NSW Department of Primary Industries

Macroeconomic Conditions

NSW primary industries experienced a remarkable turnaround in 2020-21 despite significant challenges from the COVID-19 pandemic, floods and trade tensions. Above-average rainfall in most of the state in early 2020 set up ideal conditions for the winter crop. There was a significant recovery in summer crops with larger cotton, sorghum and rice crops compared to 2019-20. Cattle and lamb prices stayed high with restockers rushing in to purchase livestock for recovering pastures.

The International Monetary Fund estimated that the world economy contracted 3.3% in 2020. The economy is forecast to return to growth in 2021. The Australian economy had a short recession but rebounded strongly through late 2020 and early 2021. Australia was one of the best-performing economies around the world since the beginning of the pandemic, though COVID outbreaks in New South Wales and Victoria since May have presented new headwinds.

Continued high livestock prices created intense competition between restockers and processors. The state recorded lower slaughter numbers with restockers paying premiums for young cattle and cows.

The cropping sector had a healthy recovery, first with the largest summer crop in three years, then a significant winter grain harvest. However, following harvest, the mice population exploded through north and central west NSW. The mouse plague has contaminated hay and crops, and imposed greater costs on farmers. Despite this, conditions are positive for the upcoming year.

Record Australian Export Values

Grain field from the air
Australian primary industries exports reached $38.6 billion in 2020-21, down 0.3% over the year. NSW exports exceeded $6.3 billion due to significant rebounds in wheat, oilseeds and pulse exports. The gains in the cropping sector outweighed lower livestock and horticulture exports, so that NSW exports finished the year up 17% on 2019-20 levels. r y

China remained a highly important trade partner for NSW, accounting for $1.98 billion in exports, though this was 16% lower than 2019-20. Wheat dairy products and sorghum were some of the major exports to China which increased by value over the year. Beef, sheep meat and wool were the largest exports from NSW to China in 2020-21.

Australian barley exports increased 86% to $1.9 billion despite the decision by China to impose anti-dumping duties on the commodity. This growth came through the higher volumes available from the large NSW crop and trade diversification away from China, which opened other markets for exports such as Saudi Arabia, Thailand and Vietnam. Exports of malting barley however were down 50%, offset by a 165% increase in feed barley to $1.5 billion.

The drivers of the growth in Australian primary industries' exports changed in 2020-21 due to the significant increase in supply of crops and decline in supply of livestock. This meant exports to our largest markets declined but there was significant growth in exports to other markets, such as Indonesia, Vietnam, Europe and Saudi Arabia. Primary industries exports to Saudi Arabia exceeded $1 billion for the first time, thanks to barley, wheat and beef. The diversity of export markets for Australian primary industries supports a resilient trading network for the industry.

COVID-19 and Trade Disruptions

The COVID-19 pandemic remained a major influence on the Australian and world economies. The Victorian Government issued stay at home orders from late June 2020 to contain an outbreak, which lasted until October 2020. NSW had a second outbreak in December and had a lockdown limited to the Northern Beaches region of Sydney. In late June 2021, an outbreak of the Delta variant began in Sydney, resulting in another lockdown across the greater Sydney region and ultimately the state.

COVID disruptions influenced world trade, including for agriculture. The USDA estimated that the COVID-19 pandemic reduced global agricultural trade by 5-10% 209 and by significantly more in the non-agricultural sector. The slowdown in trade disrupted shipping patterns, with shipping containers accumulating in North America when they were needed in Asia. A shortage of new containers being built created more issues in the availability of containers in many key global ports..

Shipping costs began to increase in late 2020 and soared in 2021 with the rebound in world economic activity as countries opened-up after lockdowns. Container rates were significantly higher for outbound routes from China compared to inbound routes. Quotes for shipping containers from China to North Europe increased from $1,700 per 40-foot container in September 2020 to $11,000 in June 2021. By comparison, return voyage containers were $1,600 from North Europe to China. Both inbound and outbound freight rates to Australia were impacted which increased the cost of exports as well as the costs of many key agricultural inputs.

Container ship

Drought Recovery and Floods

Field in drought
Conditions improved in NSW through the year, with higher than average rainfall helping the state to recover from the severe drought. After a dry June, NSW had the wettest winter since 2016. The wet and cloudy conditions meant that it was also the warmest winter since 2016. Relatively dry conditions in spring aided the winter grain harvest.

Extreme weather events affected NSW again this year. Floods in March 2021 particularly on the north coast of the state, impacted aquaculture, particularly oysters, as well as horticulture and forestry. According to the Bureau of Meteorology, “This was the result of a blocking high pressure system in the Tasman Sea and a low-pressure system off north-west Australia feeding a large volume of moist tropical air into eastern Australia”. 55

Heavy rainfall between 17 and 26 March caused further moderate flooding across most coastal catchments, including the most significant flooding on the Manning River since its previous record in 1929. The Gwydir and Mehi Rivers, and the Hawkesbury-Nepean catchment had the highest flooding in 30 years.

Water

The significant rainfall flowed into unprecedented increases in water storages. Storage levels in the northern Murray-Darling basin increased from 27.9% before the rain event to 47.1% at the end of March. Floodwaters increased storage in the Menindee Lakes, which increased to 57.7% by the end of May. General security allocations in the Murrumbidgee reached 100%, although allocations were generally announced late. For example, general security allocations in the Murrumbidgee were only 54% in October 2020 at the start of the summer cropping program.

Allocations were lower in northern NSW. General security water allocations in the Gwydir reached 58% and Lower Namoi reached 90.5%, again both late in the year. The Gwydir and Namoi rivers were at stage 3 and stage 2 drought at the start of the 2020-21 water year, but the turnaround in conditions allowed these catchments to recover. Allocations in all major catchments in NSW are expected to improve further in 2021-22.

With higher allocations average water prices fell back to pre-drought levels. The median price in the southern Murray-Darling basin was $122/ML over 2020-21, and $168/ML for the northern Murray-Darling basin.

Wentworth Weir
www.dpi.nsw.gov.au