Emily Dahl, Charlie Qin, Harry Coë, Cameron Van-Lane and Hamish Morton
- Value of Australian crop production second highest on record in 2022–23.
- Value and volume of crop exports forecast to reach a record high in 2022–23.
- Second largest winter crop harvest on record despite flooding in eastern states.
The gross value of crop production is forecast to remain at near record levels in 2022–23 at almost $51 billion (Figure 1.1). This is mainly driven by forecast near record crop production and high prices for grains and oilseeds. The gross values of wheat and barley production are forecast to reach record highs, both surpassing the previous record levels reached in 2021–22. The gross values of horticulture and sugar production are also forecast to rise to record highs. The gross value of canola production is forecast to be the second highest on record in 2022–23.
In contrast, the gross value of wine production is forecast to fall in 2022–23 due to the continued oversupply of red wine available on global markets, and the ongoing effects of China's anti-dumping decision. The gross value of cotton production is expected to decrease by 27% in 2022–23, following a record in 2021–22. This reflects a fall in production and softening demand for cotton lint that has led to a significant decrease in world cotton prices in the second half of 2022.
Record October rainfall and recent flooding in many regions of eastern Australia have caused significant damage and crop losses for growers in affected areas. Near record production in areas not flooded will offset these losses. However, continued high rainfall in December will cause further damage and additional losses if crops cannot be harvested. Downgrades in grain and oilseed quality will also affect the prices that growers receive and therefore affect the value of crop production in 2022–23. Large amounts of irrigated fruit are grown in flood-affected areas in northern Victoria and southern Queensland. These areas are likely to have been damaged by floodwater. Wet conditions and flooding across major cotton producing regions in New South Wales and Queensland prevented some growers from planting their intended cotton programs, decreasing forecast production volumes.
The value of Australian crop exports is expected to increase to $46.7 billion in the 2022–23 financial year (Figure 1.2). This would be the highest on record, 18% above the 2021–22 total of $39.6 billion. This is due to elevated world prices combined with high volumes of production and exports.
An increase in grain export earnings is expected to more than offset a fall in the value of oilseed and pulse exports. The values of wheat and barley exports are forecast to increase to record highs of $13.9 billion and $3.7 billion respectively in 2022–23. This is driven by ample export supply, strong world demand, and high prices. The value of canola exports is forecast to fall because Australian exporters are expected to receive lower prices due to stronger competition from Canada, as the world's largest canola producer rebounds due to improved growing conditions.
A projected near record production year, on the back of two years of record crop production, is expected to result in significant export supply in 2022–23. Wheat and barley exports in the 2022–23 financial year are expected to increase to record highs, at more than 50% above the 10-year average to 2021–22. The volume of canola exports is forecast to increase to a record of 5.8 million tonnes in the 2022–23 financial year. This is double the 10-year average to 2021–22 of 2.9 million tonnes.
The value of cotton exports is forecast to reach a record high of $5.1 billion in 2022–23, more than double the value of exports in 2021–22. Delays in harvesting in 2021–22 left much of the record cotton crop to be exported in 2022–23. Much of that crop was also forward sold prior to the sharp decline in international cotton prices. Raw cotton exports are forecast to increase to a record high of 1.5 million tonnes in 2022–23. An expected end to the wet La Niña conditions will allow for a timely harvest, ginning and export of the 2022–23 crop. An easing of international container constraints will also support Australian exporters in accessing cheaper, more reliable shipping capacity. In recent years, Australian cotton exporters have struggled to secure reliable shipping capacity to certain markets, such as the Indian subcontinent.
The value of horticulture exports is forecast to increase by 6% to $3.3 billion in 2022–23. Heavy rainfall and hail have caused some damage to citrus fruit, which account for over 25% of the value of all horticultural exports. This reduced some crops below export grade quality. Offsetting these falls are increases in the value of nut exports driven by high prices for nuts such as almonds and macadamias. The value of wine exports is forecast to fall slightly to $2.2 billion in 2022–23 because large volumes of bulk red wine remain available on the market and are unable to find buyers.
High prices for Australian grains and oilseeds are forecast to persist in 2022–23, reflecting elevated world prices. The Australian wheat export price (Australian Premium White) is forecast to increase by 11% in 2022–23, averaging $546 per tonne. The Australian feed barley price is forecast to increase by 12% in 2022–23, averaging $345 per tonne. Even though canola prices are expected to remain high, the Australian canola price is forecast to fall by 13% in 2022–23, averaging $780 per tonne. This reflects a decline in world oilseed prices in response to a recovery in the production of major oilseeds, including canola and soybeans. In Australian domestic markets, wet harvest conditions are expected to keep prices strong for high-protein milling wheat with the price spread between higher grades and feed wheat widening. Australian grain and oilseed prices are expected to ease when the winter crop harvest progresses.
