23

PigsForecastThe gross value of Queensland’s pig production in 2010–11 is forecast at $232 million, which is a one per cent decrease on DEEDI’s final estimate for 2009–10 and a four per cent decrease on the 2008–09 revised ABS estimate.

Analysis and discussionIncreased competition from imports is expected to cause the average price for pig meat to marginally decline throughout 2010–11. The 2011 implementation of Coles’ welfare requirement to begin purchasing sow stall-free pork and completely phase out purchases from producers using sow stalls by 2014 is not expected to markedly affect total production in Queensland throughout 2010–11. However, production numbers are forecast to slightly decline as the steady downward trend in ABS slaughter data is forecast to continue and later stabilise throughout 2010–11.

The price of feed is a major input cost, accounting for approximately 60 per cent of total production costs. Throughout 2010–11, the pig to feed grain price ratio is expected to slightly decline from historically high levels.

Historically high feed grain prices, combined with an increased level of competition from pig meat imports, have ensured that the pig industry has witnessed a continued trend toward larger and more commercialised pig production systems over the last five years. In order to achieve economies of scale, the pig industry is likely to continue this pattern of structural change, which will be manifested in the amalgamation of more farms and the exit of smaller industry participants.

PoultryForecastThe gross value of Queensland’s poultry production in 2010–11 is forecast at $370 million, which is a four per cent increase on DEEDI’s final estimate for 2009–10 and a six per cent increase on the 2008–09 revised ABS estimate.

Analysis and discussionAn estimated 102 million chickens were slaughtered in Queensland in 2009–10 (based on initial ABS livestock slaughter data). Australia-wide poultry production has been increasing by approximately four per cent per year and Queensland is expected to witness a similar increase in poultry production during 2010–11. The average gross unit value per chicken is expected to remain relatively stable throughout 2010–11.

In recent years the poultry meat industry has undergone considerable consolidation. In July 2009, Baiada (the third largest industry player) acquired Bartter Holdings (the second largest). As a result of this acquisition, Baiada replaced Ingham as the largest industry operator and the market share of these top two industry participants increased from 46 per cent to 63 per cent. This increased concentration in the processing sector has the potential to diminish the negotiating power of poultry farmers when entering into supply contracts with processors.

In 2010–11, the total number of farms is projected to fall, given the expansion of large-scale enterprises by major industry players. Growth in the poultry meat industry is likely to result from further consolidation and cost reduction as large scale enterprises reach economies of scale.

24

Poultry consumption is forecast to be around 39 kilograms per person in 2010–11, which is two per cent higher than in the previous year. Consumption is projected to grow to 42 kilograms per person by 2014–15. The relative inexpensiveness of poultry when compared to other protein sources is likely to ensure it maintains its position as the most consumed meat on a carcass-weight equivalent basis.

For a discussion of egg production, see page 28.

Sheep and lambsForecastThe gross value of Queensland’s sheep and lamb production in 2010–11 is forecast at $58 million, which is a 29 per cent increase on DEEDI’s final estimate for 2009–10 and a three per cent decrease from the 2008–09 revised ABS estimate.

Analysis and discussionAn assumed improvement in seasonal conditions and favourable returns to lamb production are expected to result in slightly lower lamb slaughter in 2010–11, as producers retain more female lambs in order to rebuild flocks and secure future lamb availability.

Reduced lamb production combined with strong demand is forecast to result in higher prices in 2010–11. ABARE forecasts the Australian weighted saleyard price of lambs to increase by 12 per cent in 2010–11. Over the medium term, lamb prices are projected to remain relatively high in real terms as domestic consumption and export demand remain strong.

In recent years, the Australian sheep industry has increasingly shifted its focus to meat production as the national sheep flock continues to decline and strong lamb prices increase the profitability of sheep meat production. However, high sheep meat prices relative to other sources of protein pose a potential downside risk to continued strong sheep meat consumption in the long term.

For a discussion on wool, see page 27.

Kangaroos ForecastThe gross value of Queensland’s kangaroo industry in 2010–11 is forecast at $20 million, which is 33 per cent higher than DEEDI’s final estimate for 2009–10.

AnalysisRussia’s current ban of kangaroo imports from Australia continues to impact the Queensland kangaroo industry. As Russia was previously the destination for around 60 per cent of Australian kangaroo products, the import ban, enacted in August 2009, has effectively cut off the kangaroo meat industry from its largest customer. The forecast increase in kangaroo GVP can be attributed to an expected increase in the average price received per kilogram for kangaroo meat over 2010–11. The average price for kangaroo meat is expected to reach $0.75 per kilogram in 2010–11, which is a 15 per cent increase on the previous year.

25

A concerted effort that began with the placement of a Queensland Government trade officer in Trade and Investment Queensland’s Seoul office in 2006 has seen many Queensland food exporters succeed in the South Korean market.

