Seasonal conditions: June quarter 2022

Global production conditions and rainfall in the 3 months to 30 April 2022 have deteriorated, further tightening global grain supplies and placing upward pressure on world prices.

Rainfall over the 3 months to 30 April 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 April affects development and yield prospects of summer crops, and the soil moisture available for winter crops. February to April 2022 rainfall was generally below average across much of 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.

In Australia, average to above average rainfall during March and April resulted in a boost to soil moisture levels across most cropping regions. This allowed for timely planting of wheat, barley, and canola. However, a drier than normal March and April across parts of South Australia saw many crops sown dry.

In the northern hemisphere, February to April rainfall affects the development and yield prospects of winter crops, especially wheat. It also influenced farmers' planting intentions and soil moisture available for 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 30 April 2022 was generally below average for parts of the European Union and the Middle East, and large areas of western and central United States. In contrast, rainfall was above average across parts of eastern United States, the western Russian Federation and East Asia. Wet conditions and/or below normal temperatures during April delayed the planting of summer crops in key growing areas across the United States and the European Union.

Figure 1.1 World precipitation anomalies, February to April 2022

Crop conditions

Global crop production conditions are generally favourable for corn and rice, while adverse production conditions have been seen for some key wheat- and soybean-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 South America and the United States (see Outlook for crops).

While global growing conditions for corn production remain relatively favourable, a reduction in planted area in 2022–23 is expected to see world corn production decline from last year’s record high, mostly reflecting reductions for Ukraine, the United States, the EU, and China that are partially offset by increases for Brazil, Argentina, Serbia, and South Africa. Adverse growing conditions in some key production regions have reduced expected global wheat production in 2022–23, with global production expected to decline for the first time in four years. Meanwhile, favourable growing conditions are expected to increase global rice production in 2022–23.

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

Pasture and rangeland conditions

Analysis of the Vegetation Health Index (VHI) for the second 10-day period in May 2022 indicates poor vegetation conditions across parts of southern and eastern Africa, in southern and central Argentina, across parts of western and central Australia, central Brazil, northern Mexico, and the centre of the United States (Figure 1.3). This is partly due to dryness and drought 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 1.3 World vegetation health indexes, 11 to 20 May 2022

According to oceanic and atmospheric indicators, the 2021–22 La Niña appears to have peaked in April to May 2022. The latest forecasts from the Climate Prediction Center indicate that La Niña is likely to continue into August 2022 (69% chance during June to August 2022). During the August to October period, the chance of La Niña conditions continuing is estimated to be about 58%, and the likelihood of an El Niño is near-zero (Figure 1.4).

Figure 1.4 Estimated El Niño–Southern Oscillation (ENSO) probabilities, April 2022 to February 2023

The outlook for the second half of 2022 is becoming more certain with strong climate model consensus for the upcoming 6-month forecast window. La Niña conditions are likely to persist into 2022–23 and there is also strong model consensus for the formation of a negative Indian Ocean Dipole event in the coming months.

Negative Indian Ocean Dipole forming

A negative Indian Ocean Dipole (IOD) event appears increasingly likely to develop through winter, with climate models indicating the continued formation of a negative IOD in the coming months. This key climate driver is likely to influence local climatic conditions over the next six 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.

Because of this developing negative IOD, Australia is seeing moisture coming in from the northern Indian Ocean across the northern part of Western Australia. This often leads to the formation of northwest cloud bands across most of Australia.

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.

Figure 1.5 Annual rainfall and key climate drivers for Australia, 1970 to 2022

Global climate outlook

The global climate outlook for June and August 2022 indicates that mixed rainfall conditions are expected for the world's major grain- and oilseed-producing regions. The lingering 2021–22 La Niña event is expected to result in below average rainfall for Argentina, southern Brazil, Europe, west Asia, southern Kazakhstan, Turkey, Ukraine, western regions in the Russian Federation, and central and northern United States.

This below average rainfall outlook follows recent dry conditions in Argentina and southern Brazil and is likely to adversely affect the development of winter crops, including wheat. Dry conditions have impacted yield potentials of winter wheat across a number of key growing regions and cooler than normal temperatures have slowed the planting of corn and soybeans in the northern hemisphere. If dry conditions continue in the northern hemisphere as crops enter their reproductive stage in summer 2022–23, this is likely to constrain global corn, wheat and soybean production.

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 19 May 2022.

Impacts of La Niña on world wheat supply in 2022–23 becoming clearer

The US hard red winter wheat crop broke its dormant stage of growth in late March/April, struggling with dry conditions associated with the re-emergence of La Niña in 2021–22. Although the 2022–23 crop was only in the early stages of development, crop health was rated at its lowest level since 1996, with only 30% of the winter crop rated as being in good-excellent crop condition. Drought conditions in the US Southern Plains due to the influence of the La Niña climate event have continued to threaten yield prospects. For the week ending 15 May, just 27% of the US winter wheat crop was rated good-excellent. The last time this occurred was during the 2014 harvest, where at this stage of the growing season, the US reported a greater proportion of its winter wheat crop as poor-very poor, than good-excellent.

Drought and heatwave conditions in Europe and India have resulted in downgrades to expected wheat production. In India, wheat production expectations now sit at 108.5 million tonnes, down just over 1 million tonnes from last year’s record harvest. This has prompted the Indian government to announce a ban on wheat exports with immediate effect.

