Seasonal conditions: September quarter 2022

Global production conditions and rainfall in the 3 months to 31 July 2022 have deteriorated, further tightening global grain supplies and placing upward pressure on world prices.

Rainfall over the 3 months to 31 July 2022 was variable for much of the world's major grain- and oilseed-producing regions (Figure 1.1). In the southern hemisphere, rainfall over the 3 months to July affects planting opportunities, the development and yield prospects of winter crops, and the soil moisture available for summer crops. Rainfall over this period was generally below average across much of central and southern Brazil. Persistent dryness has limited the yield potential of second-crop corn in southern Brazil, but conditions were favourable in production areas further north. In Argentina, an uneven distribution of rainfall throughout the growing season has limited the yield potential of corn and soybeans in key eastern growing regions, and restricted planting opportunities for wheat.

In Australia, average to above average rainfall during May in western cropping regions and during June in the east resulted in a boost to soil moisture levels. This created ideal growing conditions for wheat, barley and canola in the 2 largest grain-producing states – New South Wales and Western Australia. However, a drier than normal May and June across parts of southern Australia saw a late start to the growing season in some areas of Victoria and South Australia. These areas will rely on continued rainfall throughout the remainder of the growing season to maintain crop production potential.

In the northern hemisphere, May to July rainfall affected the development and yield prospects of spring wheat and canola crops, as well as summer crops such as corn, cotton, rice, sunflowers and grain sorghum.

Rainfall over the 3 months to 31 July 2022 was generally below average for much of the European Union, central China, and large areas of southern and central United States. Below average rainfall and unseasonably hot temperatures have reduced production prospects across parts of central and southern China, the European Union and the United States. In contrast, rainfall was above average across the Russian Federation, north-eastern China, India and South-East Asia. This is expected to benefit crop production in these regions.

Figure 1.1 World precipitation anomalies, May to July 2022

Drought conditions in China threatens to reduce rice, wheat and cotton production

On 19 August 2022, Chinese authorities issued a nationwide drought warning for the first time in nine years as the country copes with below-average rainfall and one of the most intense heat waves seen in 60 years. The “yellow” alert is the third highest on China's four-tier scale. It indicates that at least two provinces are facing drought-like conditions, and more dry weather or drought is expected.

These drought conditions are stressing rice and wheat crops and could see China increase imports of these important grains. China is the world’s largest producer of grains primarily for domestic consumption. Any decline in China’s agricultural production would come at a time when many key global commodities are already in short supply.

The hardest hit provinces are in southern and central China, especially along the Yangtze River, and officials have called for water conservation by agricultural, commercial, and industrial users. By contrast, provinces in China’s northeast have experienced beneficial growing for much of the growing season. In several of China’s southern rice producing provinces, Jiangsu, Sichuan, Anhui, Jiangxi, and Hunan, which typically account for almost half of total rice production, vegetative health and soil moisture levels are at multi-year lows. These adverse growing conditions come as China’s rice crop is in its critical grain filling stage.

Despite wheat crops facing some heat stress late in the growing season, including in Henan in central China, the largest wheat growing province, official national production estimates are still pointing towards a new record level of production in 2022–23. Although China is the world’s largest wheat producer, the country is also a sizable importer as demand, including for animal feed, outpaces domestic supply.

Drought is also hitting China’s cotton crop, with well below average rainfall and soil moisture levels impacting production in Xinjiang province, which grows the majority of the country’s crop. China is one of the top three producers of cotton worldwide.

Crop conditions

Global crop production conditions are generally favourable for soybeans and rice, while adverse production conditions have been seen for some key wheat- and corn-growing regions (Figure 1.2). Drought induced poor growing conditions in parts of Argentina and Brazil, have resulted in a decline in global production levels for soybeans in 2021–22. However, a return to favourable growing conditions in 2022–23 is expected to see global soybean production rebound to new record levels, mainly on the back of increased expected production across China, South America and the United States (see Outlook for Oilseeds ).

