Winter crop planting to exceed 22M hectares

The 2020/21 season is set to be one of the best in years, close to the record high levels set in the 2016/17 season of 23 million hectares, according to Rabobank’s recently released Australian 2020/21 Winter Crop Outlook report.

After prolonged drought conditions, which have delivered three years of decline in Australia’s grain production and exports, Rabobank is forecasting the nation’s crop planting to be up by 26 per cent on last season to 22.5 million hectares.

That is 12 per cent above the five-year average.

With above-average rainfall expected for the growing season ahead, Rabobank expects an average to above-average winter grain crop.

According to the report, much of the improvement will occur in the cropping regions of the eastern states that have been heavily affected by the drought. New South Wales-planted area is forecasted to be up by a staggering 95 per cent while Queensland is expected to be up by 44 per cent.

The report said a total wheat harvest volume of 26 million tonnes is “not unrealistic”, given the expectations for hectares planted this year.

Rabobank senior grains and oilseeds analyst, Cheryl Kalisch Gordon, said the promising crop outlook is welcome news for Australia’s agricultural sector after years of drought, followed by the summer bushfires and COVID-19 in the first half of 2020.

“While it’s still around six months until the grain is in the bin, all the hallmarks of an above-average season are now falling into place,” she said.

“2020 finally saw a strong opening to the east coast winter crop planting season, with good rains and fast planting progress.

“With the Bureau of Meteorology’s forecast for above-average rainfall for all Australian cropping regions during the critical growing months of June to August, these increased hectares planted are expected to combine with at least average yields to deliver an average to above-average grain crop.”

Dr Kalisch Gordon said eagerness to ‘make hay’ while there is moisture around after drought – along with the high cost of the alternative of restocking livestock – had featured in farmers’ decisions to expand their planted area in 2020/21.

A more buoyant outlook for wheat than barley had prompted greater increases in wheat planted compared with last year and longer term averages.

“And the recent announcement of China’s tariffs of 80.5 per cent on Australian barley would also have influenced this choice for the small number who hadn’t planted by then,” Dr Kalisch Gordon said.

While the renewed supply of Australian grain would see prices move down from the drought-driven highs of recent years, the report said average prices are expected to “remain in sight”, supported by an ongoing softer Australian dollar.

Export volumes – though remaining challenged by competitive global supplies along with the Chinese barley tariffs – would likely increase by as much as 70 per cent on last year.

This could see Australia export up to 17.5 million tonnes of wheat (up 110 per cent on last year), 4.5 million tonnes of barley (up 13 per cent) and two million tonnes of canola (up 17 per cent).

Rabobank has reported an increase in crop planting across all states.

New South Wales is set to plant a crop of six million hectares, up a whopping 95 per cent from last season driven by the best opening rains in three years.

Victoria’s planted crop for 2020/21 is forecast to be up 14 per cent to 3.5 million hectares.

For Queensland, good early rains have not been followed up in all areas, with cumulative rainfall in central Queensland now having fallen below the 10-year average.

However, the total area of winter cropping in Queensland is still expected to increase by 44 per cent to 0.95 million hectares in the 2020/21 season.

Rabobank is expecting total grain area planted in South Australia to be up 12 per cent on last season at 3.9 million hectares and Western Australia up seven per cent at 8.2 million hectares.

Across the country overall, wheat, canola and pulses will see the largest increases in planting from last year, the report stated, mainly driven by improved conditions in the eastern states.

Wheat planting is expected to be up by 33 per cent on last season, with canola up 35 per cent and area planted to pulses increased by 36 per cent.

Barley has seen a one per cent decline in planting off the back of a pessimistic price outlook.

"Further declines were limited by the fact China’s tariff decision following the anti-dumping investigation came after the majority of barley area had been planted,” said Dr Kalisch Gordon.

Rabobank forecasts Australian grain prices to move lower in 2020/21, although the “return to earth will be softened by the Australian dollar”.

“Firming global wheat production expectations and a softening in demand post the COVID-19 stockpiling means we have a neutral outlook for global wheat prices over the coming 12 months,” Dr Kalisch Gordon said.

The bank expects CBOT (Chicago Board of Trade) wheat to trade in the USc 525-534 range.

Renewed local wheat supply prospects will, however, increasingly weigh on local prices as harvest approaches, with local prices down year-on-year, Dr Kalisch Gordon says.

For barley, increased supply and a competitive global feed grain market (due mainly to cheaper corn prices because of a coronavirus-driven slump in ethanol demand for fuel) means global prices will be down this year.

Locally, increased barley supply and a challenging export market – particularly in light of the imposition of China’s tariffs – sees a flat price outlook, although also supported by the lower dollar.

Australian canola, particularly the non-GM variety, has enjoyed stronger pricing in recent times off the back of drought-driven low supply and increased usage in home-cooking during COVID-19 lockdowns and increased export demand, but prices are expected to return lower over the course of the year.

For pulses, lower global supply should keep chickpea and lentil prices supported in 2020 –with increased demand from India and Turkey critical – although higher Australian production will hold domestic prices in check.

Increased Australian production, lower domestic premiums and a favourable Australian dollar all support an increase in Australian grain exports in 2020/21, the Rabobank outlook said. However, finding a home for that grain will likely be challenging.

“Stagnant global demand, low shipping costs and depreciation of Black Sea region currencies will continue to challenge Australia’s competitiveness in traditional markets,” Dr Kalisch Gordon said.