2019-20 was a challenging year for NSW primary industries. Drought affected most producers with record low rainfall for the first 7-months resulting in near record low grain crops and continued destocking. Bushfires destroyed over 2,000 houses in NSW, burning over 5 million hectares and causing air quality issues across the state in December 2019 and January 2020. The air quality in Sydney was recorded as among the worst in the world during the bushfire event 144.
The bushfires also destroyed almost 3 million hectares of State forests, damaged orchards in the Blue Mountains and Snowy Valleys and caused smoke taint in wine grapes affecting the NSW 2020 Vintage.
The COVID-19 pandemic spread globally with over 500,000 deaths worldwide, including over 100 in Australia by June 2020. The virus began in China and then spread to Japan, Thailand and the United States, followed by Europe. By June the United States, Brazil, United Kingdom and Italy were the worst affected countries 145.
2020 has shown promising signs of improvement with rainfall across NSW in early 2020 rebuilding water storages, increasing soil moisture and allowing a significant winter crop to be planted.
NSW has been affected by drought since 2017. Between July and December 2019 much of the state had a severe rainfall deficit or the lowest rainfall on record for that six-month period. The lack of water allocations and low soil moisture profile in cropping regions led to low summer crop production in NSW.
Livestock producers were reliant on transporting hay and grain from interstate. In 2019-20 approximately 2.3 million tonnes of grain was shipped to the NSW east coast from South Australia and Western Australia 93. With extensive livestock constrained, the feedlot sector reached record numbers of cattle on feed. There were nearly 350,000 cattle in NSW feedlots in December 2019, and throughput reached record levels in 2019-20.
Significant rainfall began to fall in February 2020, initially in coastal NSW. Above-average rain fell in central NSW in March and April. In April 2020 the Darling River joined the Murray River for the first time in two years. These positive developments have helped the livestock sector begin herd rebuilding, while the improved soil moisture profile will benefit the 2020-21 winter crop.
The Combined Drought Indicator (CDI) is an interactive tool created by the DPI Climate Team that provides a snapshot of current seasonal conditions for NSW, factoring in rainfall, soil moisture and pasture/crop growth indices.
The above mapping shows a snapshot of the three year drought period that effected NSW up to 30 June 2020.
More information on the CDI can be found here: edis.dpi.nsw.gov.au
Record low rainfall in 2019 led to low and, in many cases, zero water allocations. General security allocations were mostly lower than in 2018-19, with the Murrumbidgee at 11%, Murray at 3%, Gwydir at 2.2% and the Lower Namoi at 0% 79.
Water prices were high, reflecting the extremely limited supply. For example, the average price for allocations in the Murrumbidgee Regulated River was $551 per Megalitre, the highest since 2007-08. Across the NSW Murray Darling Basin, the average allocation price was $564 per Megalitre, just shy of prices in 2007-08.
The COVID-19 pandemic spread globally with Australia recording its first case in late January 2020, at which time there were 1,320 infections worldwide 145. The virus originated in China, which introduced severe public health measures nationwide to control the spread of infections.
Shortly thereafter panic buying emerged in Australian as consumers feared a severe lockdown imposed by state governments. Toilet paper, flour, pasta and rice were in short supply and supermarkets instituted buying limits on these products. The NSW Government was the first state to put restrictions on public gatherings and businesses, encouraged working from home and then closed schools. At the same time, extensive testing was conducted throughout Australia for anyone who showed symptoms of COVID-19. This helped to reduce the spread of COVID-19 so that, by May 2020, there were few daily cases spreading by community transmission.
Unfortunately, in late June, new Australian outbreaks of COVID-19 were identified in hotels housing quarantined travellers in Melbourne Victoria. These outbreaks spread into suburbs in the inner north of Melbourne and the Victorian Government reintroduced lockdowns to reduce the spread of the virus 48.
By June 2020 the United States was the worst affected country with over 2.5 million people infected and over 126,000 deaths. Brazil, Russia, United Kingdom, Italy, Peru and Spain were also severely affected 146.
COVID-19 led to temporary shifts in export patterns. Red meat exports to China fell in February 2020, when ports were shut but rebounded to normal levels soon afterward. Similar patterns were observed in red meat exports to South Korea and USA.
The value of Australian primary industry exports reached $37.9 billion in 2019-20, the fourth most valuable year on record 94, highlighting the resilience of agricultural exports despite supply constraints brought upon by drought and trade disruptions resulting from the COVID-19 outbreak.
In general, Australian primary producers are considered price takers in global commodity markets, with the price received influenced by numerous factors including changes in the global economy, exchange rates, consumer demographics and Australia’s level of access to favourable markets 4. Historically, price growth has varied significantly across commodities but overall the total value of primary industry exports has been growing compound annual rate of 4.1% per annum over the last 10-years and at a compound annual rate of 5.3% per annum over the last 3-years 4.
The main contributors to the observed increase over the past 3-years were the meat and live animals sectors due to expanding demand for protein in major export markets supporting higher prices and improved access into China as a result of the China Australia Free Trade Agreement, horticulture reflecting a higher exportable surplus and strong demand particularly from Asia and dairy due to historically low supply and strong export demand. The main offsetting contributor was Wool, as a result of low global demand.
China, the world’s largest meat consumer, suffered an outbreak of African Swine Fever (ASF) in 2018. This caused a significant reduction in the pig population in China, creating a substantial protein gap, which persisted into 2019-20. ASF has since spread into other countries, including many other regions in Asia 14. The lower pig herd increased pork prices in China, which combined with safety concerns about the meat, increased demand for other proteins. This has been a key factor behind high beef and lamb prices globally over the past two years 123.