While the agribusiness banking specialist says there is still time for crops to be planted in most regions, and has only scaled back its Australian winter crop planting forecast to 21.6 million hectares – in line with the five-year average and two per cent down on 2017/18 – this season’s winter crop production and export capacity will be down.
Rabobank senior grains and oilseeds analyst Cheryl Kalisch Gordon said with a delayed start to the season’s plantings due to lack of rain and much of the nation’s crop sown into dry soil, high yield prospects were now largely out of reach.
"High-end yield prospects have been removed, certainly for canola, but increasingly for wheat and barley with average yields, and in some cases less-than-average yields considered likely," she said.
"Early indications are that Australian wheat production in 2018/19 will be in the order of 22.9 million tonnes, and 36.5 million tonnes for the total winter crop, lower than the 37.8 million tonnes harvested last season."
Dr Kalisch Gordon, co-author of the report with Rabobank agricultural analyst Wes Lefroy, said given the early stage of the season, the wheat crop could come in between 18 million and 28 million tonnes, while a total winter crop between 28 million and 44 million tonnes was possible.
"Given the hot, dry summer and below-average rainfall in April and May, rain over the next four weeks is critical," she said. "While planting intentions remain strong, how these intentions play out is totally dependent on what falls out of the sky, and there are considerable downside risks to the outlook."
Regardless of how the season pans out, Dr Kalisch Gordon said, grain export capacity will be limited in 2018/19. "If we see a wheat crop of 23 million tonnes, we could see Australian wheat exports fall to their lowest level in nine years at 15.5 million tonnes," she said.
Dr Kalisch Gordon said despite the challenging seasonal conditions, many hectares had been planted dry in anticipation of germinating rains.
"Nearly 100 per cent of plantings to date in New South Wales, Queensland and Western Australia have been sown into dry soil," she said. "But fairly widespread and good falls in Western Australia over the last week have ‘turned the tables’ for the outlook for their season.
"Dry-planted Western Australia crops will now have the chance to germinate in line with seasonal averages, and farmers will be able to finish their planting programs. Follow-up June rainfall will remain critical, but current forecasts suggest that it is on its way."
While conditions in South Australia and parts of Victoria had marginally improved following rain in April and May, soil moisture levels in those states remained very low," Dr Kalisch Gordon said.
With the pace of this year’s crop planting now slowing down in the wait for season-opening rains in many areas, Dr Kalisch Gordon said while the planting window remained open, the optimal planting window for canola had closed.
"Canola has been the earliest casualty to the dry, with planting intentions forecast to be down by 13 per cent across Australia to 2.4 million hectares," she said. "This may have been reflected in much lower overall cropping intentions, if the option to substitute to later sown wheat and barley were not still on the table."
Dr Kalisch Gordon said the later planting window for wheat and barley, together with strong cereal prices, was expected to drive a six per cent increase in area planted to barley in 2018/19 to 4.1 million hectares and a marginal rise in planted wheat hectares to 12.3 million hectares.
"These lower-input-cost crops, together with lower-price volatility compared to alternatives, further underpin increased barley and wheat-planting intentions at this very uncertain time of the season," she said.
The Rabobank Australian 2018/19 Winter Crop Outlook report said the very dry start to the season in Queensland and New South Wales had driven domestic wheat and barley prices to multi-year highs.
"Driven higher by the lower availability of grain in the east, after last year’s smaller crop, it is the strong demand for feed grain from livestock producers and weaker prospects for the upcoming winter crop that is underpinning record prices – particularly for barley," Dr Kalisch Gordon said.
"As such, we are seeing improved relative pricing of these cereals compared to canola, but particularly lentils and chickpeas, and these relativities are expected to be maintained throughout the year."
Although conditions had been very dry in Western Australia until recently, Dr Kalisch Gordon said, the growth in cereal prices hadn’t been as significant due to demand being more export-orientated.
"Global wheat markets remain well supplied, however we have seen US prices track beyond US500c/bushel in recent weeks as concerns over the North American crop continue, while there have also been reports of dry conditions in parts of the Black Sea region," she said.
For canola, Dr Kalisch Gordon said, reduced domestic plantings would also act as price support as the season progresses, but it was volatility with Sino-US trade tensions that were contributing to strengthening oilseeds markets.
"Despite the tariffs still being considered, Chinese soybean buyers are looking for alternatives to shore up supply," she said. "While pulse prices continue to be at the hands of the Indian government with no near-term prospects for the removal of Indian pulse tariffs."
Rabobank will release its Australian Winter Crop Production Forecast in October.
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