World grain and oilseed prices are being supported by strong demand, persistent dryness in Argentina, the European Union and the United States, and uncertainty surrounding trade flows from the Black Sea region. Export prices for grains and oilseeds are likely to remain high for the remainder of 2022–23 but are expected to remain below the record highs reached in the first half of 2022.
Australian wheat prices to follow high world prices
The Australian Premium White wheat price is trading at a premium compared to other major exporters such as the European Union and the Russian Federation (Figure 1.3). Australian wheat also remains competitively priced compared to the United States and Argentina due to dry conditions affecting production in both major exporters. For the remainder of 2022–23, Australian wheat prices are expected to continue trading below the world indicator price (US no.2 Hard Red Winter) because of drought conditions in the major winter wheat producing regions in the United States. Production of Hard Red Winter wheat fell by 29% to 14.4 million tonnes in 2022–23 due to drought. This is the smallest volume of production in the United States since 1957–58. Consecutive dry years have led to supply shortages and planting of US Hard Red Winter wheat for the 2023–24 season has progressed under dry conditions. As a result, tight supply in hard, high-protein milling wheat markets is expected to continue.
Waning global demand to decrease cotton prices
The Cotlook 'A' index is forecast to average US98 cents per pound in the 2022–23 marketing year, down 26% compared to 2021–22. A mix of macroeconomic factors is depressing demand for cotton garments across major economies. Inflation, increasing interest rates and the prospect of slowing economic growth in the United States and the European Union are expected to reduce discretionary spending, including on clothing. Meanwhile, COVID-19 related lockdowns and ongoing problems in the real estate sector are squeezing consumer spending in China. On the supply side, global cotton production is forecast to remain relatively unchanged in 2022–23.
Sharp declines in the Cotlook 'A' index through the second half of 2022 reflect the deterioration in the outlook for cotton demand. Futures contract prices suggest further significant downside price movements are not expected over the coming months.
Extreme weather leading to higher fruit and vegetable prices
Recent flooding across eastern Australia is expected to result in both localised loss of crops and supply chain disruptions affecting supply available to market. As such, some fruit and vegetables will need to be shipped to domestic markets from other parts of the country. This will result in delays stocking shelves and potential shortages at supermarkets. It is not anticipated that there will be widespread crop destruction, however, prices are expected to increase due to freight delays and higher costs transporting product to market.
Flooding in the first half of 2022 largely impacted vegetable varieties grown around south-eastern Queensland and northern New South Wales. In contrast, flooding events in the second half of 2022 have heavily impacted fruit varieties grown in the Riverina region of New South Wales. Fruit prices are likely to see a relatively larger impact from current flooding events. Fruit and vegetable prices are expected to peak in December 2022 before falling in the first half of 2023 because of the large summer harvest and reduced supply constraints.
Total winter crop production is forecast to be the second highest on record at more than 60 million tonnes in 2022–23. Favourable seasonal conditions in Western Australia, South Australia and across some key cropping regions in eastern states are expected to result in near record yields. More detailed analysis of 2022–23 crop production can be found in the Australian Crop Report.
Near record winter crop production forecasts for 2022–23 (Figure 1.4):
- Wheat – 36.6 million tonnes (record high)
- Barley – 13.4 million tonnes (fourth highest on record)
- Canola – 7.3 million tonnes (record high).
Mild spring conditions and extremely high rainfall have delayed harvesting of winter crops which is expected to extend into the new year in many regions. Record rainfall in October led to significant flooding events in large parts of eastern Australia. Despite crop losses due to flooding, the overall impact on production for these states is forecast to be offset by exceptionally high yields in areas that are not impacted. The more widespread effects of the heavy rainfall will be harvest delays and quality downgrades to winter crops.
Ongoing wet conditions have also impacted this year's sugarcane harvest, causing harvest and milling interruptions across major sugar producing regions in Queensland and New South Wales. The Australian sugarcane crush is expected to pick up towards the end of 2022. However, if heavy rainfall continues, there is the potential for cane to be left unharvested if the crush is not completed before the wet season.
