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Katarina Nossal, Yu Sheng and ABARE commodity analysts
World wheat supplies are forecast to increase in 2009-10, because of relatively large world carryover stocks from 2008-09 and production in 2009-10 forecast to be the second highest on record. The increase in supplies is forecast to place downward pressure on the world wheat indicator price (US hard red winter, fob Gulf ports). The world wheat indicator price is forecast to average US$230 a tonne in 2009-10, around US$40 a tonne lower than the previous year. Despite the forecast price decline, world wheat prices will remain relatively high.
World wheat production is forecast to be 662 million tonnes in 2009-10, which is a reduction of 25 million tonnes from 2008-09 but the second highest on record. When combined with opening season stocks, global wheat supplies are forecast to increase by 2.5 per cent from last season. Forecast declines in production in major producing regions including the European Union, Russian Federation and the United States is set to more than offset modest increases in China and India.
World wheat consumption is forecast to remain largely unchanged in 2009-10 at around 642 million tonnes. While wheat used for human consumption is forecast to rise, this increase is expected to be offset by lower use of wheat for livestock feed.
The average pool return for Australian premium white wheat (APW 10) is forecast to be A$267 a tonne in 2009-10, which is around A$50 a tonne lower than in the previous year. Improved domestic wheat production and lower global wheat prices are contributing to the forecast decline in the domestic price.
Relatively large carryover stocks from 2008-09 and historically high production are forecast to result in record coarse grains supplies. The increase in supplies is expected to place downward pressure on the world coarse grains indicator price (US corn, fob Gulf), which is forecast to decline by US$17 a tonne to average US$156 a
tonne in 2009-10. Despite the forecast decline in 2009-10, world coarse grains prices (in real terms) are expected to remain higher than in the late 1990s.
Following a record harvest of 1.1 billion tonnes in 2008-09, world coarse grains production in 2009-10 is forecast to be the second highest ever at around 1.09 billion tonnes. An increase in corn production in the United States is forecast to boost world corn production by 4 million tonnes to 794 million tonnes, more than offsetting declines in other major producing countries. World barley production is forecast to decline by 9 million tonnes from last season’s record, to 143 million tonnes.
Global coarse grains consumption is forecast to increase to a record 1.1 billion tonnes in 2009-10, which is an increase of 2 per cent from 2008-09. This is the fourth consecutive year coarse grains consumption has exceeded 1 billion tonnes. The main driver of this increase is higher use of corn as a feedstock for ethanol production in the United States.
Despite increased consumption in 2009-10, relatively high coarse grains production is forecast to maintain end of season stocks at relatively high levels. End of season stocks are forecast to be around 179 million tonnes in 2009-10, the second highest since 2002-03. Corn and barley stocks are forecast to decline by 4 per cent and 11 per cent, respectively, in 2009-10.
Australian feed and malting barley prices are forecast to decline in 2009-10. An increase in domestic production and forecast lower world prices are expected to place downward pressure on Australian prices. Feed and malting barley prices are forecast to average A$213 and A$266 a tonne, respectively, in 2009-10.
In 2009-10, the world oilseed indicator price (soybeans, cif, Rotterdam) is forecast to decline as a result of an expected record global oilseed harvest in 2009-10. This will outweigh the effect of any increase in world consumption. The world oilseed indicator price is forecast to average around US$393 a tonne in 2009-10, compared with an estimated average of US$425 a tonne in 2008-09 and the historic high of US$549 a tonne in 2007-08.
World oilseed production is forecast to rise to a record 423 million tonnes in 2009-10, which is a 7 per cent increase from the previous year. Production of soybeans, which accounts for around 57 per cent of total oilseed production, is forecast to increase by 16 per cent to 244 million tonnes in 2009-10.
World oilseed consumption is forecast to increase by 3 per cent in 2009-10, to a record 413 million tonnes. Vegetable oil and oilseed meal consumption are forecast to increase by 5 per cent and 3 per cent, respectively, in 2009-10. Mandated biodiesel use, particularly in the European Union, is set to maintain growth in the consumption of vegetable oil for industrial use.
Australian canola prices are forecast to decline in 2009-10, largely as a result of lower world prices for oilseeds and a higher Australian dollar. The domestic canola price is forecast to average A$547 a tonne in 2009-10, compared with A$591 a tonne in 2008-09.