Figure 1.2 Crop conditions, Agricultural Market Information System countries, 28 July 2022

Variable global growing conditions for corn in 2022–23 is expected to see world corn production decline from last year’s record high, with reductions for the United States, the European Union and Serbia partially offset by higher than expected production in Ukraine, Malawi, the Russian Federation, and Turkey (see Outlook for Coarse Grains). EU corn production is sharply lower as extreme heat and dryness cut crop prospects for Romania, Hungary, France, Italy, Spain, Slovakia, Bulgaria, and Germany (Figure 1.3). Various measures of vegetation health show extensive deterioration in the corn regions. The Percent of Average Seasonal Greenness (PASG) map vividly depicts summer crop area (corn and sunflowers) to be far below average during the critical month of July.

Figure 1.3 Crop masked Percent of Average Seasonal Greenness (PASG) for the EU

Global wheat production is expected to reach a new record high in 2022–23, despite adverse growing conditions in some key production regions, in Argentina, Canada, China, Kazakhstan, the European Union and the United States. Meanwhile, favourable growing conditions outside of China and India are expected to increase global rice production in 2022–23.

Pasture and rangeland conditions

Analysis of the Vegetation Health Index (VHI) for the 3-month period from 25 May to 20 August 2022 indicates below average vegetation conditions across parts of south-western and eastern Africa, in northern Argentina, across parts of western and central Australia, central Brazil, northern Mexico, the centre and south-west of the United States, the Middle East, across much of the European Union and Kazakhstan (Figure 1.4). This is largely due to dryness and heatwave conditions in some areas. Poor vegetation health is likely to reduce the availability of grass for direct grazing and increase the reliance on other fodder such as feed grains to supplement livestock diets and maintain production. This is likely to lead to increased domestic feed grain consumption in affected areas and will possibly constrain exportable supplies of grain.

Figure 1.4 World Percent of Average Seasonal Greenness, 25 May to 20 August 2022

The outlook for the second half of 2022–2023 is becoming more certain with strong climate model consensus over the next 10-months. A negative Indian Ocean Dipole (IOD) event has become established and there is also strong model consensus for the formation of a third La Niña event in the coming months.

Future climatic conditions present a range of upside and downside risks to Australian agricultural production. Generally, climate drivers that favour increased rainfall, be it La Niña or negative IOD, have a positive impact on aggregate agricultural production for Australia. Extreme weather and climatic events can, however, result in significant localised impacts to agricultural production. Excessive rainfall for instance can result in livestock and crop losses, decreased yield, quality downgrades which can all lead to decreased farm income for those affected and can increase consumer prices for some products.

Negative Indian Ocean Dipole event has established

A negative IOD event is underway, with values exceeding the negative IOD threshold (−0.4 °C) since mid-June. This key climate driver is likely to influence local climatic conditions over the next three months.

The negative phase of the IOD typically results in above-average winter to spring rainfall across much of Australia. A negative IOD also occurred in 2016 and 2021. Both years had historically high rainfall and record agricultural production.

Potential of third La Niña event forming later in 2022

The Bureau of Meteorology recently upgraded its El Niño–Southern Oscillation (ENSO) Outlook to La Niña ALERT, with a 70% likelihood of an event forming. La Niña events are typically associated with above-average rainfall for northern and eastern Australia during spring and summer. Five of the seven international climate models surveyed by the Bureau of Meteorology predict cooler than average sea surface temperatures in the central tropical Pacific, reaching or exceeding the La Niña threshold value (−0.8 °C) by November 2022 (Figure 1.5).

While back-to-back La Niña events are not uncommon and have occurred in approximately half of all past events since 1900, three in a row is less common and has only occurred three times since 1900: 1954–57, 1973–76, and 1998–2001.

Figure 1.5 International climate model outlooks for the NINO 3.4 region in November 2022

The current state of major climate drivers affecting the Australian region – three rainfall enhanced years in a row – have only occurred twice in the last 50 years. The two previous events, 1973 to 1975 and 1998 to 2000, were responsible for delivering two of the highest 3-year rainfall totals for both Australia as a whole and for eastern Australia since comprehensive rainfall records began in 1900.