The European Union’s largest wheat crop is also under pressure. The condition of France’s wheat crop is deteriorating as record heat affects the European Union’s top grower. The share of the country’s soft-wheat crop rated in good or very good condition fell to 73% as of 16 May, putting ratings below this time last year, according to the latest FranceAgriMer data. A dry, hot streak across France is draining soil moisture during a vital period for the crop’s development. The French agricultural union FNSEA has indicated that grain yields for the 2022–23 harvest may fall by up to 20-30% because of the ongoing heatwave and dry conditions in the country.

La Niña induced production decline for oilseeds in South America

In its May World Agricultural Supply and Demand Estimates (WASDE) report, the United States Department of Agriculture (USDA) cut its estimates for South American soybean production. The USDA lowered its estimate for 2021–22 soybean production in Brazil, the world’s largest producer, to 125 million tonnes. This is 8% below its February WASDE forecast and 10.4% below last year’s output. The USDA also trimmed its estimate for Argentine soybeans by around 7% to 42 million tonnes, compared with its February report.

Record corn production expected in 2021–22 despite La Niña impacts in South America

Global production of corn affects Australia’s global markets for feed grain (barley and wheat) and canola in biofuel markets. Argentina is the world’s third-largest exporter of corn, and production forecasts have been revised downward due to dryness and drought during the 2021–22 growing season.

While the USDA left Argentine corn production for 2021–22 unchanged in its February WASDE report, it cut forecast production for the country’s 2021–22 corn harvest to 53 million tonnes in the May WASDE release, down from its February estimate of 54 million tonnes. However, this number is still well above the production estimate released by Argentina’s Buenos Aires Grains Exchange, which has pegged the 2021–22 corn harvest at 49 million tonnes, following prolonged drought conditions throughout the growing season (Figure 1.6).

Figure 1.6 Drought index for South America, 23 May 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 spring-early summer period across much of Australia, rainfall continued to be average to extremely high between February 2022 and April 2022 in key production regions (Figure 1.7). This rainfall has supported average to above average pasture growth across eastern, central and southern Australia

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

During April, well above average rainfall and mild temperatures provided a boost to pasture production across most grazing regions in New South Wales, Queensland, northern 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 to build standing dry matter availability.

Figure 1.7 Rainfall percentiles, Australia, 1 February to 30 April 2022

Broadacre crops

While well above average rainfall between February and April 2022 has been largely beneficial to winter crop production prospects, it was not favourable for summer crops across parts of eastern Australia. February and March 2022 rainfall was extremely high in most cropping regions in Queensland and northern New South Wales. This led to localised flooding, weather damage, harvest delays, and the inundation and loss of some summer crops. Following extremely high February and March rainfall totals, substantial April rainfall was favourable for winter crop planting and growth.

Soil moisture and rainfall over the entire growing season need to be considered when determining planting opportunities and crop production outcomes for dryland winter crops. Adequate rainfall and high levels of soil moisture during early autumn is likely to have boosted planted area of winter crops across most growing regions.

Figure 1.8 and Figure 1.9 show the relative levels of modelled upper layer (~0.1 metres) and lower layer (~0.1 to ~1 metre) soil moisture across Australia for April 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 April 2022 (Figure 1.8) was average to above average for this time of year across cropping regions in New South Wales, Victoria, Western Australia, much of Queensland and western South Australia. Upper layer soil moisture was below average for isolated parts of the southern Queensland and central South Australia growing regions. Extremely high to above average upper layer soil moisture was evident across much of central New South Wales, western Queensland and the east of Western Australia cropping regions. Extremely high upper layer soil moisture would have prevented field access for growers across parts of New South Wales. However, the above average upper layer soil moisture levels across most cropping regions will support winter crops through germination and establishment.

Figure 1.8 Upper layer soil moisture, April 2022

Relative lower layer soil moisture levels in April 2022 (Figure 1.9) were well above average to extremely high for parts of New South Wales, southern Queensland, western Victoria, as well as much of Western Australia. Lower layer soil moisture was extremely low to below average for parts of the Central Queensland growing region and central South Australia. The below average lower layer soil moisture may reduce yield potentials for late sown summer crops in Central Queensland as their root systems extend into lower soil layers.

Figure 1.9 Lower layer soil moisture, April 2022

With generally average or better soil moisture levels in most summer cropping regions, the favourable rainfall outlook for the remainder of the growing season is likely to be sufficient to achieve current forecast 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 1.10 shows modelled water availability levels that have a high chance of occurring by the end of October 2022.

Figure 1.10 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 17 May 2022, ABARES analysis (Figure 1.10) 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 Western Australia where soils have a lower moisture holding capacity.

Irrigated crops

The unseasonably high inflows into reservoir storages in the Murray–Darling Basin during early summer appear to have slowed, with small declines in water storage levels being recorded during the first half of 2022. As at 18 May 2022, the volume of water held in storage was around 21,600 GL, or around 86% of total capacity. This was around 8,080 GL or 49% more than at the same time last year and remains at the highest level since 2016–17.

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 $80/ML, $3/ML higher 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 crops).

Average or better rainfall likely across northern and eastern Australia

According to the Bureau of Meteorology's climate outlook for June to August 2022 (published on 19 May 2022), there is a high chance of recording close to average June to August rainfall across much of eastern and southern Australia (Figure 1.11).

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 summer cropping season ends. By recharging soil moisture profiles, rainfall is also expected to support close to average crop and pasture production as winter crop sowing begins.

Figure 1.11 Rainfall totals with a 75% chance of occurring, Australia, June to August 2022