Outlook for crops
Amelia Brown, Mikayla Bruce, Peter Collins and Emily Dahl
Near-record value of crop production for 2020–21
The gross value of crop production is estimated to have reached a near-record $35.5 billion in 2020–21, boosted by Australia's second‑biggest winter crop on record and relatively high world grain and oilseed prices. Grains, oilseeds and pulses accounted for 50% of the value of crop production and horticulture for 34%. The gross value of wheat production is estimated at a record $9.7 billion, reflecting record production combined with relatively high prices. Barley and canola also recorded significant increases in value year-on-year.
The total value of crop exports is forecast to increase by 17% in 2020–21 to $25 billion. Grain, oilseed and pulse exports have all rebounded significantly since the drought in 2019–20. The value of wheat exports is predicted to increase by 60% to $6.2 billion, the value of barley exports by 63% to $2.4 billion and the value of oilseeds exports by 54% to $1.8 billion.
f ABARES forecast. s ABARES estimate.
Sources: ABARES; Australian Bureau of Statistics
Grain prices surged late in 2020–21
Surging Chinese import demand for grains and oilseeds in the second half of 2020–21, combined with global production concerns, resulted in sharp increases in crop prices. Indicator prices for wheat, barley and canola have been revised up since the March forecast. Corn spot prices moved above both barley and wheat prices in late April, which is unusual given barley and wheat generally have greater value for feed, milling and industrial uses.
Value of production down, exports up in 2021–22
In 2021–22 the gross value of crop production is forecast to fall to around $33 billion from the record high in 2020–21. Cropping regions will benefit from residual soil moisture and replenished water storages, but production – while forecast to be above average – is unlikely to match that of 2020–21. Prices for all grains are forecast to fall. A large rebound in cotton production, combined with an increase in cotton prices, will provide a partial offset. For detailed state-level crop production forecasts for broadacre crops, see the Australian crop report.
In 2021–22 the value of horticultural production is forecast to fall slightly, driven by small price falls. Seasonal conditions are expected to be favourable and irrigation water prices are forecast to be lower in 2021–22 in the southern Murray–Darling Basin. Challenges in securing harvest labour have not resulted in significant price increases at the sector level in 2020–21, and while labour shortages are expected to persist, a similar impact on prices is assumed for 2021–22.
The value of Australia's crop exports is forecast to increase slightly in 2021–22 to $25.6 billion. A significant increase in cotton export earnings (up $1.5 billion) will be almost entirely offset by lower cereal, pulse and wine exports. Lower grain exports are due to production falling from record levels, while lower wine exports are largely attributable to the fall in prices following China's imposition of prohibitive tariffs on Australian wine.
Prices to fall for most grain exports
Prices are forecast to fall for most of Australia's major export grains. The world wheat price is forecast to fall in 2021–22, which reflects increased supply and lower demand for feed wheat as corn supply is forecast to increase. Higher production for Argentina, the European Union, the United Kingdom, Morocco, Ukraine and the United States is expected to more than offset reductions for Australia and Canada. Production in the Russian Federation is forecast to be similar to last year's record, reflecting higher area planted. Corn and barley prices are expected to remain high but fall from current 2020–21 levels. The world price of corn is expected to decrease in 2021–22 and world coarse grain production is forecast to increase to a new record. However, relatively tight coarse grain supplies and strong demand are expected to continue to support prices at historically high levels.
Oilseed prices are forecast to remain historically high in 2021–22 due to strong global demand and tight inventories. The world canola price is forecast to increase as consumption outstrips production.
The European Union is a significant importer of Canadian canola. Australian canola attracted a premium over Canadian canola from July 2018 to December 2020. This premium was tied to the value of Australian canola as non-GM meal in Europe's dairy industry. Low canola production in Australia, large crops in Canada and a trade dispute between Canada and China also contributed to the price premium.
As of December 2020, Australian canola was no longer trading at a premium over Canadian canola. Tighter supplies in Canada and strong demand are supporting a sharp increase in the Canadian canola price. The current higher price for Canadian canola could improve the likelihood of Australian canola regaining market share in the European Union.
Mouse plagues damaging crops and stored grain
Mouse numbers remained high in many cropping regions in southern Queensland and New South Wales during autumn 2021, but their numbers are expected to have peaked in most regions as cold and wet winter conditions slow breeding rates.
The most significant agricultural impact of the mouse plague has been on grain and hay stored on farms in New South Wales. Increased on-farm storage because of the large winter crop harvest of 2020–21 and some congestion in the export supply chain means that stored grain may have been exposed to contamination, depending on the storage method.