Toowoomba-based DEEDI Principal Trade and Investment Officer, Andrew McCarrol, said market placements are a distinct advantage in developing business in global markets, particularly within Asia.

‘I found Korean business people were more open to discussions knowing that the person they were dealing with not only had experience in their home country, but was actually living in their country and obviously interested in their culture,’ he said.

‘It was also sometimes much easier for a non-Korean to be able to obtain business meetings with more senior decision makers than for local Koreans who are generally bound by the many traditional and often hierarchical cultural norms.’

Andrew’s placement was part of Grow Korea, a Queensland Government export project designed to help Queensland businesses access the South Korean market.

To date, the project has helped Queensland-based companies achieve trade outcomes in excess of $40 million.

Queensland-based food companies have exported numerous products including food salt, peanuts, food corn, food soybeans, beef meat and beef bone extracts, ice creams and macadamia nuts. Aussie meat pies, frozen dough products, gourmet biscuits and frozen desserts are also currently being considered by Korean importers.

However, Mr McCarrol highlights that it is not just the financial benefits that have accrued, but also strong business relationships that have resulted from this project.

‘The strong relationships that the Queensland Government and businesses have formed were clearly demonstrated during a series of food seminars that we recently held in Seoul,’ Mr McCarrol said.

‘The seminars attracted more than 100 attendees and included senior managers, purchasing managers, Korean food industry association directors, Korean national government food import and regulatory authorities, and also senior research and development managers from Korea’s major food manufacturers.

‘We were able to attract these senior Korean business people to the seminars due to the strong reputation the Grow Korea project has developed within the food network.’

A feature of the seminar series was the attendance by three Queensland food exporters who delivered formal presentations on their products and companies. In addition, 25 Queensland food companies showcased their promotional material and product samples.

‘Accessing the food market in South Korea is not an easy task,’ Mr McCarrol said.

‘Companies wishing to access this market need to visit the market frequently, learn and understand the cultural differences—including reading some local history—learn a few words of Korean and be aware of the regulatory obstacles for their product/s.

‘The key to success in the Korean market is to work hard on your business relationships and make sure you are remembered in the market.’

Feature: Market placement delivers success in South Korea

26

Although Prospects generally discusses only the larger primary industry sectors, special mention should be made of the beekeeping industry.

While the direct commodity production of the industry is relatively small (GVP in 2001–02 was $5.1 million, representing less than one per cent of Queensland’s gross value of primary industry production), it has particular importance to cropping industries. In particular, bees provide significant pollination services, either paid or as a by-product of the honey/pollen collection process. The value of pollination is reflected in the gross values of the cropping industries that are serviced by bees, but these services are difficult to value, primarily because of a lack of data about the extent of reliance on feral honeybees.

Australia is the last country that is free of the bee parasite varroa mite. If this mite were introduced, the importance of pollination by managed hives would increase significantly as feral bee numbers drop.

MilkForecastThe gross value of Queensland milk production for 2010–11 is forecast at $272 million, which is eight per cent lower than DEEDI’s final estimate for 2009–10 and seven per cent lower than the 2008–09 revised ABS estimate.

This forecast decline can be attributed to lower farm gate prices for a large proportion of the farm base and a lower forecast for total production.

Analysis and discussionOver the past year, the Australian dairy industry has started to recover from the impacts of the Global Financial Crisis (GFC). This is evidenced by the increase in both international prices and trade volumes. The high Australian dollar has, however, somewhat eroded the benefit of the global recovery for the Australian dairy industry and a nationwide downturn in production and prices has dampened the prospects of the industry.

Nationally, milk production has been constrained, dropping 3.9 per cent to nine billion litres in 2009–10. This can be attributed to harsh weather conditions across southern Australia. Prices have similarly declined as consumption growth per capita for milk has faltered. Although the first half of 2009–10 saw a growth rate of 2.5 per cent, this was effectively cancelled out by a decline in the latter half of the year.

Processors are seeking milk that better matches the demand for packaged milk sales in the region. There has been a significant shift in domestic consumption to cheaper options within dairy product ranges, including UHT. This has increased the market share for the UHT product category, which is no longer produced in Queensland. This scenario has seen the major retailers increase their market share of milk sales through their own ‘private label’ brands, which has translated to lower margins for processors and additional downward pressure on farm gate prices.

Livestock products

27

Table 4 Queensland milk production estimates and forecasts by region 2006–07 to 2010–11

2006–07 million

litres (e)

2007–08 million

litres (e)

2008–09 million

litres (e)

2009–10 million

litres (e)

2010–11 million

litres (f)

Change from 2009–10 to

2010–11 (%)

South East Queensland

419 377 406 429 415 –3.3

Far North Queensland

82 77 76 71 65 –8.4

Central Queensland

33 31 30 30 30 0

Total Queensland 534 485 512 530 510 –3.8

(e) Estimate

(f) Forecast

Source: Dairy Australia.

