A review of the last year and looking ahead to 2024

As we start the new year, I wanted to begin by looking back at 2023. It was definitely an interesting year, and challenging for many.

In this blog, I’ll review industry developments, financial challenges and changes, and share some highlights for myself and my business. I don’t own a crystal ball, but I’ll share my predictions about what’s ahead for rural agrifinance in 2024.

Industry developments, breakthroughs and hardships

For some, 2023 started well with ‘best ever’ harvests. While rain was welcome for many, for others, it was disastrous. The wine industry was hard hit, with cooler weather and heavy rains, meaning some grapes failed to ripen. The industry was already suffering with the China market still all but closed, and increased material and labour costs. So the poor harvest was another blow for the industry. The announcement in late October that China was reviewing tariffs was welcome news for many.

The recent ABARES Agricultural Overview provides a useful snapshot of key results and predictions for the year ahead.

• Global economic growth is slowing because of high interest rates and is expected to be 2.9%.
• The low Australian dollar will continue to support agricultural exports.
• Input costs are still high across all sectors. Fuel prices are high, and while fertiliser prices are down from a peak in 2022, they’re still 25% above pre-pandemic prices.
• The gross value of agricultural production is forecast to fall by $16 billion (17%) to $78 billion in 2023–24 ($84 billion including fisheries and forestry production). But this is still the third highest result on record driven by low crop volumes.
• Expected drier conditions will cause crop production to fall from record levels in 2022–23.
• Expect global prices for most commodities to decline in 2023–24, which reflects higher global supply.
• Lower domestic production and global prices are expected to reduce export values by 14% to $67 billion in 2023–2024.
• Farm input costs are expected to remain high, causing significant declines in broadacre farm cash incomes.
• Labour pressures for Australian agricultural businesses have eased over 2023 with the return of overseas seasonal workers. We should see labour costs ease as the economy slows. Affordable housing, especially in regional areas, continues to be a challenge for many agricultural sectors.
• Australian winter crop production is expected to fall in 2023–24 following three consecutive years of record production. There are mixed conditions across Australia, with production forecast to be down 33% to 46.1 million tonnes in 2023–24. This is slightly below the 10-year average.
• Wheat production is forecast to fall by 37% to 25.5 million tonnes, 4% below the 10-year average.
• Barley production is forecast to fall by 24% to 10.8 million tonnes, 4% below the 10-year average.
• Canola production is forecast to fall by 33% to 5.5 million tonnes but remains well above the 10-year average. This is because the area planted is estimated to be the second highest on record.
• The area planted to winter crops in 2023–24 is forecast to fall (year-on-year) but remain historically high at 23 million hectares. This is 4% above the 10-year average to 2022–23. 
• The area planted to summer crops in 2023–24 is forecast to fall by 21% to 1.2 million hectares because of drier than average conditions.
• Australian summer crop production is forecast to fall by 27% to 3.8 million tonnes in 2023–24. But this is still above the 10 year average.
• Livestock and livestock product value is expected to fall by 12% to $31.9 billion in 2023–24. Exports are likely to fall by 1% to $27.7 billion in 2023–24.
• Domestic production volumes for livestock are likely to rise as drier seasonal conditions increase turn-off rates.
• Rising global supply of meat and livestock products is expected to outweigh improved global demand.

You can read the full ABARES Agricultural Overview here.

Financial changes and challenges

The increased cost of living and what felt like constant interest rate increases have had a huge effect on so many people and industries.

Interest rates have increased by 4.25% in 13 interest rate rises since May 2022. This has placed significant pressure on both on-farm and off-farm family budgets.

According to the ABARES Outlook (referenced above), higher interest rates have increased debt servicing costs. Aggregate farm interest payments are forecast to increase from an estimated $1.5 billion in 2021–22 to $6.6 billion in 2023–24.

With the increased cost of servicing debt, understanding your cash flow, profit drivers and debt will be more important than ever.

Here are some blogs I’ve shared in 2023 that you might like to revisit:

Refinancing

• When to refinance and when to wait
• Understanding fixed rates and margins
• Due diligence when buying land
• How to get the most from your bank review
• Why I need to know so much about your business

 Cash flow

• Why cash flow is more important than property value
• Controlling cash flow

Profit and profitability

• Understanding your farm profit
• Understanding what drives profit in your business
• Building a profitable business

In 2024, there is a general shift towards rates stabilising or even coming down towards the second half of the year. This article, with contributions from one of my favourite economists, ANZ’s Adelaide Timbrell, provides an outline of what to expect over the next 12 months. 

Business and personal highlights

2023 has been a rewarding year personally and in business. I’ve helped 14 families and businesses get finance for expansion, succession or refinance their loans. I’ve also helped another 9 families with asset finance and provided ongoing support for the clients I’ve assisted over the last 6 years. Supporting people to grow their business, acquire land or purchase new equipment is always extremely satisfying.

I’ve enjoyed continuing to contribute to the community through my roles with Fat Farmers and the Hart Field Site. I have attendedfield days across South Australia They are great way to connect with clients and have the chance to discuss developments in the agricultural sector.

International Women’s Day and International Rural Women’s Day events were a great opportunity to bring women in the industry together and to learn from fantastic speakers.

I was honoured to be the SA/NT Finalist for Commercial Finance Broker and Regional Finance Broker in the MFAA State Excellence Awards.

Final thoughts for the year ahead

Only time will tell what lies ahead for agribusiness in 2024. One thing that won’t change is the need for your business to have funding flexibility and interest rates that reflect your business performance. With interest rates stabilising, it’s a good time to review your finance needs and ensure your rates aren’t higher than they should be.

According to Rural Banks agriculture outlook for 2024, we can expect to see lamb prices strengthen in 2024, but remain well below levels seen in previous years. Strong demand for grains with limited supplies will support prices into 2024. Rising beef production and opportunities for export growth provide an improved outlook for producers in the first half of 2024. Wool markets are predicted to remain stable with ongoing soft demand, with a small decline in supply and continued shearing cost pressures. Milk production is expected to be flat and farmgate milk prices will fall from record highs, with demand to remain flat early in 2024. Horticulture sees strong production and growing export demand, providing a positive outlook. We expect the cost-of-living and reduced disposable income will continue to affect wine sales. There are export opportunities out there, but they’ll be challenging.

Over to you

As always, I love hearing from you. I’d really like to know how you’re feeling about the year ahead. What challenges are you getting ready to face? What are you looking forward to? And what was your 2023 highlight?

If you liked this article, I’d love you to share it, especially if you’ve got friends that are putting off taking a break.