More confirmation of the extent of the damage being done to Australia's grain crops is in the latest crops round up from the Australian Bureau of Agricultural and Resource Economics (“ABARE”). The December Crop report has confirmed the extent of the drop in the 2006 winter harvest and the damage done to the 2006/07 summer harvest by the drought.
Advertisement Later today there may be a clue or two about the impact of the drought on the September quarter's growth figures.
Economists think that it will clip 0.7 of a percentage point off growth in the year to June 2007, so there could very well be a small impact registered, although the likely timing is the March and June quarters next year when grain shipments fall short.
ABARE said in October that "taking into account the downward revision in crop and livestock earnings identified in this report, the gross value of farm production of these commodities in 2006-07 is forecast to be down by 35% or $6.2 billion below the value in 2005-06.
"After allowing for the effects of inflation, the gross value of production of these commodities in 2006-07 is forecast to be 16% less than in the 2002-03 drought.
"Taking into account this latest revision to farm sector forecasts and the flow-on effects on the rest of the Australian economy, the drought is estimated to reduce economic growth in Australia in 2006-07 by around 0.7 percentage points from what would otherwise have been achieved."
The information in the crop report is a little more detailed than in the one-off report in October which confirmed that the winter wheat harvest would drop sharply to around 10 million tonnes or less, with other grains such as rice, canola and barley also being badly impacted.
In fact, the size of the estimated wheat harvest is 100,000 tonnes higher, as is the barley crop (9.7 million tones in December vs. 9.6 million tonnes in October, and 3.7 million tonnes in December vs. 3.6 million tones in October). But in the scheme of things that's immaterial.
ABARE said yesterday that the latest issue of the Australian Crop Report revealed that total winter crop production is now estimated to have fallen by 62% from last season, with summer crop production now forecast to be down by a third as dry conditions continue.
“It was the driest August to October period since 1900 across many cropping regions of Australia. When combined with some of the highest mean maximum temperatures on record, this resulted in a significant decline in winter crop production and has placed summer crops in an uncertain position," ABARE Executive Director Mr Phillip Glyde explained when releasing the report yesterday.
He said the vital wheat crop was now to have fallen by around 61% to just 9.7 million tonnes, while barley production is now estimated to have fallen to around 3.7 million tonnes, a 63% drop from the previous season. Canola production is also estimated to be down to around 426 000 tonnes, a 71% drop from last season.
ABARE said total summer crop area is forecast to decline by a quarter to 1.2 million hectares in 2006-07.
"In southern Queensland, northern New South Wales and the Riverina, below average winter and spring rainfall has depleted soil moisture profiles and water storage levels, severely limiting summer crop production prospects, particularly for rice and cotton.
"The total area planted to grain sorghum is forecast to be 802 000 hectares in 2006-07, 10% less than the record area sown last year.
“Subsoil moisture will need to be replenished before significant areas can be planted with confidence,” Mr Glyde noted.
Rice looks like being badly hit by the drought.
ABARE said that the lack of irrigation water for rice growing in 2006-07 means the area planted to rice is estimated to be only 20,000 hectares – 81% below the area planted last year while the area sown to cotton, another water intensive summer crop, is forecast to be the smallest in 20 years.
The impact of the dry season on livestock feed availability was surveyed in October and November 2006 as part of ABARE’s broadacre farm survey.
Mr Glyde said "Grain and fodder stocks held on farm will assume increased importance for farmers in feeding livestock until autumn 2007".
This means that livestock producers, especially sheep farmers in most states, will be under growing pressure to hold onto their flocks. Hand feeding will become increasingly expensive for more and more farmers.
Here's ABARE's rundown:
Winter crop production in central and southern New South Wales declined over the growing season, with below to very much below average rainfall over the April–October period, combined with above average spring temperatures.
In northern New South Wales, average winter rainfall was received, resulting in higher yielding crops in that area.
However, prospects for the major summer crops, cotton and rice, are not favourable because of a lack of irrigation water. The outlook for grain sorghum production is highly dependent on further summer rainfall, which is needed to replenish soil moisture profiles.
Winter crops in Victoria were under extreme moisture stress for nearly the entire winter growing period.
At the same time, Victoria also recorded the highest maximum spring temperatures since records began. Yields are estimated to be below to very much below average in most areas.
Throughout most of southern Queensland, the dry start to the season resulted in very few winter crop planting opportunities.
However, good planting rainfalls followed by favourable growing conditions in central Queensland resulted in the vast majority of Queensland’s winter grains harvest coming from that region.
The area planted to grain sorghum in Queensland is forecast to remain similar to last year’s area. However, subsoil moisture needs significant replenishment before summer crop planting intentions can be realised. It is likely that some planting will be held off until late January to avoid flowering during the heat of summer.
The northern part of the Western Australian grains belt had a poor start to the season and the area sown to winter crops was reduced considerably.
Production in that region is estimated to have been around 20% of average. In the central and southern regions, seasonal conditions were more favourable and crop yields are expected to be close to average.
After a promising start to the winter cropping season, prospects in South Australia declined significantly over the growing season. Winter rainfall varied from below average to very much below average in most areas, with many areas having their lowest rainfall on record.
The lack of rain was combined with above average maximum temperatures in most districts and light frosts, which resulted in yield prospects declining sharply.
Of the major winter crops, the area planted to wheat in 2006-07 is estimated to have been 14% below last year’s, at 11.1 million hectares. Production is estimated to decline by around 61 per cent to 9.7 million tonnes.
Barley production is estimated to decline to around 3.7 million tonnes, a 63% drop from the previous season. Canola production is also estimated to fall to around 426 000 tonnes, the lowest in ten years.
Total summer crop area is forecast to decline by 25% to 1.2 million hectares in 2006-07. In southern Queensland, northern New South Wales and the Riverina, below average winter and spring rainfall has depleted soil moisture profiles and water storage levels, severely limiting summer crop production prospects.
Assuming average summer rainfall, summer crop production is forecast to fall by 33% in 2006-07, to around 3.1 million tonnes, with most of the reduction being in cotton and rice.
Well below average spring rainfall and high seasonal temperatures have severely limited spring pasture growth in South Australia, New South Wales and south east Queensland, resulting in increased demand for livestock feed.
Advertisement This combined with significantly reduced winter crop production means that grain and fodder stocks held on farm will assume increased importance as part of producers’ strategies for feeding livestock until autumn 2007.
The ABS reported that at the end of October, total quantity of grain held in storage facilities operated by the major bulk handling companies was 13.2 million tonnes, of which 9.84 million tonnes was wheat and 2.16 million tonnes was barley.
That carryover stock situation will help AWB, ABB and Graincorp and others meet some of their commitments, but grain will have to be imported into the eastern states.
ABB will have some trouble meeting its commitments in export and local markets. With production estimated at 3.7 million tones and stocks of 2.16 million tonnes, there's a shortfall on the 6.6 million tonnes of the grain handled last year by ABB.
Coupled with the changes in the wake of the Cole Royal Commission, AWB's future in its present form is highly problematic.