Winter cropping regions in Western Australia, South Australia and Victoria received average to above average winter rainfall. Conversely, most of Queensland and northern New South Wales received below average winter rainfall with August being a particularly dry month across both states. The lack of rainfall, combined with above average temperatures, resulted in crops in many areas of the two states (including southern and central New South Wales) suffering moisture stress leading into the critical spring growth phase. Despite most grain cropping regions receiving average to above average rains in September, yields in parts of Queensland and southern New South Wales will be down on earlier expectations. Total winter crop production is forecast to be around 36 million tonnes, which is an increase of 8 per cent from 2008-09 (table 1).
1 Winter crop production - Australia a |
||||||
|---|---|---|---|---|---|---|
New South Wales |
Victoria |
Queensland |
Western Australia |
South Australia |
Australia |
|
kt |
kt |
kt |
kt |
kt |
kt |
|
| 1997-98 | 8 558 |
3 398 |
1 637 |
12 097 |
5 360 |
31 116 |
| 1998-99 | 9 718 |
3 495 |
2 322 |
12 232 |
6 305 |
34 159 |
| 1999-00 | 11 495 |
5 139 |
2 222 |
13 311 |
4 751 |
36 981 |
| 2000-01 | 10 834 |
6 232 |
1 340 |
8 726 |
7 486 |
34 696 |
| 2001-02 | 11 171 |
5 873 |
1 142 |
12 050 |
8 927 |
39 240 |
| 2002-03 | 3 505 |
1 955 |
836 |
6 812 |
4 227 |
17 402 |
| 2003-04 | 10 768 |
6 945 |
1 473 |
16 683 |
7 450 |
43 395 |
| 2004-05 | 10 724 |
4 203 |
1 383 |
12 472 |
5 849 |
34 711 |
| 2005-06 | 11 867 |
6 170 |
1 426 |
13 922 |
7 518 |
40 985 |
| 2006-07 | 3 837 |
1 787 |
907 |
8 253 |
2 792 |
17 613 |
| 2007-08 | 4 000 |
4 711 |
1 195 |
10 750 |
4 713 |
25 433 |
| 2008-09 s | 9 653 |
3 081 |
2 190 |
13 563 |
4 599 |
33 149 |
| 2009-10 previous | 9 823 |
5 189 |
2 104 |
11 415 |
6 169 |
34 771 |
| 2009-10 f | 9 123 |
5 549 |
1 687 |
12 977 |
6 549 |
35 961 |
| % change 2008-09 to 2009-10 | –5 |
80 |
–23 |
–4 |
42 |
8 |
| a State production includes wheat, barley, oats, canola, lupins, field peas, chickpeas, faba beans and lentils. Australian totals also include triticale, linseed and safflowerseed. f ABARE forecast. s ABARE estimate. Note: Previous refers to the numbers published in the June 2009 issue of the Australian crop report. |
||||||
Of the major winter crops, wheat production is forecast to be 22.7 million tonnes in 2009-10, which is an increase of 6 per cent from 2008-09. Barley production is forecast to be around 7.9 million tonnes, a 16 per cent increase from 2008-09. Canola production is forecast to decline by 8 per cent, to 1.7 million tonnes in 2009-10, which reflects an expected decline in yields, particularly in Western Australia.
Total summer crop area is forecast to fall by around 5 per cent to slightly more than 1 million hectares in 2009-10. This forecast decline mainly reflects a less than favourable seasonal outlook by the Bureau of Meteorology (released 23 October 2009) for the next few months. Availability of irrigation water remains a critical issue for cotton and rice.
At this early stage of the season, the area planted to grain sorghum is forecast at 662 000 hectares in 2009-10, which represents an 8 per cent decline from the area sown last year. However, additional plantings are possible if higher than expected rainfall is received during the planting window. Assuming average yields, grain sorghum production in 2009-10 is forecast to decline by 20 per cent to 1.9 million tonnes.
Winter rainfall over the grains belt was mixed. Most of Western Australia, South Australia and Victoria received average to above average winter rainfall. Conversely, most of northern New South Wales and Queensland received below average winter rainfall, with August being particularly dry. Partially offsetting this was average to above average September rainfall across most of the cropping regions. Rainfall received during September 2009 is shown in map 1.