WoolForecastThe gross value of wool production (including the value of skins) is forecast to be $90 million in 2010–11, which is a 10 per cent decrease on DEEDI’s final forecast for 2009–10 but a four per cent increase on the 2008–09 revised ABS estimate.

Analysis and discussionThe gross value of Queensland wool production is forecast to decline in 2010–11 in response to a predicted fall in production. The Australian Wool Innovation Production Forecasting Committee’s (AWIPFC) August 2010 report estimates the number of sheep in Queensland as at 1st July 2010 to be 4.3 million head (similar to a year earlier). However, the state committee predicted that the number of sheep shorn in Queensland would fall by 10 per cent in 2010–11. Overall, the national Committee predicts that shorn wool production in Queensland will fall by 10.9 per cent to 14.4 m kg greasy in 2010–11.

The Australian eastern market indicator (EMI) price for wool is forecast by ABARE to increase by two per cent in 2010–11. This reflects an expected gradual improvement in the demand for wool products in China and the United States, which will lead to increased demand for raw wool. Given the outlook for relatively weak economic growth in the European Union and the United States, a downturn in European and American consumer spending and the consequent weakening of demand for wool products remains the primary risk to wool prices throughout 2010–2011.

Despite favourable seasonal conditions over the past several months, there has been an increasing shift out of wool into sheep meat and live export as growers capitalise on strong lamb prices. This trend is expected to continue in Queensland throughout 2010–11.

28

EggsForecastIn 2010–11, the gross value of Queensland’s egg production is forecast at $112 million, which is a two per cent increase on DEEDI’s final estimate for 2009–10 and a three per cent increase on the 2008–09 revised ABS estimate.

Analysis and discussionThe Australian Egg Corporation estimated that over the past five years, the demand for eggs has increased by 20 per cent. This can be largely attributed to the increased positive health messages eggs have received from the Heart Foundation over that period. Specifically, the foundation has included eggs in its Tick of Approval program and upwardly adjusted its recommended weekly intake of eggs for a balanced diet.

In order to meet more stringent animal welfare requirements, egg farmers have had to undertake extensive capital reinvestments in larger hen cages, which has led to a reduction in the number of egg farmers and a more than halving of national egg stocks since October 2009. In addition, suppliers failed to adequately gauge the growing demand for eggs and expected the market to be oversupplied throughout 2010–11. As the level of demand has not been met, there is now a nationwide supply gap in the market. This tightening of supply will exert upward pressure on the retail price of eggs during the first half of 2010–11.

However, an increase in demand and a shortage of supply are not guaranteed to immediately translate into an average price increase at the farm gate. This is because a significant proportion of growers are contracted to supply major supermarket chains at a set price for 12 to 18 months.

29

Crops

Horticulture cropsFruit and nuts

ForecastThe total gross value of Queensland’s fruit and nut production in 2010–11 is forecast at $1.06 billion, which is eight per cent lower than DEEDI’s final estimate for 2009–10 but 10 per cent higher than the 2008–09 revised ABS estimate.

AnalysisThe gross value of banana production is forecast at $360 million in 2010–11, which is 22 per cent lower than DEEDI’s final estimate for 2009–10 and eight per cent lower than the 2008–09 revised ABS estimate.

Good growing conditions have led to higher production, but overall product quality is lower. These factors are expected to result in sharply declining prices throughout 2010–11.

Most of the state’s banana production occurs in the Cardwell and Johnstone shires in northern Queensland.

The gross value of strawberry production is forecast at $145 million in 2010–11, which is the same as DEEDI’s final estimate for 2009–10 and 66 per cent higher than the 2008–09 revised ABS estimate.

The volume of Queensland strawberry production and the prices received at the farm gate in 2010–11 are not expected to deviate from 2009–10 levels.

Most of Queensland’s strawberry production occurs in the Caboolture shire, just north of Brisbane, and along the Caloundra rail corridor.

The gross value of mandarin production in 2010–11 is forecast at $65 million, which is seven per cent lower than DEEDI’s final estimate for 2009–10 but two per cent higher than the 2008–09 revised ABS estimate.

Prices for murcotts are expected to be lower than last season’s levels, due in part to lower quality as a result of adverse weather conditions, as well as the effects of the higher Australian dollar reducing export prices and volumes.

However, care should be taken when interpreting the mandarin forecasts due to a limited number of industry sources available for commentary.

Half of Queensland’s mandarin production occurs in the Gayndah shire. A further third of production occurs in Mundubbera (not shown on map).

30

The gross value of mango production is forecast at $70 million in 2010–11, which is the same as DEEDI’s final estimate for 2009–10 and 15 per cent lower than the 2008–09 revised ABS estimate.

