Australian agriculture outlook 2024: Cropping

From the field 

Growers across the country have faced varied challenges producing this season’s crop. Dry conditions in northern regions of the country have led to below average yields. While widespread rainfall at harvest time in southern areas has many concerned about quality downgrades. After three consecutive years of record production and high prices, growers are likely in a better position this season to systematically market their crop to extract the best value from reduced production.

Wayne Saunders, Regional Manager Agribusiness – Western Victoria

Cereals

Supply

Winter cereal production in Australia is set to fall from the strong results it has posted over the past three seasons. Nationally the wheat crop is down 34 per cent from last season's record to 25.8 million tonnes. All states, except for Victoria are set to record year on year declines. Western Australia and South Australia, two key export states, are expected to see a significant drop in wheat production this year. In particular, Western Australia's decline is projected to be 42 per cent. South Australia is expected to see a decrease of 37 per cent compared to last year. Timely rainfall across Victoria in early October finished the crop off nicely. The results of the harvest show that Victorian wheat production will be similar to last season's record of 5.6 million tonnes. However, untimely rainfall during harvest has caused some concern around quality. The story is similar for barley with year-on-year production estimated to decline 25 per cent to 10.4 million tonnes. Most regions started harvesting two to three weeks earlier than usual due to the dry finish to the season. The harvest is expected to be done by mid-December. The quality for wheat has varied, but the consensus is that protein levels are lower than normally expected in a dry finish. For barley the lower protein levels has seen a larger proportion of the crop make malting grades.

The USDA predicts that global wheat production in 2023/24 will be one per cent lower than last year. The projected total is 782 million tonnes. Ending stocks are seen declining for a fourth consecutive year to 258 million tonnes and the lowest level since 2015/16. Looking at major global exporter wheat stocks paints an even tighter supply picture. The group's ending stocks are expected to drop by seven per cent to 55.1 million tonnes, the lowest in 10 years. Any upsets to global production in the new year will see this come into focus.

Demand

In the next six months, domestic demand for feed grains is expected to remain strong. Cattle numbers on feed keep increasing, July to September 2023 had the second-highest number ever. The industry is growing strongly. National capacity is at its highest ever and utilization rates are stable at around 80 per cent. This is all being supported by strong demand for the final product with grain fed beef exports for the September quarter the largest on record.

Australian wheat exports will decrease by 45 per cent this year to 17.5 million tonnes due to reduced supply. In the last quarter of 2023 Australian wheat exports faced strong competition. Especially from cheap Russian wheat into key Asian markets. Increased competition also came from improved movement of Ukrainian grain via its “humanitarian corridor” launched in August. Australian wheat exports are likely to face less competition in the opening months of 2024 from Black Sea grain due to the seasonal effect of worsening weather during winter slowing exports. This will see demand for a limited Australian exportable surplus remain strong as we head into 2024. We will once again see strong demand from China with the USDA forecasting their total 2023/24 wheat imports at 12 million tonnes. It is believed that China has already purchased two million tonnes of Australian new crop wheat for shipments starting in December, with overall demand as high as four million tonnes. When you factor in average southeast Asian imports of eight million tonnes along with around 800 thousand tonnes of inelastic demand from the Oceanic region, then Australia’s exportable surplus quickly tightens.

Barley exports are forecast to reach around 6.8 million tonnes in the coming season. Early season exports are running at record pace with around 2.6 million tonnes expected to be exported by the end of December. China has accounted for most of this volume which is providing strong underlying demand in the barley market and providing a positive influence on prices.

Price

Because of dry weather and uncertainty, growers didn't make as many forward sales as usual. Increased volumes of sales at harvest were made for cash flow. This saw wheat prices come under pressure, declining five to ten per cent across port zones. Despite prices falling they remain at decile 7 to 8 levels. With harvest well advanced and cash flow requirements met we would expect more targeted marketing going into the new year. Growers will now look for post-harvest opportunities across the different commodities such as protein wheat and malt premiums. As we head into the new year northern hemisphere exports generally decline due to seasonal conditions. This will push global demand to Australian quality wheat and help keep prices elevated at these decile eight levels. As we come out of the northern hemisphere winter any production shocks to their winter crops will come into focus and lead to more price volatility.

