Grain Report - More rain required to lock in the winter crop potential…

By Peter McMeekin

The climate outlook continues to suggest a wetter than average spring, but the month of September has been quite a mixed bag in terms of crop-making rainfall for Australian grain growers.

Broadly speaking New South Wales and Victoria have made grain in September, South Australia has consolidated production estimates, Queensland has gone backwards and so too has Western Australia.

In the most recent Bureau of Meteorology climate outlook released last Thursday, the El Niño–Southern Oscillation (ENSO) remains at La Niña ALERT which means there is roughly a 70 per cent chance of La Niña developing in 2020. Most weather models are also expecting the Indian Ocean Dipole (IOD) to move into negative territory in October.

The spring outlook is still wet, particularly for the eastern two-thirds of the country which they predict will receive above-average rainfall. This is great for the winter crop outlook in the eastern states, but it is not so good for Western Australian growers as year-to-date precipitation is already well below average in all districts.

Western Australia entered the spring on a knife-edge with late crops and a poor soil moisture profile. Good falls early in September eased the growing pains for a few weeks. However, save for a few coastal showers, it has been extremely dry in the second half of September and crops are again struggling for moisture. Substantial rainfall is required in all regions to arrest the deteriorating crop outlook.

Production forecasts have suffered accordingly. A wheat crop above 8 million metric tonne (MMT) now appears highly unlikely; such has been the yield decline. Barley production is currently around 3.2MMT but if rain is not received it could easily start with a two by the time harvest is completed. Canola production is also suffering as the subsoil moisture across the entire growing season has been insufficient to encourage a deep taproot.

On the flip side, New South Wales has had a cracking season thus far. Almost the entire cropping area has received average to above-average rainfall since the beginning of the southern wet season on April Fools’ Day. The falls in the second half of September pushed registrations for the month past the 25 millimetre (mm) mark in all districts, except in the north-west along the Queensland border and the south-west along the Victorian border.

Mind you, the rainfall was needed to maintain the state’s huge production potential. And more will be required in October to finish crops, especially in the central and southern regions. If the rains are forthcoming a wheat crop in excess of 11.5MMT is possible following an increase in the planted area this season after back-to-back droughts.

The barley area is in the same boat, particularly in the north-west, and state production is approaching 3MMT. The states canola crops are big, robust and have had excellent flowering conditions. The difference compared to the last couple of years is remarkable and this season’s production is expected to rebound to more than 1.3MMT,

Normalized Difference Vegetation Index (NDVI) is a measure of crop health derived from satellite imagery. The index quantifies vegetation by measuring the difference between near-infrared (which vegetation strongly reflects) and red light (which vegetation absorbs). The imagery suggests the area planted in New South Wales is bigger than in 2016/17 and the NDVI values are higher than or almost equal to the 2016/17 season in many parts of the state.

In Victoria, the winter crops have been ticking along quite well for most of the season, and September rainfall was sufficient to boost production estimates in all regions except the northern Mallee. NDVI readings are above average across all of the state’s winter crop area.

The excellent crop health and favourable early spring weather conditions mean that Victorian production forecasts have increased slightly in September and currently stand at around 4.1MMT, 2.1MMT and 0.7MMT for wheat, barley and canola respectively.

The picture is far more complex in South Australia where the NDVI data suggests the crop has been going backwards since it peaked in early July. The entire season has been very much hand to mouth in most districts, and some isolated areas had insufficient rainfall to complete planting in the autumn. And precipitation in September has been extremely disappointing in all districts except the southern tip of the Eyre Peninsula and the South East.

Parts of the Eyre Peninsula and the Mid-North of the state are having one of the driest seasons this century. Consequently, root zone moisture is below average, and the crops are struggling. State production forecasts for wheat and barley have now dipped below 4MMT and 2MMT respectively and could easily go lower if the state doesn’t receive some good general rains in the next two weeks. Expected canola production is now below 0.4MMT.

Lastly, the Sunshine State, most of which has been a basket case all season. Southern Queensland has just endured its fourth consecutive winter of below-average rainfall each preceded by an extremely dry summer. The tap turned off at the end of October 2016, and farming has been a struggle ever since.

The year’s story in Central Queensland is no better. The early potential has been sapped by a lack of in-crop rainfall in most areas. As a result, it is now possible that this year’s total winter cereal production in Queensland will come in below 1MMT for wheat and barley collectively. While it is double that of last year it is still a disappointing result.

Meanwhile, it was risk-off across global markets last week as investors worried about a faltering world economic recovery, rising coronavirus infections, uncertainty about US stimulus, and the upcoming elections. This sentiment is music to the ears of the Australian farmer with the ‘Aussie’ smashed, closing the week US$0.03 lower.

Notwithstanding falls in international cash and futures values across the week, the lower Australian dollar, and production issues in the key export jurisdictions, saw grower bids and the local futures bourse sharply higher for both wheat and barley by the close of business last Friday.

Australia is already competitive into Asia from a wheat perspective and into Saudi Arabia from a barley perspective. New crop domestic basis has done all the work needed to be export competitive, and the 2020 harvest has barely commenced. With substantial new crop export surpluses expected in both wheat and barley in almost all port zones, domestic grower bids will primarily be a function of the exchange rate and values relative to competing export origins.

Call your local Grain Brokers Australia representative on 1300 946 544 to discuss your grain marketing needs.