More than 40 per cent of Queensland’s mango production occurs in the Mareeba shire in Far North Queensland. A further 39 per cent of production occurs in the neighbouring Burdekin, Bowen and Townsville shires.

It should, however, be noted that any estimate made at this time of year is tentative as it is early in the flowering stage and subsequent weather events can significantly influence crop size. In addition, the pattern of alternate high and low production years have broken down over the last few years, making early-season forecasting even more difficult.

The gross value of avocado production is forecast at $95 million in 2010–11, which is 19 per cent higher than DEEDI’s final estimate for 2009–10 and 58 per cent higher than the 2008–09 revised ABS estimate.

While production was lower than initially forecast, prices were substantially higher, more than offsetting the fall in yield. Volumes are expected to be higher in 2010–11, with only a small decrease in price expected.

The neighbouring shires of Isis and Burnett make up 37 per cent of Queensland’s avocado production, while 29 per cent of production occurs in the Atherton and Mareeba shires in Far North Queensland. Just over 10 per cent is grown in Crows Nest shire on the Darling Downs.

The gross value of pineapple production is forecast at $70 million in 2010–11, which is the same as DEEDI’s final estimate for 2009–10 and 21 per cent lower than the 2008–09 revised ABS estimate.

Lower volumes of smooth cayennes for both processing and fresh markets are expected to be offset by higher prices, especially for fresh fruit.

More than a third of pineapple production occurs in the Caboolture shire, just north of Brisbane, with a further 20 per cent of production in the Caloundra shire and 10 per cent north of Yeppoon in the Livingstone shire on the Central Queensland coast.

The gross value of production of apples is forecast at $40 million for 2010–11, which is the same as DEEDI’s final estimate for 2009–10 but 21 per cent higher than the 2008–09 revised ABS estimate.

Production in 2010–11 is expected to return to the normal levels of 2008–09, after a sharp downturn in 2009–10. This increase in production is expected to be offset by lower prices than in the previous season, but still higher than two seasons ago.

More than 95 per cent of Queensland’s apples are grown in Stanthorpe.

31

The gross value of production of macadamias in 2010–11 is forecast at $31 million, which is nine per cent lower than DEEDI’s final estimate for 2009–10 but 94 per cent higher than the 2008–09 revised ABS estimate.

Forty per cent of macadamia production occurs in the Burnett shire north of Bundaberg. A significant amount is also grown around Gympie and just north of Gympie in the Tiaro shire.

The gross value of table grape production is forecast at $50 million in 2010–11, which is the same as DEEDI’s final estimate for 2009–10 and 110 per cent greater than the 2008–09 revised ABS estimate.

The main varieties are Menindee seedless, flame seedless and red globe. Queensland table grapes are early season, with 90 per cent harvested between October and December.

The major production areas are in the Balonne shire (where more than 40 per cent of Queensland’s table grapes are grown) and the Emerald shire (where a third of production occurs).

32

Feature: Successful tropical fruit wine producers look to new markets

The delectable exotic flavours of tropical fruit wine will become a much desired treat across Australia if the fruit wine industry has its way.

Tropical fruit wines, ports and liqueurs from mainstream tropical fruits and exotic and native fruits such as mangosteen, black sapote and dragonfruit are wowing taste buds across the northern regions.

Chefs and bar managers are increasingly turning to tropical fruit wines to enhance the dining experience.

North Queensland’s eight tropical fruit wine producers are looking beyond their local markets following the release of the report Markets for Tropical Fruit Wine Products, which was funded by the Australian Government’s Rural Industries Research and Development Corporation.

Judy Noller, Trade and Business Officer with Trade and Investment Queensland said the key is to develop a retail fruit wine category, new market niches and supply chains to markets in Australia.

‘Fruit wine is a growing industry around Australia, and collaboration across production regions would support market and product development,’ Ms Noller said.

‘Tropical fruit wineries in the far north have developed a wide range of new products over some seven years, adapting traditional and modern grape wine-making techniques to the individual attributes of the broad range of fruits used.

‘The product variety has expanded from wines and ports to cream cocktails and coffee liqueurs, ranging from dry through to sweet.’

The study found the wines are versatile products, suited not only for drinking, but also to enhance cooking, desserts and cocktails.

‘Product quality meets Australia’s exacting export standards under the guidance of Brian Wilson, an international winemaking consultant from Melbourne, as well as being recognised through awards such as the Cairns and Tasmanian fruit wine awards,’ Ms Noller said.

‘The wineries are proactive with cellar doors and tastings at local events.

‘The project found Japan’s emerging fruit wine market offers the best export prospects initially. Japanese distributors and retailers who tasted a range of north Queensland tropical fruit wines commented on their high quality and likely consumer appeal.’

Other promising markets include the United States, Canada, Singapore and Europe.

