“Too much of a good thing“ has robbed Queensland of a record winter grain crop this year, according to the latest Rabobank forecast.
In its newly-released 2022/23 Australian winter crop report, the agribusiness bank says excessive rain throughout the state has resulted in many regions harvesting 90 per cent of planted crop hectares, with some further south harvesting only 80 to 85pc.
With a forecast total crop harvest of 2.6 million tonnes, Queensland’s production will fall six per cent from last year.
“Excessive rain leading into harvest followed significant issues at planting where some farmers replanted up to three times or had to abandon hectares all together,” report author, RaboResearch agricultural analyst Dennis Voznesenski said.
“Across … southern Queensland, we expect to see considerably less hectares harvested than were planted due to excessive rains either at planting, during the growing season or leading right into harvest.
“And the challenge of a wet harvest will be compounded by labour shortages, with an estimated 30pc of farms in Queensland and 27pc in NSW having to change harvest strategies as a result of insufficient labour.”
Rabobank says, however, despite weather challenges, Australia is on track to harvest a near-record winter grain crop of 61.9 million tonnes.
Its forecast is down only one per cent on last year’s when all-time production records were broken, with the total grain crop estimated to be 41pc above the five-year average.
Nationally, Rabobank forecasts wheat production to come in at 35.5 million tonnes – down two per cent on last year, but 47pc 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 31pc 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 81pc up on the five-year average.
* Exports *
With another bumper national harvest on the way, Australia will have plenty of grain and oilseeds for the export market, the Rabobank report says.
However, supply chain bottlenecks will limit the ability to supply world markets, both in regional areas and with capacity at Australian ports.
The exportable surplus in Australia from the 2022/23 harvest is expected to exceed the nation’s official estimated 2021 national export capacity of 47.5 million tonnes, Mr Voznesenski said.
* Commodity price outlook*
For Australia’s grains and oilseeds, the report sees 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 carry-over 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.
Prices, however, are not forecast “under the base (most likely) case” to rise to the 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 A$390 and A$420 a 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 A$320 and A$350 a 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 EU and a potential reduction in Canada’s export capacity later in the year, the report says.
Prices for non-GM canola track/FIS are expected to trade between A$700 and A$830 a tonne in 2023.
Pulses are “still looking for love”, the report says, with more than 18pc 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 inputs *
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 has been “demand destruction”, the report says, with high prices resulting in lower usage and larger than initially anticipated inventory, especially in the Americas, which is indicative of further price declines.
“The downward slide in global potash prices is likely to persist for the coming months,” Mr Voznesenski said, “with regional benchmarks taking a cue from further anticipated weakness in the Americas.
“Still, geopolitics around Russia and Belarus can definitely impact prices of both phosphate and potash.”
An expansion of agrochemical production capacity in China has seen prices decline this year, the Rabobank report says.
“And, under our base case, we expect further downside moving into next year,” Mr Voznesenski said.
