As agricultural producers and supply chain operators look ahead to see what the year may hold, it will be important to view the glass (of good local milk or perhaps Chardonnay) as being both half empty and half full.
The half empty glass reminds all those in agribusiness that while a great season may be a time to enjoy the fruits of your hard work (and to take a break at some point!) it is not a period for complacency. At some point, the season will inevitably turn, commodity prices will come down from their highs and interest rates will eventually rise again. For these and other possible eventualities, agribusinesses across Australia need to continue to plan their strategies accordingly.
Crucially, it is just as important to remember that the glass is also half full. Taking the time to research and implement a change to any operation can bring a wide range of benefits – not just economic and agronomic but also by increasing the enjoyment and mental stimulation of running the business.
This could take a vast array of forms – whether increasing farm plantations for stock benefits and income diversity, exploring new crop varieties, or implementing new developments in agtech, genetics or sustainability management. This potential to grasp new opportunities at the right time extends right down the agri supply chain as companies right from the farm-gate to the consumer’s table look for new efficiencies, new markets and new technologies.
The importance of developing a number of these changes has been a reaction to the ongoing pandemic-related supply chain interruptions but there is every reason why these developments could have long terms benefits for many businesses.
Gains in grain
Australian grain farmers know all too well, contrary to what some people may think, there’s never really a “downtime” of year. Certainly, the sowing and particularly harvest periods are intensively busy but the rest of the year involves either monitoring the crop in the ground and providing the inputs needed to maximise its potential, maintaining and upgrading all the plant and equipment needed to run an efficient operation and all the other aspects of the modern farm.
That said, the period around February, when the harvest is effectively finished across the country, at least provides the industry with some kind of a breather to reflect on the harvest just passed and evaluate the factors likely to impact the year ahead. This could include both the choice of crops to be sown as well as the variables which may impact grain prices.
This year of course, with the Ukraine catastrophe and other geopolitical tensions, planning is more complex but still a necessity.
Despite some concerns toward the end of the season, the 2021/22 Australian grain crop is estimated to have hit new record levels. In particular, the wheat crop reached another record, while Australia’s barley reached its third-highest level despite earlier concerns on the impact of Chinese tariffs on barley farmers’ planting intentions.
For wheat, while the record harvest of 34 million tonnes was up around 0.7 million tonnes (2 per cent) on the previous year, it was a massive rise of around 135 per cent on the drought impacted crop of 2019/20. The record volume was particularly boosted by optimal growing conditions in Western Australia which normally accounts for around 40 per cent of the national wheat crop.
While there had been concern late in 2021 around the possible impact of weather conditions on the crop in some regions, it ultimately had a minor bearing on the overall harvest volume. If anything, the main impact of the heavy rainfall in November 2021 on cropping regions in New South Wales and Northern Victoria was on the quality of the crop. The rain caused some of the grains to sprout resulting in a reasonable volume of grain being downgraded to feed wheat in these regions.
The sharp increase in the proportion of feed wheat as part of the overall harvest had a notable impact on wheat prices. Ordinarily, the price gap between feed wheat and milling wheat is around $A20 to $A40 per tonne. However, given the major volume of feed wheat, this gap grew to around $A110 to $A150 per tonne. Notably, milling wheat prices rose sharply from their pre-harvest levels while feed wheat prices declined from those levels, although remained relatively high based on strong global demand.
In line with the record wheat harvest, Australia is also likely to see record wheat export levels of around 25.5 million tonnes, up around 7 per cent on the previous year. This will be driven not just by the record crop but by ongoing strong global grain import demand.
While Indonesia would ordinarily be Australia’s largest wheat export market, the 2021/22 export season has seen exports to China reach around 0.93 million tonnes, over double those to Indonesia in the same period. While the bulk of exports continues to be Asian markets, exports to African markets continue to grow strongly.