January 10, 2012

 

Australian 2012-13 wheat yield still good amid lower prices

 

 

Wheat plantings in Australia for 2012 may only have a slight reduction even with the sharp downturn of the crop prices since mid 2011, John Eastburn, Chairman of GrainGrowers Ltd., said Monday (Jan 9).

 

Given favourable seasonal conditions at planting time in May and June, growers will still "push it to the limit again," he said.

 

With a current harvest all but finished, Australian wheat production is estimated by the state-run Australian Bureau of Agricultural and Resource Economics and Sciences at a record 28.3 million tonnes this crop year ending March 31, about 50% more than a long-term annual average.

 

After annual domestic consumption of around six million tonnes is met, the balance is available for exports, making Australia the third-largest global supplier in 2010-11, according to industry regulator the Wheat Export Authority.

 

Underpinning the estimated record output in 2011-12 was a record area planted of 14.1 million hectares, according to Abares.

 

Crops were sown in May and June last year when benchmark ASX milling wheat futures for delivery in New South Wales was quoted around AUD320/tonne (US$329.52).

 

ASX wheat futures have since fallen sharply with March milling wheat futures quoted Monday around AUD212.50/tonne (US$218.82), a price level that generates only "pretty ordinary" returns. This has brought operating margins down to a level that is just above the cost of production, said Eastburn, who grows grains in the Coonamble region of northern New South Wales.

 

But that may not dent planting intentions for this year.

 

"Most producers are locked in and have to plant again, even knowing that the prices aren't that good," Eastburn said.

 

Having invested around AUD2 million (US$2.06 million) each in their farm plant and equipment as many have, growers can't readily leave that idle, waiting for better times, he said.

 

Some growers in the southern areas of Western Australia, South Australia, Victoria and southern New South Wales will plant more land to rapeseed, but this option isn't available to growers in northern cropping areas, he said.

 

Nor, given the costly entry levels, can landholders swing their operations to sheep or cattle production, he said.

 

"Wheat production will probably come back a little bit," he said without venturing a planting or production estimate for 2012-13.