The Australian Bureau of Agricultural and Resource Economics and Sciences (Abares) has released its annual outlook report in conjunction with its annual conference in Canberra. The report finds that 2016-17 is set to be a bumper year for agriculture mostly off the back of exceptional growing conditions. It’s a report that highlights the importance of the right environment for agricultural production and also how susceptible agriculture is to the impact of climate change.

One of the more unusual aspects of last week’s GDP figures was that the leader of the pack over the past year has not been the mining industry.

For the first time since September 2008, and for only the fourth time in the past 20 years, the agricultural industry was the biggest contributor to annual GDP growth:

The reality is it has been a very long time since Australia has ridden on the sheep’s back (or on top of a silo full of wheat).

Over the past 40 years, the agriculture and forestry industry has contributed just 2% of Australia’s GDP growth – the third lowest of any industry.

That does not mean the industry is unimportant, but perhaps it does show how we do view the industry through an historical and cultural lens that we don’t, for example, with the accommodation and food services industry, despite the two industries contributing a similar level of value added into the economy.

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The agricultural industry however remains a good representation of the Australian economy to the extent that it remains captive to world prices, the value of the Australian dollar and the vicissitudes of weather and climate.

According to the Abares report, good weather and rising world prices in the second half of 2016 will see the gross value of Australian farm production increase by 8.3% in 2016–17 to a record $63.8bn.

Abares director, Peter Gooday noted that even though the forecast is for production to fall slightly in 2017-18 to $61.3bn, that would still see it 17.3% higher than the average of the five years to 2015-16.

The figures in the Abares 2017 Outlook highlight the exceptionally strong production of wheat, barley, and industrial crops like cotton and sugar cane in 2016-17:

And while forecasting is hard enough without having to throw in the quirks of whether or not rain and sunshine occur at the right time in the right amounts, Abares suggests 2016-17 is to be a bit of a peak, with farm production not to reach these heights again this decade:

The report suggests the main reason for the decline is an assumed return to average seasonal conditions in 2017-18.

The report estimates that while there is a small forecast rise in the volume of livestock production, it would be offset by a fall in the volume of grain and oilseed production from its record high in 2016–17.

Agriculture continues to punch above its weight is on the export front – accounting for around 13% of the value of all our exports.

As the deputy prime minister and minister for agriculture and water resources, Barnaby Joyce told parliament last week, we now have record beef and sheep prices, and wool is at a price not seen since the 1980s. Prices for wheat and barley, however fell:

The impact of the Australian dollar is crucial in agricultural exports.

Abares notes that the depreciation of the Australian dollar relative to the US dollar from 2013 increased the competitiveness of Australian exports – because most rural commodities are bought and sold in US dollars.

The RBA’s index of commodity price shows that while rural prices have fallen since 2011, the falling value of our dollar meant the prices in Australian dollar terms actually held up:

In effect farmers were getting more Australian dollars for their produce, even while they were getting less in US dollar terms.

Abares notes that the total real value of Australian agricultural exports increased for seven consecutive years from 2008–09 to 2014–15.

They attribute this growth to the global demand for food, particularly from Asian countries, that has seen an increase in our exports to Asia and also to productivity growth among farm production.

On this score it is worth noting that over the past 20 years, only the wholesale trade industry has seen greater improvements in productivity than the agriculture industry:

Farming in 1997 is akin to the dark ages compared to how it is done now with much more efficient equipment and methods.

Abares expects export to overall hold up in 2017-18 – with some falls offset by improvement in other commodities:

The Abares Outlook report makes for good reading for the government. While they can take no credit for good weather and high world prices, the outlook does frequently make positive mention of the various free trade agreements that have been recently entered into by Australia.

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But the forecasts for the next five years highlight that even with increased access to China markets, production is expected to remain flat. The report also notes that it estimates are “subject to significant climate effects” and that “in the two decades to 2014–15, climate conditions deteriorated across many grain-growing regions.”

The report also notes that farmers have begun adapting to the impact of climate change, noting that “anecdotal evidence suggests that farmers have adopted a variety of management practices, including conservation tillage, to exploit summer soil moisture in anticipation of reduced winter rainfall.”

At the annual Abares Outlook conference beginning today in Canberra, one session will discuss “climate change: recent effects on crop yield and productivity.”

It should make for an interesting discussion, because above else, the Abares report shows that even with more open markets, and strong prices, the industry remains hostage to the sun and rain.