The Australian Bureau of Meteorology, in its seasonal rainfall outlook (released 23 October 2009) for the November 2009 to January 2010 period, indicated that there was a moderate to strong shift in the odds favouring below average rainfall across the eastern half of New South Wales and south-east Queensland (map 2).
For the three months starting November, the chance of exceeding average rainfall was assessed as being less than 40 per cent across the eastern half of New South Wales and south-east Queensland. Chances dropped to between 30 per cent and 35 per cent in northern New South Wales and southern Queensland along the border.
The national outlook for maximum temperatures over November to January showed a moderate to strong shift in the odds toward warmer than normal conditions across most of Queensland and the northern half of New South Wales. The chance of average maximum temperatures exceeding the long-term average was more than 60 per cent across most of New South Wales and Queensland, with 70 per cent chances over much of central and south-east Queensland (map 3).
A number of organisations provide forecast yields for grains, including wheat and sorghum. The shire scale wheat forecasting system of the Queensland Primary Industries and Fisheries combines starting soil moisture conditions with the seasonal outlook, including the most recent trend in the Southern Oscillation Index (SOI). The probability of exceeding average wheat yields at the beginning of October (map 4) was close to average in most regions, with the exception of large areas of Queensland, parts of central New South Wales and central Victoria.
The majority of New South Wales winter cropping regions received below average autumn rainfall. This meant many winter crops were dry sown or not sown during the optimal planting window. However, widespread rainfall in early June allowed intended cropping programs to be completed. The wet start to June was followed by below average rainfall in July and August.
However, widespread rainfall in early September arrived just in time for many moisture stressed crops in central and northern New South Wales. Some further followup rains were also received in October. Despite southern New South Wales recording average winter rainfall, it was later than ideal for winter crops. Insufficient rainfall, combined with hot and windy conditions in mid-September, means yields in southern New South Wales are likely to be below average, although some of these areas benefited from rains received in October.
Wheat production is forecast at around 6.3 million tonnes, which is 7 per cent lower than production in 2008-09. Barley production in 2009-10 is forecast to fall by around 3 per cent, to 1.5 million tonnes, reflecting an expected decline in yields. The area planted to canola is estimated to have increased by 23 per cent in 2009-10, which reflects the favourable start to the season in New South Wales. Despite this increase in area, production is forecast to be 2 per cent lower, at 258 000 tonnes.
The area planted to grain sorghum is forecast to decline by 7 per cent in 2009-10 to 200 000 hectares. However, if significant rainfall is received in the latter part of spring, the area planted to grain sorghum could increase. Assuming average yields at this early stage of the season, grain sorghum production is forecast to decline by 20 per cent to 655 000 tonnes.
The area planted to cotton in 2009-10 is forecast to increase by 25 per cent, to 110 000 hectares, reflecting the greater availability of irrigation water in the Namoi and parts of the Mcintyre regions. Assuming a return to average yields, cotton lint production is forecast to be 220 000 tonnes, while cottonseed production is forecast to be 312 000 tonnes, which is an increase in both cases of 24 per cent.
The major cropping areas of Victoria received average rainfall throughout the winter months. Winter crops were in a good position leading into the critical spring period. Further rainfall in spring has been received and crops are expected to reach their yield potential.
Yields in the Mallee are expected to be close to their historical average, with the majority of this region receiving average rainfall throughout winter and spring. Yields in the north-east Mallee are likely to be more variable depending on the soil type, with crops on lighter soils looking better in September than those on heavier soils. Winter crops in the Wimmera and Western District appeared to be well placed and there is potential for above average yields.
Total winter crop production in Victoria is forecast to reach 5.5 million tonnes in 2009-10, an increase of
80 per cent from the drought affected harvest in 2008-09. Reflecting an improvement in wheat yields, wheat production is forecast to increase to 2.7 million tonnes. Barley production is forecast to nearly double to
1.7 million tonnes, as yields are forecast to improve. The area planted to canola is estimated to have increased to 220 000 hectares, with production forecast to increase by 60 per cent to 400 000 tonnes.