Wet conditions have also delayed planting of some summer crops. Australian cotton production is forecast to decrease by 23% in 2022–23 to 4.3 million bales. Wet weather and flooding across major production regions in eastern Australia will have impeded many growers from accessing fields for soil preparation and planting. Crops planted toward the latter end of the planting window are also likely to generate lower yields due to the compressed season.
Prospects for summer grain sorghum crops are favourable. Grain sorghum production is expected to be above the 10-year average. Above average spring rainfall will provide high soil moisture levels that are expected to support crops through the start of the summer cropping season. Area expansion is expected in parts of northern New South Wales and Queensland, particularly in areas that were too wet to plant winter crops.
Similarly, there is a considerable downside risk to domestic wine grape production if higher rainfall associated with the La Niña event coincides with the harvest. Heavy rainfall could split ripened grapes which increases the risk of fungal infections on vines. Currently, many vineyards remain waterlogged, and growers have been struggling to access their crop to spray fungicides.
World wheat production to reach new record
World wheat production is forecast to increase slightly in 2022–23 to reach a new record. This is despite dry seasonal conditions in major wheat-exporting countries such as Argentina and the United States. Increased production in Canada, Kazakhstan and the Russian Federation is forecast to more than offset lower production in Argentina, the European Union and Ukraine. Despite production of US Hard Red Winter wheat falling to historically low levels, total US wheat production is around the same as 2021–22 due to increased production of other types of wheat.
Mixed conditions limit supply in key coarse grain exporters
World supply of coarse grains is forecast to tighten in 2022–23 due to decreased production of corn and minimal change in production of other coarse grains including barley, oats, and sorghum. World corn production is forecast to decrease by 4% in 2022–23 (Figure 1.5). Decreased corn production is driven by lower production in major northern hemisphere producers including the European Union, Ukraine and the United States. US corn production is forecast to decrease by 8% in 2022–23 due to reduced area planted and dry conditions limiting yield potential in the western and southern corn belt. In the European Union, summer drought conditions have negatively impacted yields. Ukrainian corn production is forecast to decrease by 25% to 32 million tonnes in 2022–23. Although corn production in Argentina and Brazil is currently forecast to increase by 7% and 9% respectively due to above average forecast yields, the impact of a third La Niña may downgrade yield prospects in the coming months.
World barley production is forecast to increase slightly to 149 million tonnes in 2022–23, reflecting mixed seasonal conditions in major barley-producing countries. In the European Union, drought conditions have impacted barley yields leading to decreased production. In contrast, significantly higher yields are forecast in Canada and the Russian Federation due to improved seasonal conditions. Ukrainian barley production is forecast to decrease by 36% to 6 million tonnes in 2022–23.
Favourable outlook for world oilseed production
In 2022–23, world canola production is forecast to rise by 14% to 84 million tonnes. Increased canola production will be driven by a recovery in canola yields in Canada, the world's largest canola producer. This follows a recovery in growing conditions in western regions of the country, which were affected by drought in 2021–22. Meanwhile, world soybean production is forecast to rise by 10% to 391 million tonnes, driven by Brazil. This follows an expected recovery in soybean yields in the country's southern states, which were affected by drought in 2021–22.
World cotton production to remain steady
World cotton production in 2022–23 is forecast to remain relatively unchanged compared to 2021–22. A dry season across major cotton-producing regions in the southern United States decreased US production by 20% compared to last year. Major flooding and subsequent pest damage cut cotton production in Pakistan by 33% compared to last year. However, the major production declines in the United States and Pakistan have been offset by favourable conditions and large plantings in India and Brazil. China also saw a slight increase in production.
A large proportion of the small 2022–23 cotton crop in the United States has already been committed (sold). Given the United States' prominence as the world's largest exporter of cotton, especially premium machine-harvested cotton, buyers will be looking to other premium cotton producers to cover inventories until the next cotton season. This may improve Australian cotton prices over the coming months.
Steady outlook for world wine production despite adverse weather
The northern European crop has been hampered by frost and drought, however, overall global tonnage for 2022–23 is expected to be close to average. The continued large supply of bulk red wine globally and favourable conditions in Chile, a major southern hemisphere competitor, are placing further downward pressure on prices. Inflationary pressures have been impacting suppliers across the world at all stages of the supply chain and accessing dry goods such as cork and glass bottles remains an issue.
World wheat demand to remain strong
World consumption of wheat is expected to remain around historically high levels. Feed use is expected to decline in some countries given the relatively cheaper cost of other feed ingredients. In contrast, food consumption is expected to remain high in 2022–23, reflecting strong demand for milling wheat. This is because milling wheat has few substitutes and is used to produce staple food products such as bread, pasta, and noodles.
