RaboResearch general manager Stefan Vogal gives ag outlook

RaboResearch general manager for Australia and New Zealand Stefan Vogel told a broad market outlook breakfast in Leongatha on Wednesday the Reserve Bank of Australia would likely lift the cash rate beyond 4.1 per cent in the last quarter of 2024 to drive down inflation.

It comes as the RBA's outgoing governor Philip Lowe told a parliamentary committee on Friday that, "Things are moving in the right direction, but it is too early to declare victory".

Mr Vogel said the US interest rate of 5.5pc would also likely rise by the end of the year.

"Over here in Australia, we think we are pretty close to the peak, but not yet at the peak, so we are expecting one more increase in October or November of 25 basis points that brings us somewhere around 4.35pc and then we will probably plateau for a while," Mr Vogel said.

"Even by the end of next year, we are still going to be very close to 4pc."

Research presented by Mr Vogel showed average Australian land values increased by 30pc in 2021 and 2022, respectively, but after a strong start this year, values were forecast to slow in the final quarter of 2024.

"We will see a smaller growth in land values, but we still think land prices will not break dramatically," he said.

"We will still see a healthy and in-demand land market, but with a slower growth rate, so land in our view is still a good investment for farmers who can make the numbers work.

"I think the bigger driver is not so much interest rates, but really around the margin outlook for farms and whether it gets drier and that is of more concern than interest rates."

The breakfast heard access to labour remained one of the biggest issues for the country's agriculture sector, and a partial solution to that problem was integrating farms with foreign workforces.

Mr Vogel said wage growth was expected to increase, but could be slowed by the use of international workers.

"Australia is projected in the next five to 10 years to grow in terms of population, but most of it will come from immigration and that will hopefully help in the labour market side," Mr Vogel said.

"We've seen some of the big abattoirs bringing foreign workers in who already did the job in other parts of the world, because they can come into Australia and know what they are doing.

"With that, we may solve a few bottlenecks left and right, but for the typical farmer we will still have a tight labour market."

Mr Vogel said farmers were looking at ways to bolster on-farm labour, including by offering more lucrative wages and packages, and the use of technology to fill the void.

"Those who take good care of their workers and the manager and their families and have decent housing usually don't have too big of a labour problem," he said.

The reduced costs of fertilisers were also a talking point of the presentation, with farmers urged to consider how they source and apply the likes of urea.

"Fertiliser prices have come down dramatically from the highs we had last year and are 50 to 60pc lower in most cases, but we are not back to the levels we had before the coronavirus crisis," Mr Vogel said.

"We've seen urea prices move higher in the last few weeks again because of decent demand from our competitors: Brazil is a big competitor in the market buying fertilisers these days.

"The problem domestically for farmers is whether they get enough, do they get it when they need it and because we're an import region, we hear farmers more and more saying they're not getting the volumes of fertiliser they need."

He said despite the possibility of a recession, Australia was more likely to experience an economic downturn - and predicted agriculture would not be the worst-hit sector.

"If you look at these economic slowdowns and headwinds we have in the world, you also need to consider which industries are good industries to be in and which ones are not," Mr Vogel said.

"From a consumer side of things, the consumer always tries to find value and spend less money, and while people may not buy the expensive cuts of meat, they might find cheaper cuts or chicken.

"That's where some of the more expensive on-farm products will suffer, but on the other side, farmers will get through because people are willing to pay for quality."