It is a truth universally acknowledged that we rarely talk about drought when we are not in drought. You could loosely call it the “hydro-illogical cycle”.
For a dry continent such as ours, how we manage rain and its deficit is a big piece of both agricultural and environmental policy.
Historically, we usually plan for a drought in the most emotionally draining and politically sensitive time: in the middle of a mammoth dry.
Right now, we are in this weird stage, after three wet years, of maybe looking down the barrel of three dry years, according to one scenario in the latest government forecasts.
It’s not quite the biblical cycle of seven years of plenty and seven years of lean but it does present a small window of opportunity to talk about how we should manage the next big dry.
Australian farmers have had a blinder
On Tuesday, the Australian Bureau of Agricultural and Resource Economics and Sciences (Abares) is delivering its latest forecasts on what levels of food and fibre they expect from Australian farmers.
Complacency is understandable, reading the top line of the 2023 Agricultural Commodities Report. In short, Australian farmers have had a blinder, which is a technical term for an excellent season.
Three wet years are unusual enough for Australia but commodity prices were high, competitor countries had their own droughts, and Russia invaded Ukraine – restricting the two countries’ outputs that provide 30% of the world’s wheat.
Abares expects Australian farmers to deliver their biggest production year on record in 2022-23 by volume and value, worth $90bn. That is $2bn bigger than the previous record set in 2021-22.
Western Australia farmers appear to have been dealt the best hand with record-breaking deliveries in grain across the state amounting to a harvest of 25.6m tonnes. In essence, those farmers planted the largest ever area of winter crops, got rain at the right time and had minimal frosts.
For context, the WA grain forecast is 61% higher than the 10-year average to 2021-22. Given WA is a big wheat and barley producer, that is a lot of bread and beer.
South Australia is also estimated to reach a new record of 12.6m tonnes, 19% higher than its previous record.
Flooding in the eastern states crimped the bumper year for two reasons.
Firstly, some crops were damaged or downgraded. In cropping regions, New South Wales and Victoria were the worst affected. An estimated 8.1% and 2.9% of cropping land in these states respectively were significantly damaged by floods alone.
Secondly, farmers could not get onto some paddocks to plant their next crop, particularly in southern Queensland, and northern and central New South Wales.
Abares is expecting a return to drier conditions in 2023-24, which will mean total agricultural production is expected to fall 10% to $81bn.
The agriculture minister, Murray Watt, is expected to urge the audience at the Abares outlook conference not to be complacent of the risk of future drought, even after three years of floods.
“While three seasons of La Niña have contributed to record-breaking production, we can’t be complacent about the risk that future drought poses,” Watt said.
The climate challenge ahead
Things get tricky in the years ahead, for farmers dealing with the climate crisis and government forecasters. Abares has tried to do something different by presenting two models that juggle various economic and climate scenarios over the next five years.
Abares’ executive director, Jared Greenville, said the different scenario forecasts are designed to acknowledge the variability due to climate change.
“The problem is the long history is not a very good predictor of the future any more,” he said.
The “baseline” scenario assumes inflation remains high but declines in 2024 in combination with less rainfall due to El Niño conditions. The “drier” scenario assumes interest rates stay higher for longer, with three back-to-back El Niños.
In short, we are going to get dry, as per Australian cycles, but in the drier scenario, we could also have lower prices for our crops combined with higher prices for inputs like fertiliser and diesel, combined with high interest rates at a time when the seasons get tougher.
Abares also confirms what is obvious in the agricultural real estate pages. Reserve Bank data shows total agricultural business debt in Australia jumped by 22% in real terms from December 2019 to December 2022.
Farmers are spending on expanding as the land price booms. They have mostly been able to service that debt in the short term because their land prices keep rising.
But a drought combined with sustained high rates will test that capacity to pay those interest bills.
So where does this crystal ball gazing leave us? Even while flood victims remain homeless and some communities may begin sliding into drought, policy makers and advocacy groups have a sweet spot of sorts, before the next extreme comes our way.
That is because climate change has caused this concertina effect between the extremes of droughts and floods, affording less time for communities to recover.
We need to take this chance in between the hydro-illogical cycle to prepare calmly and rationally.
