2020 was a year to remember – in more ways than one. Highlights and lowlights included;
- COVID 19 Pandemic
- Trade War with China
- Incredible rainfall throughout the year
- Surging commodity prices
In a normal year, any one of the above issues would have been big news. In 2020 however, we took everything in our stride.
COVID and agriculture investments
No report on 2020 could be complete without some commentary on the COVID-19 virus. This time last year we were just getting started. Despite some initial setbacks, Australia basically sailed through the worst ravages of the virus. Having said that, State Governments across the country used the opportunity to increase their powers and seemingly delighted in fining citizens for breaking even the slightest petite behaviour. Travel between states was (and remains) problematic. The Federal Government has borrowed billions of dollars to give to businesses affected by the lockdowns – the ramifications of which, will be felt for decades. International travel remains a dream – and it is unlikely it will be resumed anytime soon.
Having said that, the areas where our farms are situated are quite isolated and never saw the worst affects of the lockdowns which were mainly city based. Farmers went about their businesses as usual and got on with the job of doing what they do best – producing food. There were a few logistical issues with farmers finding it harder than normal to procure fertiliser and chemical, but by and large, the pandemic did not affect rural Australia.
Trade War and farmland investments
Australia has never been a country afraid to get into a fight. We have very strong opinions about certain issues – and are not afraid to voice them on a world stage. Hence, with the recent crackdown on democracy protesters in Hong Kong, it was only a matter of time before we drew the ire of the Chinese Communist Party. Because of our strong views on democracy, the Communist Party has decided to ‘punish’ Australia and has put tariffs on a range of products including wine, barley, wheat, coal and beef. These type of actions rarely work as intended (rich Chinese are now unable to enjoy their favourite bottles of Grange and there have been rolling blackouts across many Chinese cities because of the lack of coal). Meanwhile, in Australia, we have been busily developing new markets for our products (last week a ship was loaded with 38,000 tonnes of barley destined for Mexico), and have got on with trading across the globe. The reality is the Chinese still need to import those products and as long as they buy commodities from somewhere, they are creating demand for products and keeping prices high.
Excellent season for agriculture and farmland investments
After three very dry years along the Eastern seaboard culminating in the horrendous fires last summer, the rain finally arrived in Feb 2020. It did not stop for the entire year. Where previously dust had blown, paddocks were quickly transformed into lush pastures and green crops of wheat barley and canola. By November 2020, it was pretty clear harvest was going to be something special. It didn’t disappoint. NSW produced its biggest crop on record (over 18 million tonnes) and Australia produced it’s second biggest crop on record (with only Western Australia having a below average harvest). Coupled with the high yields, pricing was excellent delivering a rare double whammy to farmers of high yields and high prices. For many farmers, it was like winning the Lotto.
All of our tenants had excellent results throughout the year. Many farmers recorded their highest yielding crops ever. Many farmers averaged returns of over $1,500 a hectare which is unheard of this territory ($1,000 a hectare is considered an excellent result).
Commodity investments in Farmland and agriculture
Commodity prices remain strong. Cattle, sheep, grain and oilseed prices all remain at levels which are extremely profitable for farmers. The wool market recovered slightly over the year. With the Chinese slapping tariffs on many of Australia’s agricultural exports, many commentators expected downward pressure on Australian prices. Nothing could be further from the truth. Since finishing harvest, grain exporters have been fully booked with grain export terminals working at full capacity to move the large crop. The grain is being moved across the globe from the Middle East to Asia.
Sheep and cattle prices remain strong. Some of this is because stock numbers are low after the drought and rebuilding of flocks and herds is still occurring across the country.
The commodity that has seen the highest rise in price is soybeans. The price has been pushed higher by very strong demand from China. Although we don’t grow soybeans in Australia, we do grow canola which is also an oilseed. Canola prices have been very strong based on the back of strong soybean prices.