Bob and Elaine de Brueys of de Brueys Boutique Wines, Mareeba, welcome the report’s recommendations as they strive to develop new markets.

‘Our wines are also being trialed in Europe, where we need to convince them that our product is high quality as well as different due to being made from exotic tropical fruits that are rare in Europe,’ Mr de Brueys said.

This year their Flagship Coffee Elixir and Tropical Temptation tied for Best Liqueur trophy at the Australian Fruit Wine Awards held in Cairns.

Ms Noller said the business was an example of how the industry can grow.

33

Vegetables

ForecastIn 2010–11, Queensland’s gross value of vegetable production is forecast at $1.08 billion, which is 10 per cent higher than in 2009–10 and 22 per cent higher than 2008–09 revised ABS estimate.

Analysis

Queensland’s gross value of potato production is forecast at $50 million, which is 11 per cent greater than DEEDI’s final forecast for 2009–10 but eight per cent lower than the 2008–09 revised ABS estimate.

Market prices for the start of 2010–11 are already higher than in the corresponding period last year. In response to these higher prices, some growers are planning to increase plantings in the main potato growing regions. However, potato production in North Queensland is expected to suffer due to water-logging problems.

The main potato growing areas are the Atherton and Herberton shires in Far North Queensland, the Burnett shire, north of Bundaberg and Gatton, west of Brisbane.

Tomato GVP for 2010–11 is forecast at $236 million, which is 31 per cent higher than DEEDI’s final forecast for 2009–10 and 26 per cent higher than the 2008–09 revised ABS estimate.

Production is expected to decrease slightly in the Bowen region in response to the recent poisoning event. This reduction should cause a slight spike in prices, but only for a period of four to five weeks before production returns to more normal levels.

Half of Queensland’s tomato production occurs in the Bowen shire, with some production in the Isis shire around Childers.

The gross value of capsicum and chilli production in Queensland is forecast at $120 million for 2010–11, which is 20 per cent more than DEEDI’s final forecast for 2009–10 and 30 per cent more than the 2008–09 revised ABS estimate.

Reasonable water availability is likely to result in an increased volume of production across the State. There is, however, expected to be a slight reduction in production in Bowen over the next few months due to the poisoning event.

As with tomatoes, the main areas for capsicum production are the Bowen and Isis shires. The main chilli production region is Bowen, with some grown in the Stanthorpe region.

34

The gross value of sweet potatoes is forecast at $55 million, which is one per cent higher than DEEDI’s final forecast for 2009–10 and 25 per cent greater than the 2008–09 revised ABS estimate.

Queensland produces 85 per cent of Australia’s sweet potatoes, with Bundaberg being the main growing area. Some sweet potatoes are also grown in Cudgen in northern New South Wales. All production is sold domestically.

The growth of the sweet potato industry has been rapid over the past five years. However, it is projected that the industry will shortly enter a period of consolidation and will not continue to expand as rapidly.

Other vegetablesThe gross value of lettuce production in Queensland in 2010–11 is forecast at $68 million, which is five per cent higher than DEEDI’s final forecast for 2009–10 but four per cent lower than the 2008–09 revised ABS estimate.

Improved available water supply levels will see the industry in Queensland rebound. This is expected to result in a small amount of growth in the industry in 2010–11.

The Gatton, Esk and Cambooya shires are Queensland’s main areas of lettuce production.

Queensland’s gross value of mushroom production is forecast at $64 million, which is seven per cent higher than DEEDI’s final forecast for 2009–10 and 198 per cent higher than the 2008–09 revised ABS estimate.5

The mushroom industry has experienced rapid growth over the past four years, driven by steady growth in market demand.

The main two production areas for mushrooms are the Beaudesert and Stanthorpe shires, southwest of Brisbane, where almost 60 per cent of production occurs. The neighbouring shires of Isis (around Childers) and Burnett (north of Bundaberg) account for 12 per cent of production, while nine per cent of production occurs in the Maroochy shire (around Nambour).

Watermelon production in Queensland in 2010–11 is forecast at $44 million, which is one per cent lower than DEEDI’s final forecast for 2009–10 but six per cent higher than the 2008–09 revised ABS estimate.

A third of Queensland’s watermelon production occurs in the adjoining shires of Bowen and Burdekin in Central Queensland. Smaller pockets of production are in the Chinchilla and Rosalie shires on the Darling Downs, as well as in the Banana shire and Gatton shire.

5 This large growth rate is likely due to a difference in the methodology used by the ABS and the compilers of Prospects. It is believed that Prospects includes a number of smaller growers that are not included by the ABS.

35

Lifestyle horticulture

ForecastThe GVP of Queensland’s lifestyle horticulture industry production sectors (including nursery, turf and cut flowers) in 2010–11 is forecast at $989 million, which is two per cent higher than in 2009–10. The forecast for 2010–11 and the revised estimates for 2008–09 and 2009–10 are based on the survey conducted by OESR on behalf of DEEDI.

