March 20, 2024

 

Rabobank: Rise in gross margins of Australia's winter crops in 2024-25 with lower production cost

 

 

Gross margins for Australia's winter crops in 2024-25 are set to increase on the back of a lower cost of production, according to Rabobank.

 

The report, "Australia's winter crop gross margins", forecast that the country's 2024-25 wheat crop will see the largest increase in gross margins from the previous season, at around 34%, up 14% on 2023-24.

 

The average gross margin for barley is estimated at 33%, a rise of 8% on last season, and canola is expected to see a similar jump, at 26%, an increase of 9%.

 

Report author, RaboResearch grain and oilseeds analyst Vitor Pistoia, said these figures could have a significant bearing on growers' planting decisions for the outcoming season. He added that this trend could favour wheat plantings, with the 2024-25 crop projected to have a gross margin of $281 per hectare, compared with an average $158/ha in 2023-24.

 

"The $281/ha gross margin forecast situates wheat as potentially the most profitable of the three major crops for 2024, together with barley," Pistoia said.

 

He added that these dynamics – and the fact wheat is the cheapest to produce of the three big Australian winter crops – will likely see the area planted to wheat in the coming season remain above the 12-million-hectare mark.

 

"Also, due to the lowest variable cost, wheat might expand its area over other crops, especially canola," Pistoria noted.

 

He said while the price of wheat was forecast to drop 8% year-on-year, a predicted larger reduction in the variable costs of fertiliser and chemicals, estimated at 20%, would boost the gross margins.

 

"In the 2023-24 season, wheat was cropped on 12.5 million hectares or 55% of the winter crop area," Pistoia said. "Its total revenue was only exceeded by beef, and Australia is the fifth largest exporter of wheat globally."

 

He also highlighted that wheat had been the only crop to have achieved above-average gross margins in four of the past seven seasons.

- Rabobank