Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Friday, 3 March 2017

Biggest wheat crop on record

Bumper crop

It's been a challenging decade indeed for Australia's agriculture industry, with droughts and other burdensome problems having arisen. 

More lately the takeover of Graincorp (ASX: GNC) by Archer Daniels Midland was blocked by the Foreign Investment Review Board (FIRB) for not being in the national interest, leading CEO Alison Watkins from agribusiness to Coca-Cola Amatil (ASX: CCL). 

A browse through the national accounts this week - which I ripped apart in a bit more detail here - showed that not only have prospects for the agricultural sector picked up, it's been by far the best performing sector of the economy over the 2016 calendar year as measured by industry Gross Value Added (GVA).

Australia's quarterly GDP increased by 1.1 per cent to $422.5 billion in the December quarter, and the agriculture, forestry, and fishing sector was one of the key contributors to the rebound. 

In fact, it had been an all-comers record-smashing winter season for Aussie wheat growers, with total winter crop production up by almost 50 per cent in 2016 according to the Australian Government statistics.

Elsewhere, mining export volumes continue to do what they have been doing. 

But it's far from all good news.

After all, the number of persons actually employed in agriculture has nosedived over the past three decades, while direct mining employment has never really accounted for a large share of the workforce (it's about 236,000 today). 

The weakest performing sector was construction, wherein the winding up of the respective construction phases of some huge resources projects has contributed to a decline in output over the last four quarters consecutively.

Given that residential construction also looks set to peak this year - a sector known for its powerful multiplier effect - well, this is not really a positive look for the economy!

Construction has been a huge driver of industry GVA over the past decade and the sector now directly employs 1,062,000 Australians (from a total workforce of just under 12 million). and growth, anyone?