• The gross value of nursery production is forecast at $788 million, which is the same as 2009–10.

• The gross value of turf production is forecast at $116 million, which is 10 per cent higher than 2009–10.

• The gross value of cut flower production is forecast at $85 million, which is five per cent higher than 2009–10.

AnalysisThe gross value of nursery production is forecast at $788 million in 2010–11, which is the same as DEEDI’s final estimates for 2009–10 and 2008–09.

Survey results from the production and retail nursery sectors are mixed. Although continuing rainfall and an improved economic outlook are causes for optimism within the industry, smaller producers are yet to see the gains from these developments. Large producers are expected to be the primary beneficiaries of positive developments in the nursery industry in 2010–11.

Plant varieties produced and sold by nurseries reflect consumer trends in lifestyle and landscaping. The current focus on sustainable living, along with growing and purchasing locally grown food, is reflected in higher production and retail sales of fruit, vegetable and herb plants. Some retailers have also noted a move towards colourful ornamentals for domestic gardens, with water-efficient native plant sales still strong.

The increasing costs of inputs such as labour and water, as well as high levels of business debt, are of concern to the industry. Production nurseries servicing large scale projects and local governments have experienced an increase in costs associated with meeting prescribed quality assurance processes.

Feedback from the industry indicates that nurseries are diversifying their markets, looking more to interstate and international markets where possible, whilst maintaining their existing local customers.

The outlook from the industry is mixed, with stronger economic conditions and increased rain and water availability drawing householders back to their gardens. There are, however, risks that a hotter than average spring may curtail expected growth, and that the gains in the industry will not reach the smaller producers.

The gross value of turf production is forecast at $116 million in 2010–11, which is 10 per cent higher than DEEDI’s final estimate for 2009–10 and five per cent higher than the estimate for 2008–09.

Winter rain has helped to maintain production, but has not significantly increased sales as yet, since wet weather makes it difficult to harvest and lay turf. The turf sector is expected to perform well in spring, based on strong production levels and good conditions predicted for turf laying.

36

Increased residential developments in South East Queensland provide the major opportunities for expansion within the turf market. Major road developments in 2010–11 are also expected to bolster the turf industry throughout the year.

Innovation will drive the growth of the sector, with industry leaders looking to increase mechanisation and use best practice procedures. Skilled labour is also important for future growth. As a general trend, larger businesses are becoming stronger within the sector.

The GVP of cut flowers is forecast at $85 million in 2010–11, which is five per cent higher than DEEDI’s final estimates for 2009–10 and 2008–09.

Domestic flower sales are relatively strong as the economy continues to recover. However, imported flowers are exerting pressure on the Queensland cut flower industry. Imported flowers are around 15 per cent cheaper than a year ago, due to the increased purchasing power of the Australian dollar internationally. In response, larger producers of traditional cut flowers are diversifying into other areas such as ornamental plants.

Export markets are the focus for Queensland’s native cut flower producers—particularly Japan, the United States and Europe. Flowers have seen a significant decline in sales due to the decline in international consumer spending and the consequent glut in the international flower market. The high Australian dollar is of great concern to export producers—Australian product is now up to 20 per cent more expensive on the international market than it was two years ago. Australian flowers struggle to compete with cheap produce from Africa, Costa Rica and South America.

Small producers on city fringes have been exiting the industry, with land being redeveloped for housing. Drought over the past few years initially triggered some industry rationalisation, but more producers are beginning to enter the Queensland cut flower industry due to potential growth and extension opportunities.

Other cropsSugarcane

ForecastThe gross value of Queensland’s sugarcane production in 2010–11 (i.e. from the 2010 harvest) is forecast at $1.24 billion, which is 13 per cent lower than DEEDI’s final estimate for 2009–10 but 28 per cent higher than the 2008–09 revised ABS estimate.

Total sales of the Queensland sugar industry, in raw-sugar equivalent, are expected to be worth $1.92 billion in 2010. Although there has been an increasing use of different pricing options for sugarcane, it is assumed that Queensland Sugar Limited’s (QSL) Seasonal Pool price and the grower share in the old uniform cane-payment formula are still the best indicators for industry valuation along the supply chain.

AnalysisAfter the damage to cane crops between Mackay and Proserpine by Cyclone Ului in March, Queensland’s 2010 season has been further set back, with crushing interrupted by rain and industrial action in some mills. The size of the season’s sugarcane crop is around 30 megatonnes.

37

Assuming the long-term average 13.5 CCS6 and a price of $475 per tonne of sugar, the value of the 2010 cane crop is around $1.24 billion. However, predicted continuing wet seasonal conditions pose a major risk of further harvest interruptions, which would cause the value of the harvested crop to fall short of its potential.