Most of Queensland recorded below to very much below average winter rainfall. August was particularly dry, with unseasonably high temperatures. This resulted in further depletion of subsoil moisture for nearly all cropping regions, particularly in central and south-west Queensland. Conditions in south-east Queensland were slightly better in September, reflecting a better start to the season.
Earlier planted winter crops are in a better position than late planted crops that were unable to take advantage of stored subsoil moisture. Late planted winter crops suffered the full effect of no in-crop rainfall, combined with heat wave conditions in late August. This resulted in poor crop establishment and crop failure in some areas. Widespread rainfall in the first week of September arrived just in time for many crops in southern Queensland. Follow up rainfall in September and October provided a boost to yield potential in some cropping regions.
The area planted to grain sorghum is forecast to be 8 per cent lower than in 2008-09, which reflects below average winter rainfall and a less than favourable rainfall and temperature outlook for the three months from November 2009 to January 2010. Grain sorghum production is forecast at 1.2 million tonnes in 2009-10.
The area planted to cotton in Queensland in 2009-10 is forecast to have increased by 12 per cent to
85 000 hectares. Compared with the same period in 2008, supplies of irrigation water are abundant in the Emerald region, improved in St. George and Dirranbandi regions and largely unchanged in the Darling Downs region. Assuming a return to average yields, cotton lint and cottonseed production in 2009-10 are forecast to increase by 2 per cent to 155 000 tonnes and 219 000 tonnes, respectively.
Total winter rainfall across the Western Australian grains belt was around average. Winter crop prospects remained good into September, but further rains were needed for crops to achieve potential.
The northern part of the Western Australian grains belt had a good season, with average rainfall received during the winter months followed up by average rainfall in September. In the southern and eastern parts of the grains belt, conditions have been more variable. Crops in many of these areas had been showing signs of stress from lack of moisture by the end of winter but average rainfall in September would have assisted in maintaining average yields.
The area sown to winter crops is estimated to have increased to 7.5 million hectares. Despite this increase, winter crop production is forecast to be around 586 000 tonnes less than last season at 13 million tonnes.
The area sown to wheat is estimated to have increased slightly to around 5 million hectares in 2009-10, as the late start to the winter cropping season resulted in a larger area being planted to wheat. Wheat production is forecast to be 8.7 million tonnes, which is a decline of 200 000 tonnes from last season. The area planted to barley is forecast to be down slightly, to 1.2 million hectares, while production is forecast at 2.4 million tonnes, which is 6 per cent lower than last season.
Canola production is forecast at 825 000 tonnes in 2009-10, compared with 1.1 million tonnes harvested last season. Canola yields are forecast to return closer to historical average from the records achieved in the previous year.
Planting of winter crops across South Australia was finalised during June. July rainfall was average to above average for most regions providing a good start for crops. August was relatively dry, with most of the state recording below average rainfall, although the warmer temperatures assisted crop growth across the state. Average rainfall in September and October assisted crops, with yields expected to be average to above average.
Total winter crop production is forecast to increase by 42 per cent in 2009-10 to be 6.5 million tonnes, which reflects the favourable seasonal conditions. The total area planted to winter crops in South Australia is estimated at 4 million hectares, which is a marginal increase from last season.
The area planted to wheat is estimated to have increased by 2 per cent, to 2.2 million hectares in 2009-10. Wheat crops are currently well placed and, with good spring rainfall, yields are forecast to be closer to the long-term average. Wheat production is forecast at 3.5 million tonnes in 2009-10, which is an increase of 51 per cent from the drought affected crop of 2008-09. Barley production is forecast to be 2.2 million tonnes, an increase of 33 per cent resulting from a forecast improvement in yields.
Reflecting a good start to the season and relatively high prices at the time of planting, the area planted to canola in South Australia is estimated to have increased by 6 per cent to 175 000 hectares in 2009-10. Canola production is forecast to increase by 4 per cent to 237 000 tonnes in 2009-10.
Fundamentally, long-term productivity growth occurs as new technology and knowledge allows production processes to become more efficient in converting inputs into outputs. This may be achieved by reducing input use, using a different combination of inputs, or producing a different mix of outputs.
For the broadacre agriculture industry (including broadacre crop, beef and sheep production), total input use fell by an average of 0.5 per cent a year over the past three decades and total output increased by 0.8 per cent a year. The ability of farms to use less inputs reflects improvements in farming practices and technology.
