of cereals, sugar, and fruit to the rest of the world. Crops include cereals, grains, and legumes among others. Wheat accounts for the greatest contribution to the production value of cereals but requires a large land area. The yield of wheat in Australia has fluctuated around two metric tons per hectare.
In terms of animal products, the beef industry is the most significant for Australia – it is one of the leading beef exporters in the world, a position that looks likely to remain as the country continues to export the majority of its red meat. Conversely, Australians are tending to consume less beef and veal than in previous years. Following global trends, consumer preferences have shifted towards fish and poultry products.
The dairy industry in Australia is heavily influenced by international markets, trends, and events, primarily because it is a deregulated, open market. Although most of the dairy products produced in Australia are consumed locally, Australia is a key exporter of dairy, particularly to China and Japan. Employment in this industry is extensive; thousands of Australians are employed directly through dairy farms or companies. Furthermore, the subsequent processing of dairy products provides even more employment opportunities.
What affects this industry?
Australia contends with of a range of environmental factors that affect its agriculture industry. The 2020 bushfire season was particularly damaging, with millions of hectares of agricultural land affected. As with many sectors, the agricultural industry relies on water availability. Australia’s consumption of water in this sector was almost eight million megaliters in 2019. Pasture, cereal, and grazing crops require significant volumes of water, with most of this water distributed through irrigation channels or pipelines. With water scarcity and extreme weather already taking a toll on Australian agriculture, farmers will have to innovate and include emerging digital agriculture technology into their practices. This AgTech could provide tools and data to make more informed decisions and may lead to solutions to ensure growth in this industry in the future.

Improving Agricultural Statistics

The Department of Agriculture, Water and the Environment is committed to delivering accurate, timely and reliable analysis and data about Australian agriculture. As the department’s research arm, ABARES is working with the​ Australian Bureau of Statistics to modernise the agricultural statistics system. Modernisation will ensure the long term sustainability of the system by reducing survey burden, particularly for farmers, reducing data collection costs and improving the quality of statistics.

For more information on the modernisation process and latest news, visit the Improving agricultural statistics​ webpage.

Australian Agricultural Census 2015-16 visualisations
This series of visualisations is based on the most recent agricultural census data collected by the Australian Bureau of Statistics (ABS) for 2015-16.

Agriculture in Australia has historically been one of the most significant industries in the country, both in terms of domestic production as well as in relation to the value of exports. Producing a wide range of primary products such as wheat, milk, fruits, nuts, vegetables, and meat, the sector contributes to a an important share of the country’s GDP. The major export commodities in this sector include beef, wheat, wool, wine, raw cotton, and lamb.

Australia’s key agricultural products
Crop production in Australia is vital in providing food for its local population as well as for livestock feed. Australia supplies a wide variety of cereals, sugar, and fruit to the rest of the world. Crops include cereals, grains, and legumes among others. Wheat accounts for the greatest contribution to the production value of cereals but requires a large land area. The yield of wheat in Australia has fluctuated around two metric tons per hectare.
In terms of animal products, the beef industry is the most significant for Australia – it is one of the leading beef exporters in the world, a position that looks likely to remain as the country continues to export the majority of its red meat. Conversely, Australians are tending to consume less beef and veal than in previous years. Following global trends, consumer preferences have shifted towards fish and poultry products.
The dairy industry in Australia is heavily influenced by international markets, trends, and events, primarily because it is a deregulated, open market. Although most of the dairy products produced in Australia are consumed locally, Australia is a key exporter of dairy, particularly to China and Japan. Employment in this industry is extensive; thousands of Australians are employed directly through dairy farms or companies. Furthermore, the subsequent processing of dairy products provides even more employment opportunities.
What affects this industry?
Australia contends with of a range of environmental factors that affect its agriculture industry. The 2020 bushfire season was particularly damaging, with millions of hectares of agricultural land affected. As with many sectors, the agricultural industry relies on water availability. Australia’s consumption of water in this sector was almost eight million megaliters in 2019. Pasture, cereal, and grazing crops require significant volumes of water, with most of this water distributed through irrigation channels or pipelines. With water scarcity and extreme weather already taking a toll on Australian agriculture, farmers will have to innovate and include emerging digital agriculture technology into their practices. This AgTech could provide tools and data to make more informed decisions and may lead to solutions to ensure growth in this industry in the future.