• Farm income and commodity outlook have greater affects on farm sector confidence than by other economic cycles;
• Seasonal and climatic conditions have more influence on farm income than economic cycles as they influence the ability to produce commodities;
• Farm income is a function of yield and commodity price;
• The farming sector produces basic, essential food and fibre products which people require to sustain life. There are obviously discretionary elements within agricultural products, however they represent a relatively small share of total agricultural production;
• Drawing on previous global downturn examples, such as the 2007 GFC, Agriculture has proven to have limited correlation with other economic cycles or property cycles.
The major economies have reacted to establish stimulus packages and social welfare support schemes to assist citizens through this unstable period. Australians can be assured that the farm sector will be there to supply adequate food for our consumption. The Australian agriculture sector exports a significant component of food produce and is among the highest volume of food exporters to many other nations globally who are not benefitted by strong food security. Export trade is an essential service and the global demand for food remains high.
As at Q1 2020, the rural property market in Australia is still active and operating in line with investor’s expectations and the long-term investment strategies already in place. Based on our market observations and industry discussions, investors are not presently concerned with the short term effects of disruption to our lives resulting from the COVID-19 pandemic. Industry participants believe that despite any longer-term economic effects from the COVID 19 pandemic, demand for food and fibre products will be sustained. The purpose of closing down many parts of the general economy is to control the rate and spread of infection. Doing so will enable our health system to manage the provision of care. Essential services such as food production, processing and distribution are still operational and will ensure that the product gets from the paddock to the plate.
We encourage sector stakeholders to remain calm and to reassess the situation frequently. It is crucial that enterprises establish their own bio-security arrangements to ensure that any incident of COVID-19 has minimal disruption on their day to day activities. For more information on how Colliers International’s Valuation & Advisory Services team can assist with market insight and analysis, please contact one of our agribusiness experts today.