QSL’s 1 September forecast of the 2010 Seasonal Pool price is $450 to $510 per tonne; second only to their record 2009 actual price of $508.77 per tonne, after a July 2009 forecast of $440 to $485 per tonne and actual pool returns of $335 per tonne in 2008 and $275 per tonne in 2007. Thus, despite the continuing strength of the Australian dollar, Queensland cane farmers can expect another good season after many years of hardship.

Industry backgroundUp to the middle of 2010, indicators pointed to a turning of recent years’ shortage into a surplus, but market signals have been mixed since then. This was reflected in New York ICE No. 11 prices that eased off their long-term high since February (US$ 0.28 per pound) to US$0.14 per pound in June, but have since recovered to US $0.20 per pound by the end of August.

There are expectations of large crops in Brazil and India (July 2010), assuming continuing favourable weather. A good European Union (EU) crop (at Feb 2010) foreshadows accumulating EU stocks whose exportation is most likely prohibited by the recent WTO ruling. However, crops were hampered by drought in South Africa, Russia and the Ukraine (Aug 2010), and by floods in Pakistan (which usually has the same size crop as Queensland, but imports 1 to 1.5 megatonnes of sugar).

Macquarie forecast worldwide demand to increase by the long-term trend of two per cent to three per cent. Increasing demand is expected to keep India’s market in balance, leaving no exports. A tight domestic market in Thailand has caused sugar rationing in supermarkets and may force imports to bridge the short-term imbalance (July 2010), driving traditional export customers Pakistan and Indonesia to look for other suppliers at a time when their reserves are almost exhausted. Similarly depleted reserves in India and the Philippines are further contributing to international stocks being historically on the low side (August 2010).

RBS Morgan suggests that today’s sugar market has substantially changed compared to a decade ago when large price rises used to depress demand. The expanding reliance by biofuel producers on the sugar value chain is now underpinning demand even during price rises. Hence, RBS Morgan considers sugar oversold at the June 2010 price of US$0.14 per pound and expects the price to rally for the rest of the year.

Figure 10 International real and nominal raw sugar prices, 1960–2009

Source: www.capital-chronicle.com 2009, Sugar: sweetness and blight.

6 CCS or Commercial Cane Sugar is a measure of sugar content

38

Industry realignment is continuing in Queensland. Following a court order reversing a hold on its demerger plans, CSR sold its Sucrogen (sugar and renewable energy) division to the Singapore-based agribusiness conglomerate Wilmar International in July 2010. The unsuccessful bidder for Sucrogen, Bright Foods of Shanghai, is rumoured to be still interested in Queensland sugar, namely Maryborough Sugar Factory, which has been very active in pursuing the acquisition of Queensland sugar assets itself. Although its repeated attempts to acquire Tully Sugar have been unsuccessful, it contracted with Bundaberg Sugar to operate their Mulgrave, South Johnstone, Babinda and Tableland mills as a 50-50 joint venture from 1 December 2010, with a call option to purchase the remaining 50 per cent by 29 February 2012.

Cotton

ForecastCotton GVP for 2010–11 is forecast to be $710 million, which is 100 per cent above DEEDI’s final estimate for 2009–10 and 118 per cent above the 2008–09 revised ABS estimate. The 2010–11 season has very strong prospects based on high expected prices and very good water supplies.

AnalysisFor 2010–11, the total area sown to cotton in Queensland is forecast to increase by 133 per cent to 175 000 hectares. Despite an anticipated 10 per cent fall in average yields due to increased dryland cotton plantings, cotton lint production and cottonseed production are forecast to increase by 108 per cent in 2010–2011. This can be attributed to the large forecast increase in total area sown. The forecast cotton price for 2010–11 of $490 per bale is 17 per cent higher than last year, although the cottonseed price has remained constant at $175 per tonne. The forecast increased cotton lint and cottonseed production, combined with strong prices, is estimated to increase Queensland cotton GVP by 100 per cent to $710 million.

Discussion

Area sownThe 2009–10 cotton season was highly variable, with early dry conditions followed by floods in some areas. Area sown to cotton in 2010–11 is forecast to be 175 000 hectares, which is a 133 per cent increase on the estimated 75 000 hectares in 2009–10. This expected increase in area sown is partly due to a rise in the estimated price of cotton in the September 2010 quarter.

Extensive dryland crop plantings are anticipated for the Darling Downs and Border Rivers regions, and around Emerald in central Queensland. New areas are also being sown to cotton, most notably the dryland plantings in the McKenzie River irrigation development and in the Belyando region north of Clermont.

These new plantings will contribute to a forecast seven-fold increase in dryland cotton plantings to 56 000 hectares, up from an estimate of 6600 hectares in 2009–10, but are dependent on follow-up rain closer to the planting window in spring.

