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The farm commodity ABARES forgot

- Wednesday, March 02, 2016

The forecast of annual farm production for 2015-16 released by ABARES at its annual Agricultural Outlook conference being held in Canberra this week was quite positive, indicating that the gross value of farm production will increase by around 5% compared to 2014-15 and equal almost $59 billion dollars. However, a farm commodity that is very quickly growing in value was completely overlooked in ABARES estimates.

Included in the forecast value of farm output of almost $59 billion were all of the major commodities that have been the mainstay of Australian farm production for many years. Topping the list is beef, followed by wheat, milk, vegetables, fruit and nuts, wool and lambs. The one commodity not included in the ABARES forecast, however, was carbon abatement. 

As noted in the recently released Farm Institute Insights newsletter, farmers were successful in securing about 72% of the carbon abatement contracts that were awarded in the first two Emission Reduction Fund tenders conducted by the Australian Government. These two tenders resulted in the allocation of $1.2 billion of the Emission Reduction Fund, meaning that the successful farm-based projects were potentially worth approximately $864 million. The typical contracting period is reported to be seven years, meaning that the annual value of these carbon abatement contracts for the farmers involved is approximately $123 million per annum.

This puts the annual value of carbon abatement above the estimated annual value of production of traditional farm commodities such as corn, honey, field peas, triticale, soybeans and sunflowers. 

Perhaps ABARES might have to add a new line item to its farm commodity forecasts in the future. One very significant reason for the inclusion of carbon abatement  is that unlike other farm commodities, the long-term nature of carbon abatement contracts makes the value of this farm commodity very easy to forecast into the future!

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