Australian agriculture outlook 2024: Horticulture

From the field 

Drier weather conditions and cheap irrigation costs are expected to drive above average production and quality across most key varieties coming into 2024. While temporary water costs are expected to slowly rise as the season progresses, this is unlikely have a large impact on output in the short term. Price outlooks are more varied following a broad easing across fruit and vegetable markets over the last six months. Domestic demand for premium horticultural produce remains a key concern.

Wayne Saunders, Regional Manager Agribusiness – North West Victoria

Overview

Strong output and rebounding export demand are anticipated over the first half of the 2024. This positive outlook is partially offset by high input costs and stagnant domestic demand. The drier summer and autumn months are being generally mitigated by low irrigation costs. Reduced rainfall is also expected to provide good harvest conditions for key crops over this period. As a result, higher quality for key export varieties is anticipated compared to last season. The dry conditions will slowly push temporary water prices higher over the course of 2024. However, high-water storage levels will keep irrigation costs below average which will continue to benefit irrigated crops. Price moves will be more varied over the first half of 2024. This follows a year of continued declines across the back half of 2023. Rebounding export demand and stable domestic consumption will see greater price support for export orientated varieties. Meanwhile almond and macadamia prices are expected to rise from historical lows. This is driven by improving global consumption, though prices will remain below long-term averages. Seasonal labour costs will remain elevated despite a significant improvement in supply over the past 12 months. The makeup of seasonal labour has shifted significantly over the past five years. This is best seen in the continued expansion of the Pacific Island Labour Mobility (PALM) Scheme. Seasonal workers employed under the scheme have grown from 8,000 workers pre-pandemic to over 40,000 as we enter 2024. This scheme requires high investment from growers and is one of the drivers of these elevated labour costs.

Fruit

Production volumes across key varieties in the first half of 2024 are forecast to lift sharply compared to the first half of 2023. This is driven by improved seasonal conditions and low water costs. Improved output is most obvious in southeast Australia where damaging rainfall last summer weighed on production.  Export demand for produce is expected to continue rebounding to near record levels. Demand from India, China and the Middle East remains strong. Increased volumes of higher quality fruit are expected to be harvested over the next six months. This higher quality produce finds particular favour amongst these key export markets. The improved quality is a result of the drier seasonal conditions seen over spring and summer. This will result in reduced disease and crop damage in comparison to last year. The ongoing development of export pathways into the UK and Indian markets will further lift export demand. While the recovery in trade relations with China will also see a further rebound in demand from our largest export market. Domestic demand remains mostly stable. Cost of living pressures will continue to drive a decline in demand for more premium fruit produce.

Table grape production will reach near record levels this season. The USDA are forecasting a crop of 220,000 tonnes up from the 210,000 tonnes produced last season. This strong forecast is a result of favourable conditions and low water costs. Dry weather through until harvest would ensure grapes are higher quality than last season. Unfortunately, heavy rainfall  seen at the end of November has increased the chance of downy mildew spreading. Though the spread may be relatively limited should dry weather prevail through December.  The high quality and resurgent Chinese demand will see table grape exports increase to the third highest level on record. Further consultation is being undertaken to expand access to the Japanese market. This will lift table grape prices for producers following a couple of tough seasons. Wine grape prices are expected to see a more mixed outlook in 2024. Substantial red wine inventory levels will continue to see uncontracted red grapes remain unsold. Australia's stock-to-sale ratio of red wine is currently sitting at around 2.6. For context, prior to 2022 this ratio sat at 1.6. This indicates that there is around a year of stock on top of what would be typically stored. The review into punitive tariffs imposed on most Australian wine exports to China does provide some hope for a rebound in Chinese demand. An official decision isn’t expected until as late as March 2024. Unfortunately, the Chinese wine market has contracted significantly over the past three years with demand unlikely to return to prior levels. We don’t anticipate further reductions in red wine grape prices. Though they are unlikely to lift from current lows for the 2024 vintage. White grape producers remain in a better position, with a more sustainable supply and demand outlook.