Improved water storages and rainfallThere has been greatly improved irrigation water supply in the Condamine, Border, Macintyre, Barwon and Moonie Rivers. August/September rainfall has been very good in all regions, ensuring ample stored soil moisture supplies for both irrigated and dryland growers. As a consequence, water storage levels in the major irrigation dams for cotton have grown considerably in the past year. This is depicted in Figure 11.

39

Figure 11 Capacity of major Queensland irrigation dams for cotton as at 16 September 2010

0

20

40

60

80

100

Source: ABARE Australian Commodities, September Quarter 2010

YieldsAs a result of increased soil moisture profiles in cotton growing areas and increased irrigation water storage levels, irrigated cotton yields in 2010–11 are forecast to increase by around seven per cent from 2009–10 levels. Meanwhile, the average dryland cotton yield across Queensland is estimated to fall by around three per cent from 2009–10 levels. This can be attributed to increased plantings of dryland cotton in the Border Rivers and central Queensland, where yields are around 16 per cent lower than those achieved in the Darling Downs. Overall, cotton yields in 2010–11 are expected to remain close to the long-term average.

ProductionThe expected increase in area sown in 2010–11 is estimated to raise cotton lint production to 1 296 000 bales (294 190 tonnes), which is a 108 per cent increase on the 2009–10 level. Cottonseed production is also forecast to increase in 2010–11 by the same proportion to 426 500 tonnes, from the 2009–10 level of 204 000 tonnes.

Domestic priceAs at September 2010, cotton prices were in the order of $495 per bale. Many growers have forward sold substantial amounts at similar and higher prices, although reduced ginned seed values for stockfeed and oil have offset the lint prices to some extent.

A slightly more conservative $490 per bale is forecast as the average cotton price for 2010–11. This is an increase of around 17 per cent on the previous year, due to a tightening of world stocks and world cotton demand outweighing supply.

Meanwhile, the cottonseed price in September 2010 is estimated to have remained constant at $175 per tonne since 2009–10, although this represents a fall of nearly 50 per cent from 2008–09.

World productionAs can be seen from Table 5, China is the world’s largest cotton producer, yielding over seven million tonnes in 2009–10 and accounting for 32 per cent of world production. However, China is also a net importer, as the country possesses a large share of global cotton mills and is the largest manufacturer of cotton textiles.

40

The next largest cotton producers are India (23 per cent of world production), the United States (12 per cent) and Pakistan (nine per cent). The United States, although producing the equivalent of 37 per cent of Chinese production in 2009–10, is the world’s largest cotton exporter. The United States is forecast to export 3.2 million tonnes of cotton in 2010–11, accounting for around 40 per cent of global exports.

Table 5 World cotton production (000’s metric tonnes) 2009–10

Country Production % World production

China 7076 32%

India 5117 23%

US 2654 12%

Pakistan 2090 9%

Brazil 1165 5%

Australia 348 2%

Total 22 241 100%

Source: USDA, Cotton: World Markets and Trade Monthly Circular, August 2010, USDA Foreign Agricultural Service, USDA

International supply and demand forcesStrong demand from large cotton-consuming countries such as India and China and global supply concerns have driven up world cotton prices.

Over 2009–10, global consumption exceeded production by over 15 per cent, causing global stocks to draw down and subsequently forcing up prices significantly. Over 2010–11, the large gap between global consumption and production is expected to be maintained, which will tighten stocks further, particularly in exporting countries.

For the major world importers, USDA forecasts the following changes for 2010–11:

• China is expected to increase imports by 7.3 per cent to 12.5 million bales (2.7 million tonnes)

• Brazil to increase imports by 100 per cent to 600 000 bales (128 000 tonnes)

• Turkey to increase imports by 3 per cent to 3.4 million bales (725 000 tonnes)

• Mexico to lower imports by around 7 per cent to 1.4 million bales (298 000 tonnes)

Increases in cotton exports by most major exporters are also forecast for 2010–11:

• US to increase exports by around 5 per cent to 15 million bales (3.2 million tonnes)

• India to increase exports by over 10 per cent to 6.5 million bales (1.38 million tonnes)

• Australia to increase exports by 7 per cent to 2.3 million bales (490 000 tonnes)

• Turkmenistan to increase exports by over 10 per cent to 1.05 million bales (224 000 tonnes)

• Brazil to lower exports by over 13 per cent to 1.9 million bales (405 000 tonnes)

As at August 2010, global cotton imports for 2010–11 were forecast to be 8.327 million tonnes, slightly exceeding forecasted exports of 8.326 million tonnes. As a consequence, global closing stocks are tight at 1.94 million tonnes. Total global production is projected to be 25.441 million tonnes, outweighed by consumption of 26.316 million tonnes by 3.5 per cent.