Records and heartbreak as crops cop the big wet

“At a rough estimate, Australian growers were looking at potentially a 60 million tonne crop this year,” GrainGrowers chair and Victorian grower Brett Hosking said.

“My estimation is approximately 20 million tonnes of production are in the cropping areas experiencing current weather events.

“Presently, we don’t know what the damage will be. There are a lot of variables at the moment. However, we know what grower concerns are.

“Infrastructure, particularly local roads, are a concern. Major supply routes are cut in half in many places and damaged roads in regional areas are a significant safety risk for communities.”

Mr Hosking said with increased water sitting around, communities were also going to be particularly susceptible to pests and diseases.

“Mosquito-borne illness like Ross River fever are a worry and Japanese encephalitis is a huge concern,” he said.

“As communities try to take in the impact of current damage, and are also preparing for further flooding, we urge government at every level to work together and provide fast, clear, co-ordinated and responsive support.

“Communities can’t be trying to navigate the intricacies of who does what with disaster declarations.”

National harvest set to be a bumper

Meanwhile, in its newly-released report 2022-23 Australian Winter Crop Forecast, Rabobank said despite the weather challenges, the nation was set to harvest its third consecutive bumper winter crop.

Forecast to be down only one per cent on last year — which broke all-time production records — the total grain crop is estimated to be 41 per cent above the five-year average.

But it won’t be good news for all, the report said.

While farmers in some parts of Australia will “reap record or near-record crops”, others in areas across NSW and Victoria are facing “yield, volume and quality downgrades due to excessive rains, washed-out fields and unharvestable crops”.

Report author Dennis Voznesenski said nationally wheat production was forecast to come in at 35.5 million tonnes — down two per cent on last year, but 47 per cent above the five-year average.

Barley production is expected to reach a record 14.8 million tonnes, up seven per cent on last season and 31 per cent above the five-year average.

The canola crop is forecast to reach a record 7.2 million tonnes, also a seven per cent increase on the previous year and a whopping 81 per cent up on the five-year average.

Mr Voznesenski said “on the whole”, Western Australia and South Australia were set to break production records.

“While Victoria was on track to break production records until last week, we are going to have to wait for all the forecast rainfall to come through and for waters to recede to see the full impact of the rains on production,” he said.

“The unfavourable conditions mean harvest is likely to be drawn out into January.”

He said a substantial increase on last year’s rainfall across the Mallee and Wimmera in Victoria and Murray Mallee in South Australia had set up some farmers in these regions to harvest all-time record crop yields.

NSW farmers, however — especially those in central regions — were battling conditions even wetter than last year, Mr Voznesenski said.

“And the challenge of a wet harvest will be compounded by labour shortages, with an estimated 30 per cent of farms in Queensland and 27 per cent in NSW having to change harvest strategies as a result of insufficient labour.”

Exports face roadblocks

With another bumper national harvest on the way, Australia would have plentiful grain and oilseeds for the export market, the Rabobank report said.

However, the ability to supply world markets would be limited by supply chain bottlenecks, both in regional areas and with capacity at Australian ports.

The exportable surplus in Australia from the 2022-23 harvest was expected to exceed the nation’s official estimated 2021 national export capacity of 47.5 million tonnes, Mr Voznesenski said.

“When an approximate figure is also added for still unsold 2021-22 crop, the exportable surplus could rise to 53.5 million tonnes, and this does not include an unknown volume of grain owned by the grain trade itself,” he said.

Commodity price outlook

For Australia’s grains and oilseeds, the report sees the strong local supply limiting the potential of prices moving above current levels for a sustained time during the harvest period.

“With another near-record crop in the process of being harvested, and still significant carryover from last year, we expect local prices to be pressured below global levels during the key harvest window from now until January and likely into late March,” Mr Voznesenski said.

“Growers may see some local price upside between late March and May, ahead of the Northern Hemisphere harvest.

“But from late quarter two next year — when Northern Hemisphere grain starts coming on to the market — and with an expected rise in the Australian dollar, we are likely to see downward pressure on local prices.”

Global grain prices are expected to remain above the five-year average for the next 12 months as supplies from Ukraine and Russia continue to be unpredictable and global stocks below average, but prices are not forecast “under the base (most likely) case” to head back up to record levels seen between March and June this year, Mr Voznesenski said.

Locally for wheat, Rabobank forecasts national average APW1 Track/Free-In-Store prices to trade between $390 and $420/tonne over the next 12 months, “with upside towards the end of quarter one and the beginning of quarter two 2023”.

For feed barley, national average Track/Free-In-Store prices are expected to trade between $320 and $350/tonne.

Strong global and local supply of canola is bearish for prices, however, there may be improvements in demand next year with proposed changes to biofuel mandates in the European Union and a potential reduction in Canada’s export capacity later in the year, the report said.

Prices for non-GM canola Track/Free-In-Store are expected to trade between $700 and $830/tonne in 2023.

Pulses were “still looking for love”, the report said, with more than 18 per cent of last year’s Australian pulse harvest estimated to be unsold, with this figure significantly higher in Queensland.

“A large rebound in lentil production in Canada is expected to weigh on prices over the next 12 months, while economic and political turmoil in Australia’s second-largest export market of Sri Lanka will also limit demand in 2023,” Mr Voznesenski said.

“However, in the short term, recent rains and damage to the Victorian lentil crop could see price support.”

The outlook for chickpeas remains largely bearish, though early next year may see some upside from increased purchases from Bangladesh ahead of Ramadan.

Farm input costs bite

Farm input costs — which have risen substantially over the past year — could weigh significantly on farm margins ”moving forward”, Mr Voznesenski said.

However, while there is notable risk for urea prices increasing, reprieve may be due for other fertilisers and agrochemicals in the near term.

Mr Voznesenski said with urea production significantly dependent on natural gas — which has been skyrocketing in price in Europe — the bank sees urea prices as having the largest “upside risk” moving into 2023.

For phosphates, there had been “demand destruction”, the report said, with high prices resulting in lower usage and larger than initially anticipated inventory, especially in the Americas, which was indicative of further price declines.

“The downward slide in global potash prices is likely to persist for the coming months, with regional benchmarks taking a cue from further anticipated weakness in the Americas,” Mr Voznesenski said.

“Still, geopolitics around Russia and Belarus can definitely impact prices of both phosphate and potash.”

An expansion of agrochemical production capacity in China had seen prices decline this year, the Rabobank report said.

“And under our base case, we expect further downside moving into next year,” Mr Voznesenski said.