By Angus Brown | Source: ABARES
The latest Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) has released their latest quarterly Agricultural Commodity Report. The report makes some interesting reading, and on the grain front, they don’t expect wheat to get any more popular any time soon.
The harvest recently completed produced a smaller wheat crop off a smaller area. Last year’s record crop, along with weak international and local prices saw a dramatic drop in planted hectares. The fall in plantings amounted 5% this year, and the poor season accounted for the rest of the 65% fall in production.
ABARES expect wheat plantings to continue to fall over the coming five years. Despite the fall in plantings, ABARES are forecasting slight improvements in productivity, leading to a gradual rise in production. The jump in production into the 2018-19 is due to a return to a ‘normal’ season. Average yields are expected to rise from 1.7t/ha to 2t.
Very small increases in yields are expected to be responsible for increased production, but as we know, seasonal conditions will vary and move yields around.
Like wheat, barley production fell heavily into the 2017-18 harvest, with a small fall in area combining with weaker yields. Barley plantings are expected to increase this year, and rise incrementally after that. Barley is expected to take some ground off wheat, but also pulses, as it acts as an alternative break crop.
It’s interesting that ABARES are expecting barley production to remain above long term trends for the coming five years. With increasing area planted, we could see a repeat of the big crop of 2016-17 under the right conditions.
Canola is the last of the big three winter crops, and ABARES are making some more dramatic predictions for the oilseed. ABARES are forecasting an 8% rise in Canola plantings. Again, canola is expected to take ground off wheat and more importantly, pulses. Lower pulse prices, and relatively strong canola values has ABARES predicting the second biggest canola plant on record.
Over the medium term ABARES are forecasting lower world oilseed prices will see canola plantings fall. They say this is due to hectares switching back to grains, but this doesn’t show up in their wheat or barley forecasts.
It looks like ABARES are not expecting cropping to take back ground it has lost to livestock in the last couple of years. This is probably a fair assumption, with wool and livestock prices looking strong relative to cereal and canola values.
A return to the heady days of 14 million hectares of wheat seems a long way off with current prices. However, it was only back in the 2016-17 harvest when we produced a record crop of wheat areas which were at a 9 year low.
We can’t make a price prediction based on ABARES forecasts, but we can look at basis. Production at slightly stronger levels to this year point towards continued strong basis over the coming years for wheat. Without the hangover of the big crop of 16-17, we could even say that with a 24 million tonne crop in the coming harvest might see basis at similar strong level to current.
Increasing Canola production will put more pressure on already weak basis.
Mecardo information is provided to assist in your marketing decisions. It contains a range of data and views on the current market. It is not intended to constitute advice for a specific purpose. Before taking any action in relation to information contained within this report, you should seek advice from a qualified professional. The information is obtained from a variety of sources and neither Mecardo nor Ag Concepts Advisory will be held liable for any loss or damage whatsoever that may arise from the use of information or for any error or mis-statement contained in this report.
Mecardo will send you its latest market analysis outlook delivered to your Inbox as it's published. You will also receive one month Premium access for free.
You tell us what information you want to hear about, so you'll only be alerted to information that is relevant to you.Learn more about Mecardo Sign Up Now!