June 3, 2008

Australia in a strong position to expand grain planting

The area in Australia planted to grains and oilseeds will expand a little in coming years, seasons permitting, reflecting the impact of projected price increases, according to a study issued Tuesday by the government's Australian Bureau of Agricultural and Resource Economics.

Assuming average seasonal conditions, the area sown to winter crops is projected to expand 6.3 percent to an average 23.6 million hectares a year in the five fiscal years ending June 30, 2013, from 22.2 million hectares a year in the five years ended June 30, 2008, the study found.

"Continued productivity improvements in the grains industry over the medium term mean total grains and oilseeds production is projected to be 48 million tonnes by 2012-2013," Abare forecast.

Australian crop plantings and production are closely tied to seasonal conditions. Winter crop output has been limited by three droughts in the past six years, with production in the past decade ranging from a low of 17.4 million tonnes in both 2002-03 and 2006-07 to a peak of 43.4 million tonnes in 2003-04, of which 26.1 million tonnes was wheat and 10.4 million tonnes barley, according to Abare figures.

In a normal season, after domestic demand is met, a large surplus of wheat, barley and other crops is available for export, making Australia a major global supplier.

The study, "Financial Performance of Grain Producers, 2005-06 to 2007-08," found grain producers are in a strong position to expand production in 2008-09 and boost productivity because of recent capital investment in land, plants and machinery, substantial liquid asset reserves, high equity levels and strong farm cash flows.

Many livestock producers reduced animal numbers during 2007 due to the drought. As prices of replacement livestock are likely to be high in 2008, producers are likely to place greater emphasis on cropping next fiscal year to secure a quicker recovery in incomes, it said.

Increased production can also be driven by productivity growth, it said. In the past three decades, cropping farms in Australia realized an average annual productivity growth of 2.3 percent, it said.

Abare will update its production and planting estimates for new winter crops in a Crop Report scheduled for issue June 17.