World coarse grain demand constrained
Tight world supply of coarse grains and elevated prices are forecast to weigh on world feed grain consumption. World coarse grain consumption is forecast to contract for the first time in 10 years, decreasing by 1% in 2022–23. Corn consumption in the United States is forecast to decrease by 4% in 2022–23, reflecting reduced feed use and stable levels of ethanol production. Decreased feed consumption reflects a forecast decline in animal numbers as drought conditions and high feed prices contribute to increased livestock slaughter. Although high corn prices have increased input costs for ethanol producers, producer margins are supported by elevated prices for gasoline and ethanol.
China leads global feed demand and is the primary export market for Australian sorghum. Chinese consumption of feed grains is forecast to increase in 2022–23, reflecting rising pig herd numbers. China meets growing feed consumption through imports of grain, including corn, due to insufficient domestic production. China is expected to draw down domestic grain stocks due to reduced imports from Ukraine, which has historically been a major supplier of corn to the Chinese market.
World demand for oilseeds to remain stable
World demand for cooking oil is expected to grow slowly, resulting from relatively low economic growth in emerging markets and developing economies. Growth in these economies is being weighed down by rising food and energy prices, as well as COVID-19 related lockdowns in China.
World demand for biodiesel is expected to remain steady, supported by various government policies to combat climate change. For example, on 14 September 2022, the European Union committed to a reduction of at least 55% of greenhouse gas emissions by 2030. The European Parliament continues to recognise biofuels as a means of achieving those greenhouse gas reductions. However, they find that it is also important to consider the "indirect land use change associated to the production of certain biofuels, bioliquids and biomass fuels". Australian growers are continuing to produce sustainable certified canola. EU demand for Australian canola is therefore expected to remain strong.
World protein meal demand for feed is expected to remain strong in 2022–23. This will be driven by increased profitability in the Chinese pork sector. Chinese pig prices have been rising since mid-2022. This means it will be more profitable for Chinese pig producers to feed imported soybeans.
World economic outlook putting downward pressure on cotton demand
Global cotton consumption is forecast to decline by 4% in 2022–23 to 108 million bales. A combination of a sluggish economic outlook and a build-up of cotton lint inventories is stifling mill demand for raw cotton. COVID-19 related lockdowns and ongoing real estate challenges in China, inflationary pressures, and increasing interest rates in other major economies is dampening demand for clothing.
The decreased demand is being felt right along the supply chain. Mills, weavers and textile manufacturers are also contending with higher energy costs and a build-up of more expensive inventories due to over-ordering when freight dislocations were far more pronounced. Consequently, many mills are operating at reduced capacity. Demand for cotton lint is unlikely to improve markedly until economic conditions improve in major economies and retail activity recovers.
Uncertainty surrounding Russia's commitment to the Black Sea export corridor
Global grain and oilseed prices could remain volatile if the Russian Federation continues to waver in its commitment to the Black Sea export corridor. Following an attack on a Russian naval base in Sevastopol, the Russian Federation threatened to withdraw their support for the Black Sea export corridor, which Ukraine uses to export grains and oilseeds. The Russian Federation’s withdrawal could have threatened Ukraine's ability to export grains and oilseeds through the Black Sea. However, the Russian Federation has since reaffirmed its support for the export corridor.
Chinese demand for Australian sorghum to remain strong
Chinese demand for Australian sorghum is forecast to remain strong in 2022–23, supported by tight domestic feed grain supply and reduced global sorghum production. Corn imports are lower, leading to a forecast drawdown of stocks. This is due to reduced world corn production and disrupted grain exports from Ukraine. China imports most sorghum from the United States, where production is forecast to decrease by 47% in 2022–23. This is expected to lead to stronger demand for Australian sorghum exports (Figure 1.6).
Demand for fibre sustainability accreditation to grow
For a growing number of major retail brands, sustainability is becoming a prominent component of their marketing mix. This is happening in response to rising consumer awareness around the sustainability impact of consumption decisions. The accreditation of products as they flow through supply chains provides the assurance to such claims. For cotton, the Better Cotton Initiative (BCI) has attracted major brands, such as Adidas, IKEA and Nike. This demand for certified cotton is likely to grow. Approximately 19% of cotton produced globally is BCI certified. In Australia, approximately a third of cotton is certified under the myBMP system (the Australian equivalent of BCI), compared to approximately 78% in Brazil. Sustainability will increasingly become a hallmark of premium products.