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Global Ag View: Drought leaves Australia's grain growers high and dry
The third consecutive year of severe drought has left Australia facing the prospect of winter wheat production falling to the lowest tonnage in more than a decade.
According to a report by Rabobank, production was expected to reach just 27.7 million tonnes in 2019/20, down 9 per cent on last year and 31 per cent below the five-year average, making it the smallest crop since 2007/08.
Last week the most significant rainfall in three years fell in New South Wales, but the country would need to see much more to end the current drought.
In addition, the area of New South Wales is struggling to contain more than 80 bush fires, with some exceeding 100,000 hectares.
With most of Australia’s cropping regions entering the 2019 planting season with below-average soil moisture, barley production was down 7 per cent on last year, 21 per cent down from the five-year average, and canola was down 16 per cent, 45 per cent down on the fiveyear average.
Queensland has been worst hit after a year of floods and drought left wheat at 0.5m tonnes, down 31 per cent from the 2018/19 season, and 72 per cent below the five-year average.
A fall in production was also on the cards for Western Australia, with the biggest percentage decline in canola, which was expected to be just 0.8mt – half of Western Australia’s five-year average.
Despite New South Wales being set to make significant gains of 31 per cent on last year’s disaster, this was still 61 per cent below the five-year average, reflecting the extent of decline last year rather than significant gains over typical production levels.
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However, record wool and strong sheepmeat prices have increased margins for mixed farmers this season, alleviating some crop pressure.
Rabobank predicted basis to hold firm, however, further price gains were likely to be capped by increased international grain imports.
Depreciation
Exports continued to decline for the third year running and were expected to reach 8mt, 3.9mt, and 0.9mt for wheat, barley, and canola, respectively, in 2019/20 – collectively down 15 per cent year-on-year.
However, further depreciation of the Australian dollar over the coming 12 months would assist grain export competitiveness.
Australia’s reduced capacity to service international markets over multiple years was expected to severely challenge its competitiveness in export markets once exportable surplus grows again.
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