All eyes on ASX agriculture shares as farm incomes tipped to grow by 18%

All eyes are on agriculture on the ASX, with farms’ cash incomes predicted to grow and bans on GM lifted.

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fish eye view of dairy cows in paddock

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Two recent announcements by government bodies have pointed to a fruitful future for Australian farmers, which could have investors wondering if ASX agriculture shares are poised to benefit.

The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) announced yesterday that the 2020–21 season will likely be the second most profitable ever for Australian farmers.

Additionally, the NSW Government announced it will lift its ban on genetically mutated (GM) crops. Minister for Agriculture Adam Marshall said doing so could deliver primary industries $4.8 billion over the next decade.

Farmer’s delight

Better conditions and higher rainfall are likely to see the average cash incomes of Australian farms rise this season.

Those of broadacre farms are expected to grow by 18%, to average $184,000. ABARES Assistant Secretary Peter Gooday said broadacre agriculture’s low labour demands mean that farms have dodged the labour shortage felt by other Australian farming practices.

The increased rainfall also benefits crop growers, where farm incomes are expected to increase by 37%. 

Livestock farms are predicted to miss out on the season’s gifts, with incomes rising for beef and dairy farms but falling for those yielding sheep, lamb and wool.

Mr Gooday says the announcement – which draws its data from the latest survey of broadacre and dairy farms – heralds a “welcome income increase for many farming businesses — particularly those on the east coast who have been doing it tough.” 

He commented:

The boost from better seasonal conditions has been tempered by lower commodity prices and only modest increases in livestock receipts because of herd and flock rebuilding.

There has been a big turnaround in NSW this year with a record winter crop following several extremely poor years, and elsewhere cash incomes are around or above the 10-year average except in Western Australia.

GM good to go

The NSW Government’s ban on GM crops will be lifted on 1 July 2021, potentially garnering billions of dollars of benefits.

Minister for Agriculture Adam Marshall said GM could reduce NSW farmers’ expenses by 35% while boosting production by 10%.

“The potential agronomic and health benefits of future GM crops include everything from drought and disease resistance, to more efficient uptake of soil nutrients, increased yield and better weed control”, he said.

“This is also great news for consumers as by lifting the ban we are empowering companies to invest in GM technology that has the potential to remove allergens such as gluten, improve taste and deliver enhanced nutrition.

“NSW has a proud history of over 130 years of research experience and partnerships and we believe today’s announcement will open the State to a new world of advances that will drive prosperity in this sector for years to come.”

ASX agricultural shares

While not all agriculture companies on the ASX are making moves today, two ASX agriculture shares that have seen a bump are Elders Ltd (ASX: ELD) and Nufarm Ltd (ASX: NUF).

At the time of writing, the Elders share price is up by 3.13% to $11.88, while Nufarm shares have climbed by 6.98% to $5.21

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Elders Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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