Abstract
In BMI' s Australia Agribusiness Report for Q3 2009 we introduce the new Rice
Outlook. Before the
onset of the long drought in 2002, Australia was a
significant rice exporter. Annual production of around
one million tonnes
in the late 1990s and first couple of years of this decade allowed the country
to export
upwards of half a million tonnes of rice a year. Since 2002,
however, apart from a brief spike up above
1mn tonnes in 2006 when the
weather seemed to be getting back to normal, output has been pitiful. In
2008, production fell to a record low of 19,000 tonnes. This has transformed
Australia into a net rice
importer.
While the next couple of years
should see production creep back up, we doubt that Australia will return
to
regularly producing a large rice crop. Rice production in Australia is
a thirsty business. Dwindling
irrigation water supplies in New South
Wales, where the country' s rice production is based, will likely see
farmers turn to less water-intensive crops. Though, if rice prices were to
increase again as they did in
2008, production could increase for short
periods.
There are increasing worries that the devastation of rice
production could be a sign of things to come as
changing weather patterns
mean Australia, the world' s driest continent, gets even drier. Following
the
long drought, the system of irrigation that feeds large parts of
Australian agriculture is at record low
levels. The health of the
Murray-Darling river system is also reaching critical levels.
Climate
change has moved rapidly up the agenda since Labor prime minister Kevin Rudd
came to power
at the end of 2007. While the majority of Australian farmers
would agree that tackling climate change is
in their best interest, there
is increasing worries that the government' s plans for a new emissions
trading
scheme will seriously dent the competitiveness of Australian
agricultural products.
The scheme is set to come into effect in 2010, but
under the current plans agriculture will be excluded
until 2015 at the
earliest. If livestock farmers are indeed forced to pay for the carbon emitted
by their
animals, production costs would shoot up. Assuming that the
majority of Australia' s competitors do not
initiate their own schemes, the
likelihood of which is very high, this would see the competitiveness of
Australian products on the export markets hit hard. Even while agriculture is
not included in the scheme,
input costs will increase owing to higher
prices for electricity, fuel and chemicals, according to a report
cited in
The Australian.
While the concern in the agricultural sector is
understandable, we do not believe that the Australian
government would
unilaterally impose charges on the sector without other major producers
following
suit. A decision on whether to include agriculture in the
emissions trading scheme is due to be made in
2013. Unless other
agricultural nations are by that time willing to make a similar commitment to
reducing
the emissions of their farming sectors, it is highly unlikely
that Australia' s farmers will be made to pay up
just yet.
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