Global climate outlook

The global climate outlook for September to November 2022 indicates that mixed rainfall conditions are expected for the world's major grain- and oilseed-producing regions. The lingering effects of the 2021–22 La Niña event is expected to result in below average rainfall for Argentina, southern Brazil, western and central Europe, western, southern and north-eastern China, and central and western United States.

This below average rainfall outlook follows recent dry conditions in Argentina and southern Brazil and is likely to adversely affect the establishment of winter crops, including wheat. Dry conditions and well above average temperatures have impacted yield potentials of corn and wheat across a number of key growing regions in the northern hemisphere. If dry conditions continue through crop reproductive stages, this is likely to constrain global corn, wheat and soybean production.

Globally, a third consecutive La Niña event may result in below average rainfall for the southern United States, southern Brazil and much of Argentina. This could have implications for global grain production during 2022–23 in the southern hemisphere and into 2023–24 in the northern hemisphere.

For commodity-by-commodity assessments of the global crop production conditions and country-by-country assessments of the climatic outlook and the potential impact on global production conditions for each crop, see the ABARES Weekly Australian climate, water and agricultural update for 18 August 2022.

This analysis of rainfall, production conditions, and the climate outlook forms the basis of ABARES forecasts for Australian agricultural production in 2022–23.

Recent rainfall and production conditions for livestock

Following a wet late summer-early autumn period across large areas of southern Australia, rainfall continued to be average to above average between May 2022 and July 2022 in many key production regions (Figure 1.6). This rainfall has supported average to above average pasture growth across eastern, western and southern Australia.

However, rainfall was not favourable for agriculture in all of Australia's important agricultural regions. Between May and July 2022 rainfall was extremely high across much of the Australian east coast and caused a second round of localised flooding, resulting in a lack of field access, inundation of pastures and livestock losses for producers in the worst affected areas.

During July, average to above average soil moisture levels, adequate rainfall and mild temperatures provided a boost to pasture production across grazing regions in eastern and central New South Wales, south-eastern Queensland, western Victoria, the west of South Australia as well as regions in the west and north of Western Australia. This has likely enabled farmers to continue flock and herd rebuilding and provided opportunities lower the reliance on supplementary feeding to maintain current herds and flocks.

Figure 1.6 Rainfall percentiles, Australia, 1 May to 31 July 2022

Broadacre crops

While close to average rainfall between May and July 2022 has been largely beneficial to winter crop production prospects, well above average to extremely high rainfall has not been favourable for winter crops across parts of eastern Australia. May and July 2022 rainfall was well above average for most cropping regions in Queensland and central New South Wales. This led to localised flooding, planting delays, and the inundation and loss of some winter crops.

Soil moisture and rainfall over the entire growing season need to be considered when determining planting opportunities and crop production outcomes for dryland winter and summer crops. Adequate rainfall and high levels of soil moisture during early autumn is likely to have boosted planted area of winter crops across some growing regions, however excessive rainfall and waterlogging is likely to have restricted planted areas across parts of New South Wales and Queensland.

Figure 1.7 and Figure 1.8 show the relative levels of modelled upper layer (~0.1 metres) and lower layer (~0.1 to ~1 metre) soil moisture across Australia for July 2022. Soil moisture estimates are relative to the historical long-term average (1911 to 2016) and presented in percentiles. Upper layer soil moisture responds quickly to seasonal conditions and often shows a pattern that reflects rainfall and temperature events in the days leading up to the analysis date. Lower layer soil moisture is a large, deeper store that is slower than the upper soil layer to respond to seasonal conditions and tends to reflect the accumulated effects of events that have occurred over longer periods.

Relative upper layer soil moisture levels in July 2022 (Figure 1.7) was average to above average for this time of year across most cropping regions in New South Wales, Queensland and Western Australia. Upper layer soil moisture was below average for southern New South Wales, much of Victoria and South Australia growing regions. Extremely high to well above average upper layer soil moisture was evident across much of northern Queensland. Extremely high upper layer soil moisture would have prevented field access for growers across parts of Queensland. However, close to average upper layer soil moisture levels across most cropping regions would have supported the germination and establishment of later planted winter crops.