Barley prices have remained well supported since China returned to the Australian market. That demand is expected to continue into 2024 with the USDA forecasting China’s barley imports at 7.5 million tonnes. Since most of France's surplus barley has been sold, China will rely on Australian barley in early 2024.

Overall, the outlook for cereal prices remains positive for the first half of 2024. Downside risks will come from another large Russian wheat crop, currently forecast at 90 million tonnes. Along with this the US winter wheat crop is in its best condition in several years.

Oilseeds

Australian canola production is forecast to decline 33 per cent year on year to 5.3 million tonnes. Despite this decline the result remains above the five-year average of 4.9 million tonnes. This is in part due to growers keeping planted area near record levels at 3.2 million hectares. Due to bad weather, the USDA says global canola production will decrease by 4.5 per cent to 85.6 million tonnes. Despite the fall in production, it will still be the second largest crop on record. The demand for food, feed, and biofuel keeps increasing every year. It is projected to reach 85.7 million tonnes. Consequently, ending stocks are forecast to drop 16 per cent year-on-year to 6.5 million tonnes.

Australian canola exports for the coming season are forecast to reach 4.7 million tonnes, down 22 per cent from last season’s record 6.15 million tonnes. Current export demand is strong with shipments by the end of December forecast to reach 1.3 million tonnes. Outside of our traditional EU customers demand has remained strong from Middle East and Subcontinent buyers.

The price of oilseeds in the first half of 2024 will rely heavily on the Brazilian soybean crop. The USDA currently has their 2023/24 soybean production at a record 163 million tonnes. This would see global soybean ending stocks for 2023/24 finish at a record 114.5 million tonnes. Domestic canola prices peaked at around 700 dollars per tonne just prior to harvest. Since then, prices have declined from harvest selling pressure by around 10 per cent. With canola harvest winding up this pressure should abate, and see demand fundamentals take over. Global export demand for Australian canola should be supportive of prices in the first half of 2024. Current supply and demand fundamentals should see Australian canola trade between 600 and 700 dollars per tonne.

Pulses

ABARES are forecasting production of Australia’s five main pulses are set to decrease 31 per cent to 2.96 million tonnes this season. Year-on-year production of lentils are down 27 per cent, chickpeas are down two per cent and faba beans 30 per cent. Lupins have seen the largest production decline of all pulses, down 53 per cent. Grown predominantly in Western Australia, growers planted less area this season. Combined with dry seasonal conditions for key regions yields have dropped below average.

International demand for Australian pulses has been strong over the past year. Lentil and lupin export volumes were at record levels at 1.75 million tonnes and 845 thousand tonnes respectively. Chickpea exports were also strong at 605 thousand tonnes. This is despite a small crop in 2022/23 and quality issues from record rains. India was the number one destination for lentils with exports totalling 821 thousand tonnes. Pakistan is the number one destination for Australian chickpeas with 373 thousand tonnes.

Exports of pulses in the early season have been strong. Around 360 thousand tonnes are scheduled to be shipped by the end of December. Lentils make up 154,000 tonnes. Chickpeas and lupins each make up 100,000 tonnes. As with cereals, prices for most pulses have come under some harvest selling pressure. Yet, with high quality product coming to market along with reduced supplies, prices remain historically high. Lentils delivered to Adelaide are trading at around $900 per tonne. Lentil prices in the future will depend a lot on whether India decides to keep zero tariffs on Australian lentil imports. The decision will be made by March 31, 2024. If tariffs are brought back imports will drop significantly and have a negative impact on prices.

Faba bean prices remain strong on the back of solid export demand, especially out of South Australia. Prices are also expected to be supported by domestic demand over the summer months. A number of mixed farmers have decided not to sell sheep and lambs into the depressed market and are lot feeding, with faba beans making up the protein portion of rations.

The chickpea harvest in Queensland and New South Wales is finished. The yields were average or lower, but the quality is excellent. Prices have fallen around five per cent over harvest, however at around $850  per tonne remain at levels not seen since early 2020. Strong bulk demand from Pakistan and Bangladesh along with Middle East nations active in the container market will keep prices elevated.

Source: Profarmer Australia

Source: Profarmer Australia, CME Group, Rural Bank

Source: Australian Crop Forecasters

Source: USDA