AFTER three consecutive strong harvests, Australian grain and oilseed production is set to return to more modest totals for the current season as drier growing conditions ‘hit home’, Rabobank says in its just-released 2023/24 Australian Winter Crop Forecast.
The bank says Australia is on track to harvest a total winter crop of 48.72 million tonnes for the current season.
While down 24 per cent on last season’s record-breaking 63.85 million tonne national crop, this is still close to the five-year average and above totals recorded in 2018/19 and 2020/21.
Prices are expected to provide some silver lining to the lower production totals for Australian farmers, says report co-author, RaboResearch associate analyst Edward McGeoch.
He said dry conditions in Australia are pushing local prices for wheat and barley above those globally, and global export demand should also be supportive of canola prices.
Mr McGeoch says drier weather conditions that have spread across many cropping regions in the country and the prevailing El Nino climate outlook are playing a significant role in the tighter supply outlook for Australian grain and oilseeds.
“Production expectations are varied across regions with some farmers expecting to see elevated production due to positive growing conditions they have experienced while others will be facing tough decisions as to whether it will be worth harvesting their crop,” he said.
The bank says all cereal and coarse grain production – including wheat, barley and oats – is expected to decrease this season, with wheat declining the furthest, down to 26.9 million tonnes.
Winter crop production is expected to decline across all states, except Victoria, where the bank sees it rising by eight per cent from last year.
However, Mr McGeoch says this is primarily due to the losses incurred during last year’s harvest, with a significant proportion of crops in the northern parts of the state unable to be harvested because of flood damage.
Canola production is forecast to fall 24 per cent on last year to 5.77 million tonnes.
This total, however, remains 20 per cent higher than the five-year average, while pulse production – though forecast to be down this season – also remains slightly higher than the five-year average, at 3.08 million tonnes.
The report says Australia’s export outlook for the year ahead will be significantly impacted by the fall in the production potential for the current season, “given we are coming off a string of consistently strong seasons”.
“We are however still well positioned to support global wheat needs, while also seeing supportive factors for canola and barley exports,” Mr McGeoch said.
Barley and canola export surpluses from the 2023/24 harvest (excluding carryover from last season) are expected to total 5.9 million tonnes and 4.6 million tonnes respectively.
“Again, reductions in global production of barley and canola are supporting export demand to key markets,” Mr McGeoch said.
Feed barley track/FIS prices are expected to trade, on average, between AUS 320-370/tonne over the next 12 months, just above the five-year average of AUD 312/tonne.
Australian farmers are expected to face a better year ahead when it comes to their farm input costs, the report says, with the exception of diesel.
Report co-author, RaboResearch agricultural analyst Vitor Pistoia, says there are two “driving forces” behind the improved outlook for input costs.
The reports says, based on market factors at the moment, urea is expected to remain near current levels and phosphate to ease by 10 to 15 per cent in early 2024.
For potash, the forecast is for stable prices.
Mr Pistoria said agro chemicals are likely to have lower prices and better affordability in the 2024 season.
Diesel prices, however, look to remain at elevated levels, due to capped petroleum production in many exporting nations, along with reduced global refinery capacity, impacted by shutdowns and maintenance.
Brent oil prices should stay around the USD 95/barrel mark, with potential hikes up to USD 100/barrel possible.
“These factors, combined with expectations for a continuing weak Australian dollar, put the diesel terminal gate price slightly above AUD 2/litre, in a range between AUD $2 to $2.2/per litre,” Mr Pistoia said.
"This is six to 17 per cent above January 2023 prices.”
For machinery and parts, despite substantial reductions in component costs in the past 12 months – including for steel, rubber and international freight – prices are not expected to decline considerably.
This is due to the weaker Australian dollar and local inflation in machinery-producing nations.