Figure 1.7 Upper layer soil moisture, July 2022

Relative lower layer soil moisture levels in July 2022 (Figure 1.8) were well above average to extremely high for parts of central New South Wales and most Queensland cropping regions. Lower layer soil moisture was extremely low to below average for northern cropping regions in Western Australia. The below average lower layer soil moisture across parts of Western Australia is an indicator of the advanced growth stage of winter crops in that region. Further rainfall will be required during late winter and early spring to maintain current yield potentials in this region.

Figure 1.8 Lower layer soil moisture, July 2022

Generally average or better soil moisture levels in most cropping regions and the favourable rainfall outlook for the remainder of the growing season are likely to provide sufficient plant availability water to achieve current forecast winter and summer crop production during 2022–23.

Potential crop yield is determined by soil moisture at planting and rainfall received during the growing season. Estimates of water availability over a growing season provide an indication of potential crop yield which can be used to inform crop production forecasts. Figure 1.9 shows modelled water availability levels that have a high chance of occurring by the end of October 2022.

Figure 1.9 Modelled water availability levels that have a 75% chance of occurring by the end of October 2022

On average, the total water requirement to achieve the national 5-year average wheat yield of 2.0 tonnes/ha is 235 millimetres, based on a conversion rate of 16kg of wheat per millimetre of water and a standard soil evaporation loss factor of 110 millimetres. The total water requirement to achieve 3.0 tonnes/ha, 2.5 tonnes/ha, 1.5 tonnes/ha, 1.0 tonnes/ha, and 0.5 tonnes/ha based on this same conversion rate have been estimated to be 295, 265, 205, 175, and 140 millimetres, respectively.

The crop yield associated with a specific level of water availability varies across regions with variations in soil characteristics. The implications for yield of the analysed threshold values of water availability will differ across regions, as responsiveness of crop yield to soil water availability depends on factors such as temperature, humidity, soil nutrition, and the timing of rainfall.

As at 24 August 2022, ABARES analysis (Figure 1.9) indicates above average yield potential across much of New South Wales and Queensland, and average to above average yield potential across Victoria, South Australia, and Western Australia. This average or above average yield potential is highly dependent on the timing and intensity of rainfall events during the remainder of the growing season, particularly in New South Wales and Queensland where soil moisture levels are already well above average for this time of year.

Irrigated crops

The inflows into reservoir storages in the Murray–Darling Basin during autumn and winter and low drawdown in the first half of 2022 has seen water storage remain historically high. As at 25 August 2022, the volume of water held in storage was around 23,200 GL, or around 92% of total capacity. This was around 2,800 GL or 14% more than at the same time last year.

ABARES modelling indicates that the average water allocation price in the southern Murray–Darling Basin (sMDB) is forecast to remain low in 2022–23 at $58/ML, $9/ML lower than 2021–22. Back-to-back years with high water availability and rainfall have led to reduced irrigation water demand in 2021–22. Most of the major entitlements in the sMDB are forecast to reach 100% allocation in 2022–23 under the wet, average, and dry scenarios.

State allocation outlooks also indicate that, for most entitlements, opening allocations in 2022–23 are likely to be higher than in 2021–22. Higher opening allocations, combined with high carryover levels, mean there is more certainty about water availability at the start of the 2022–23 water year, allowing irrigators to make more informed planting decisions. Higher water availability offers favourable irrigated planting prospects in both Queensland and northern and southern New South Wales during 2022–23 (see Outlook for Natural Fibres).

Average or better rainfall likely across northern and eastern Australia

According to the Bureau of Meteorology's climate outlook for spring 2022 (published on 25 August 2022), there is a high chance of recording above average September to November rainfall across much of northern and eastern Australia (Figure 1.10).

With average or better levels of soil moisture across most cropping regions, this rainfall is likely to be sufficient to support above average crop and pasture production as the winter cropping season ends. By recharging soil moisture profiles, rainfall is also expected to support close to average crop and pasture production as summer crop sowing and the northern wet season begins.

Figure 1.10 Rainfall totals with a 75% chance of occurring, Australia, September to November 2022