Australia’s Agricultural production is forecast to reach a record $73.0 Billion in 2021-22. The sector looks to eclipse the $70 billion mark for the first time, capitalising on favourable growing conditions coupled with record prices across many commodities, as shown in Figure 1.  The Murray Darling Basin contributes about 40% of Australia’s agricultural production and is expected to see growth in the production of most of its exportable goods.

Figure 1  Forecast price changes for Australia’s top 10 agricultural commodities in 2021-22. Source: ABARES

Kilter Rural’s investor clients are well placed to capitalise on the 2021-22 Australian Agricultural boom through its market-leading management of Land and Water Assets across the Southern Murray Darling Basin.

In particular, Kilter Rural’s Australian Farmlands Fund, having just completed the redevelopment of several former dairy properties in Victoria’s Goulburn Valley, is expecting a bumper canola harvest.

Australia is currently set to produce its largest ever crop of canola in the 2021-22 growing season. Despite expectations for a bumper crop, canola prices are at their highest ever levels, driven by global supply factors. Drought and extreme temperatures during 2021 have significantly impacted the Canadian canola harvest. Canada is the world’s largest producer and exporter of oils seeds and current figures suggest that 2021 will be Canada’s smallest canola harvest since 2010. The US Department of Agriculture has stated that world canola stocks fell by 24% in 2020-21 due to tight supply and strong demand. Stocks are expected to decline by a further 20% in 2021-22 due to lower production globally. This is likely to support the current level of pricing throughout this period (figure 2).

Figure 2: Canola pricing increases. Source: ABARES

Another example is the wine industry in the sMDB. Kilter Rural’s water funds have exposure to a select group of high-quality wine grape producers. Although prices have been impacted to some extent by the trade sanctions imposed on the industry by China this has been more than offset by favourable growing conditions and bumper yields.

In fact, the Australian wine grape industry has experienced a ‘unicorn vintage’ for the 2020-21 season – a vintage where a rare combination of events has resulted in an exceptional harvest in terms of both yield and quality. A lack of heatwaves over Summer, minimal disease pressure and good harvest conditions are just some of the factors which helped deliver a record crush of 2.3 million tonnes. This result is 30% above the 2019-20 crush and 17% above the long-term average of 1.74 million tonnes. The total value of the 2020- 21 vintage is estimated to be $1.56 billion, up 36% or $400 million from the previous year.

Although it is early in the 2021-22 wine grape growing season conditions to date have also been extremely favourable and growers will also benefit from lower water input costs.

It is a positive story for agriculture across Australia and the sMBD where Kilter operates. If you would like to find out more about investing with Kilter contact our team: invest@kilterrural.com

Disclaimers:

Everything contained in this document is for informational purposes only.  It has been prepared from information believed to be accurate. However, no representation or warranty is made by Kilter Pty Ltd (“Kilter”) as to the accuracy or adequacy of any information contained in the presentation. Past performance is not indicative of future performance. The information in this document was published for the original recipient to whom it was provided.  Kilter accepts no responsibility to any person who receives this information from anyone other than Kilter. This document is not an offer, recommendation or personal advice in relation to an investment in any Kilter fund or any product or service offered by Kilter.  The analysis in this paper is accurate as of October 2021. There are usually differences between forecast and actual results because events and actual circumstances frequently do not occur as forecast and these differences may be material. The actual outcomes are dependent on future events, which may be radically different from those predicted for reasons outside Kilter’s control.