ABARES Cuts Crop Forecasts Again

By Glenn Dyer | More Articles by Glenn Dyer

The East Coast drought – now dipping into Victoria and the dry emerging parts of southern Western Australia – has seen Australia again cut its 2018-19 wheat harvest estimate to where it is now forecast to be the lowest since the GFC and the last big drought in 2008.

Overall winter crop production is forecast to fall by 23% in 2018–19 to 29.3 million, with the fall in wheat output the major factor.

Wheat production during the 2018-19 season is now estimated to total 16.95 million tonnes, the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) said yesterday in a Spring/Summer update.

That was below ABARES’ September estimate of 19.1 million tonnes, which was on course to be the lowest since 2008 when output hit just 13.6 million tonnes. Before that the harvest had been estimated at more than 21.9 million tonnes, up 3%. That was obvious before the impact of the dry weather in NSW and Queensland became more apparent as winter rainfall failed to eventuate in predicted amounts.

Lower wheat production will reduce Australia’s wheat exports which will, in turn, support world prices which hit their highest levels in two months on Monday ahead of the downgrade by Australia, which is a major exporter.

ABARES said barley production is forecast to fall by 18% to around 7.3 million tonnes, and canola production is forecast to fall by 39% to around 2.2 million tonnes.

That is bad news for GrainCorp which is facing the odd takeover offer from a claimed investor called Long-term Asset Partners which seems to be providing finance of more than 100% for the $2.4 billion bid.

The slide in barley production forecast by ABARES will also hit GrainCorp, although it now has significant assets offshore for processing, especially malting the grain for the booming craft beer industry.

Other companies in the sector – such as Elders, Nufarm, and Incitec Pivot have all seen their share prices hit by the impact of concerns about the drought.

GrainCorp, which earns most of its revenues from trading, shipping and storing wheat and the slide in the size of the crop (and for barley as well) means there will be little in the way of surplus grain to deal in – and what it can get will be at higher prices.

Looking at summer production, ABARES said the “area planted to summer crops is forecast to fall by 18% in 2018–19 to 1.1 million hectares driven by forecast falls in area planted to rice and cotton. Area planted to grain sorghum is forecast to increase by 8% in response to favourable prices.”

Summer crop production is forecast to fall by 24% to 3.1 million tonnes. Summer crops prospects are highly dependent on sufficient and timely in-crop rainfall because of low levels of soil moisture in many regions, the forecaster said.

Production on the east coast has been particularly hampered with the entire state of NSW, the second-largest producing region, hit by drought earlier this year.

ABARES said production from NSW would reach 1.98 million tonnes, the lowest since 1995

ABARES said that winter crop production in Western Australia is expected to account for 56% of national production in 2018–19, compared with an average of 36% in the 20 years to 2017–18. Winter crop production in WA is forecast to increase by 11% to 16.3 million tonnes in 2018–19 Wheat production is forecast to increase by 22% to 9.7 million tonnes in 2018–19, “largely because of an expected 35% increase in the average yield. Forecast production is similar to 2016–17 when spring frosts were also a factor in some regions,” ABARES forecast.

“Barley production is forecast to increase by 4% to 3.8 million tonnes in 2018–19, which reflects a small increase in planted area. The average yield is forecast to be the same as in 2017–18, which was the second highest on record. Canola production is forecast to decrease by 21% to 1.6 million tonnes in 2018–19. This reflects a 13% fall in planted area and an expected 10% decrease in the average yield because of unfavourable planting and early growing conditions,” ABARES said yesterday.

The group to get the benefit of this will be CBH, the gain grower-owned co-operative which is the biggest grain exporter in Australia. It constantly provides evidence that privatisation is a chimera so far as it is concerned. It doesn’t need it, and its grower-owners won’t allow it.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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