Australian wheat industry sees looming contraction

Estimates of Australia's 2010/11 wheat harvest may be reduced as farmers hold back from planting since they are wary of poor prices, rising input costs and a potential locust plague.

 

Forecasters say their early estimates of 22 -22.5 million tonnes for the next season are conservative, but some admit the current outlook is still vulnerable to downsize.

 

Input prices, including fuel and fertiliser costs, are rising sharply. The price of diammonium phosphate, the key fertiliser used by Australian grain growers, has jumped nearly 30% since the start of the year as global demand goes up.

 

Ironically, recent rains have set up the best pre-planting conditions for years, but poor prices, rising fuel and fertiliser costs mean that wheat looks like an unprofitable crop to many farmers now.

 

The recent rains have also spawned millions of locusts in northeast Australia and they have already eaten the early plantings as they swarm south through the grain belt.

 

USDA estimates Australia's farmers to plant about 13 million hectares this year, 6% less as compared with last year; whereas the local government is more optimistic predicting the area will be only cut to 13.7 million hectares.

 

Analysts and wheat industry insiders suggest that farmers may instead decide to devote more acreage this year to cotton, rapeseed or pulses such as chickpeas, lupines and lentils.

 

Australian Prime White wheat is now selling at around AU$210 (US$196) per tonne.

 

There are also good reasons for farmers to switch some acres out of wheat as a way of rejuvenating their fields. Planting others crops, such as chickpeas and lupines, adds soil nutrients and in the long term will protect future wheat crops from disease.