It would be the winter of discontent for Australia's agriculture sector if Rabobank's latest 'Australian Winter Crop Outlook' report is any guide.
The specialist agribusiness bank predicts that the country's national harvest would drop by nine percent in the 2019/20 winter crop season to 27.7 million tonnes (the smallest output since 2007/08) from the previous year's "already drought-diminished grain harvest and is 31 per cent below the five-year-average for Australia's winter crop".
According to Rabobank senior grains analyst Kalish Gordon, "There is no 'sugar coating' the fact Australia's grains industry is suffering the ongoing severe impacts of drought" with many of Australia's grain-producing regions facing their third straight year of "severely drought- affected production".
"This means that the tough times are getting tougher and the tail of enduring impacts of the drought is getting longer ... And these impacts don't just apply to cash flow for growers - they also relate to stymied expansion plans, as well as growing soil and resource management challenges."
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Rabobank's report predicts that Australia's overall wheat production would drop to 15.8 million tonnes in 2019/20, representing an 8% fall from the previous season's crop and 32% below the five-year average.
The bank forecasts barley production to fall by 7% to 7.7 million tonnes - 21% below the five-year average - over the same period.
Because of declining crop output, Rabobank expects "another year of limited exports in 2019/20 - the third consecutive year of below-average export volumes".
As Dr Kalisch Gordon explains, "Exports are likely to be in the order of eight million tonnes of wheat, 3.9 million tonnes of barley and less than a million tonnes of canola ... "Collectively, this would be 15 per cent below last year's export program."
Worse, shipments from other countries are increasing to make up for the shortfall in Australian crop deliveries to key export markets. "
Not only that, with the expected reduction in local production, Rabobank expects that Australia would need to increase its grain imports by a massive 52% from the previous season (which is 250% above the preceding five-year average).
Rabobank expects gains prices to remain relatively flat over the next year. "A continuation of difficult seasonal conditions and still very high feed-grain demand on the east coast is expected to maintain an elevated price floor for wheat and barley, while further international imports of wheat from Canada are expected to put a price ceiling on upside movement in the new season".