The high mouse numbers in southern Queensland and northern New South Wales have caused some damage to maturing summer crops. The extent of this damage varies from paddock to paddock. Winter crop sowing in affected regions is progressing well and active management has enabled growers to maintain planting intentions. Damage to winter crop emergence does not appear to have been widespread to date, however risks of a population rebound exist if the onset of warmer weather occurs earlier than usual.
Cotton prices and production forecast higher
Improvements in the economic outlook for major economies for 2021–22 and a recovery in the price of synthetic substitutes will likely result in increased demand for cotton and wool. Greater disposable incomes, combined with the relaxing of COVID-19 containment measures in major economies, are expected to result in increased spending on textiles and apparel. The continued recovery in oil prices in 2021–22 will push up the price of oil-based synthetic fibres, making natural fibres a more attractive substitute. China's increased import demand will mainly be met by US cotton under phase 1 of the US–China trade deal but is expected to put upward pressure on global cotton prices throughout 2021.
Increased availability of irrigation water in Australian cotton growing regions has led to the price of water falling from the highs reached during the drought. Due to an increased supply of water and high international cotton prices, near-record plantings for irrigated cotton are expected, along with high yields in 2021–22.
The rainfall to support dryland plantings is less certain this far out from planting in September and October, but plantings are expected to rise slightly from 2020–21. If a negative Indian Ocean Dipole develops over the coming months, a greater increase in dryland cotton plantings would be likely in 2021–22. The largest plantings and resulting production of cotton in Australia have historically occurred following coincidental La Niña and negative Indian Ocean Dipole events, boosting water availability. Australian cotton production for 2021–22 is forecast to be 946,000 tonnes.
Labour shortages not leading to higher fruit and vegetable consumer prices
Consumer prices for fruit and vegetables have not recorded large price increases, despite labour shortages due to border restrictions on seasonal workers. March Consumer Price Index data indicates that average fruit and vegetable prices over the first 3 quarters of 2020–21 have not changed dramatically from prices during 2019–20. Fruit prices fell 1.6% in the March quarter while vegetable prices rose 0.3%. Wholesale market prices for fruit and vegetables in Melbourne (see weekly wholesale prices) have not recorded price movements significantly different from seasonal patterns seen in past years.
Fruit and vegetable prices normally react quickly to supply-side shocks. In the March edition of Agricultural commodities, ABARES forecast selected fruit and vegetable prices could rise by between 7% and 29% in 2020–21, with the most pronounced rises expected for fruit. These price increases were expected to result from lower production, stemming from a reduced supply of overseas workers available to harvest fruit and vegetables.
These forecasts did not anticipate the success many horticultural businesses had in implementing adaptations to increase the volume of produce harvested per labourer. Examples of these changes include:
- longer hours per worker and longer durations of employment
- less downtime between employers
- changes to harvesting processes to increase speed, such as more fruit collection points in orchards
- delaying maintenance work to free up additional picking labour
- diverting staff from other parts of businesses to pick produce.
In addition, more favourable seasonal conditions increased yields. This meant pickers could pick fruit quickly for longer, before decreasing fruit density led to diminishing returns to additional hours of labour. At the margin, reductions in exports of fruit (down 7% in the 12 months to February 2020) and vegetables (down 6%) have also provided more volume for domestic consumption. However, export volumes are small relative to domestic consumption.
ABARES has revised estimates of impacts on horticultural markets. Fruit prices are now forecast to rise by around 4% in 2020–21 and fruit production is expected to fall by around 4% (a 17% fall was forecast in March). Vegetable prices and production are expected to remain relatively unchanged year-on-year.
China market loss reduces grape prices and wine exports
The loss of China as an export market continues to have a significant impact on the Australian wine industry. The average price of Australian wine grapes is forecast to fall from $704 per tonne in 2019–20 to $540 per tonne in 2020–21. Prices are expected to remain depressed in 2021–22 to average $556 per tonne.
After 2 years of drought-affected production, wine grape and wine production are estimated to have recovered to longer-term averages in 2020–21 at around 1.5 million tonnes of wine grapes and around 1.2 billion litres of wine. The recovery is a result of more favourable seasonal conditions. Negligible exports to China, resulting in lower prices, are forecast to keep wine grape and wine production in Australia at around these levels in 2021–22. This is 14% below the 1.4 billion litre peak of wine production reached in 2016–17.
The value of wine exports is forecast to fall to $2.6 billion in 2020–21, well below the peak of just under $3 billion in 2018–19. The Australian wine industry is expected to continue to export around 60% of production, but to lower value markets than China. The volume of wine exports is expected to be around 700 million litres in 2020–21 and remain around that level in 2021–22. This export volume forecast for 2020–21 is down from 744 million litres in 2019–20 and is well below the peak of 867 million litres in 2017–18. The value of wine exports is forecast to be around 10% lower in 2020–21 than it was in 2019–20 due to a fall in average export unit values.
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