Stone fruit production is expected to jump substantially this season. This follows two consecutive years of wet conditions and high input costs. The drier weather conditions and cold winter temperatures are also driving improved quality this season. As a result, the USDA are estimating cherry and peach/nectarine output will increase by 18 and 13 per cent, respectively. This surge in exports is the result of the strong output, higher quality and resurgent demand from China. A heavy rainfall event across South Australia has impacted early varieties. Though a good run of weather into December should see output and quality remain high. The main questions now lie around domestic demand. Local interest in the less expensive peaches and nectarines will remain steady. Domestic demand for higher priced cherries may be reduced due to high cost of living pressures. Mainland states will likely see cherry prices sit slightly below average leading into Christmas due to the lower consumer demand and high production.

Vegetables

Australian vegetable production is forecast remain above average in the first half of 2024. This follows a strong finish to 2023. The drier end to the year combined with favourable water costs are driving increased planting across most staple crops. A warmer than average summer may see some fluctuations in volumes. High temperatures increase the likelihood that crops will ripen at a similar time. This would see an influx of produce hit the market in a short period. Demand remains strong at an export level. However, domestic demand does remain under threat from increasing cost of living pressures. This is unlikely to affect staple vegetables. Premium vegetables may see variations in domestic demand due to more price sensitive consumers.

Onion production volumes across Australia remains slightly above average. Relatively good yields and quality have been seen across key growing regions following dry weather. Poor EU output will ensure export demand for Tasmanian onions remains elevated for a second season. The Tasmanian onion harvest should be in full swing by January. European shortages will peak around March which is well timed with the Tasmania harvest. Output from New Zealand will also be key to filling supply gaps with the country recently securing a Free Trade Agreement with the EU. The agreement saw the 9.6 per cent tariff on New Zealand onions removed immediately. Tariffs remain in place on Australian onions. This follows a breakdown in trade agreement negotiations at the end of October. Brown onion prices are sitting well below average. Currently, prices are almost 40 per cent lower compared to last season. Meanwhile red onions are currently hovering around 20 per cent lower than last year. Prices should begin to lift, though will remain slightly below average.

Potato production volumes will remain in-line with longer term averages in 2024. This follows a challenging 12 months for growers. Prices will remain steady with rebounding consumer demand for potatoes. This rebound in demand was driven by the sharp drop in prices observed over spring.

Nuts

Australian almond production has been forecast to rebound by the USDA in 2024. Total output is estimated to rise 28 per cent to 140,000 tonnes in 2024. A varroa mite related shortage of beehives in key regions and challenging conditions were the key factors in last season’s reduced yields. Global demand for almonds continues to grow. The USDA are estimating consumption will increase by around six per cent from last season. Australian almond exports are also expected to increase by around five per cent to 100,000 tonnes. This is primarily thanks to strong demand from India and China. Almonds have been a key beneficiary of the Australia-India Economic Cooperation and Trade Agreement (AI-ECTA). Tariffs on Australian almonds were reduced by 50 per cent to a quota of 34,000 tonnes per year. Exports of both in-shell and shelled almond exports to India have seen the significant increases as a result. Export tariffs for shelled almonds are now just Rs 50/kg compared to the previous Rs 100/kg. As a result, shelled almonds are now much more economically viable for Indian importers. This growth in exports to India is expected to continue into 2024. The strong export demand combined with low domestic carryover stocks will also push almond prices higher over the first half of the year. Though coming off of a low base. Global almond prices remain near their lowest level in 20 years.

Australian macadamia output for the 2023 season is estimated at 48,500 tonnes in shell by the industry body. This is well down from the almost 53,000 tonnes produced last season. The lowest farmgate prices in over a decade and significant farm costs will be key factors heading into the 2024 season. We estimate production will return above 50,000 tonnes in 2024 on the back of low irrigation costs and more favourable seasonal conditions. Growing export demand will provide some upside to prices despite the growing output. Significant macadamia output coming out of South Africa, China, Vietnam, and South America is likely to keep farmgate macadamia prices well below average over the coming season.

Source: Hort Innovation, ABS, Rural Bank

Source: Hort Innovation, ABS, Rural Bank