Different input combinations have also enabled broadacre productivity gains. In broadacre agriculture, farms have increased the use of materials and services, which has reduced their requirements for other inputs, such as labour and capital, and hence lowered overall input use. For cropping farms, this could reflect increased use of chemicals, which may be related to the continued uptake of reduced tillage, and fertilisers. There could be limits to which farms can improve productivity by substituting materials inputs such as fuel and fertiliser (Nossal, Zhao, Sheng and Gunasekera 2009).
Broadacre farms have also altered the mix of outputs produced. For example, one driver of broadacre productivity growth has been the large shift from sheep production into cropping during the 1990s as a result of relatively higher returns. Changing output mix to reflect changes in market, policy and environmental conditions is important for maintaining growth in productivity.
The cropping industry, which is defined as farms with income mostly from grains, has typically outperformed the overall broadacre sector in terms of total factor productivity (TFP) growth (figure b). Total factor productivity compares the changes in output with the change in use of all inputs into production, including land, labour, capital, materials and services. Productivity estimates on an annual basis for agricultural industries are volatile. The average rates of productivity growth estimated by ABARE represent trend movements in productivity. These trends are estimated using econometric methods.
Between 1977-78 and 2007-08, the cropping industry TFP increased by 1.9 per cent a year on average, compared with 1.4 per cent for total broadacre. Mixed crop-livestock also achieved TFP growth of 1.4 per cent a year over the same period (table 2).
2 Productivity, output and input growth |
|||
|---|---|---|---|
TFP growth |
output growth |
input growth |
|
% |
% |
% |
|
| Total broadacre | 1.4 |
0.8 |
-0.5 |
| Cropping | 1.9 |
3.1 |
1.2 |
| Mixed crop-livestock | 1.4 |
0 |
-1.4 |
Productivity growth in the cropping industry has been achieved by farmers expanding output with only modest increases in input use. Between 1977-78 and 2007-08, output growth was 3.1 per cent a year compared with growth in input use of 1.2 per cent a year. The mixed crop-livestock industry improved productivity mostly through greater efficiency in input use. While output remained constant, input use fell by an average of 1.4 per cent a year over the period.
There are some indications that productivity improvement in the cropping and mixed crop-livestock industries has been slowing in recent years (figure c). Long-term productivity growth in the cropping industry was significantly higher (3.2 per cent) between 1977-78 and 2001-02 than between 1977-78 and 2007-08 (1.9 per cent). The pattern is similar for the mixed crop-livestock industry.
Drought and adverse seasonal conditions have had a major effect on output, and hence productivity growth, in recent years. Crop production has been most severely affected. However, recent discussions with industry suggest that other factors could also be hampering productivity gains.
For example, one industry perspective is that the expansion of cropping enterprises into areas previously used for grazing was a large source of productivity growth in the 1990s when seasons were more favourable. These gains have largely been exhausted because soil nutrient levels have decreased and fertiliser requirements are now higher. There is also a viewpoint that there have been fewer substantial gains in crop varieties in recent years resulting in only marginal gains in yield. Limited labour availability and over-capitalisation by some farms could also be limiting productivity growth. ABARE will present the findings from its industry discussions in more detail in the coming months.
For the cropping industry, productivity growth has differed between regions. Using cropping regions defined by the Grains Research and Development Corporation (GRDC), producers in the western region achieved annual TFP growth of 2.2 per cent a year, compared with 2 per cent in the northern region and 1.8 per cent in the southern region, between 1977-78 and 2007-08 (table 3).
The western region has typically had higher productivity growth than the northern and southern regions, which can be attributed partly to larger farm size (figure d). The northern region has achieved productivity gains by using fewer inputs in maintaining output. Comparatively, the southern region has increased input use and expanded crop production. While productivity in all regions has been affected by drought in recent years, the southern region has experienced the most significant fluctuations in productivity estimates.
3 Productivity, output and input growth |
|||
|---|---|---|---|
TFP growth |
output growth |
input growth |
|
% |
% |
% |
|
| Western region | 2.2 |
2.9 |
0.7 |
| Northern region | 2 |
0.1 |
-2 |
| Southern region | 1.8 |
2.8 |
1 |