Winter crop harvest for season 2021/22 on alert for a record result

While everyone is a winner with one of the biggest crops on record gearing up for harvest we take look at the crops expected to give the highest returns 

Report co-author, Rabobank senior commodities analyst Cheryl Kalisch Gordon expects strong support for local wheat prices as global wheat stocks have fallen rapidly

With growers set for a bumper winter harvest, the total production forecast for a near-record crop.

The specialist agribusiness, Rabobank estimates the nation will harvest a minimum of 52.87 million tonnes of winter grains, oilseeds and pulses for season 2021/22. While down 5% on last year’s second highest crop on record, this is still a hefty 25% above the five-year average.

Canola growers are the stand outs, with production estimated to reach a new record of 5.16 million tonnes, up 14% on last year and a stellar 48% above the five-year average, driven by increased planting and favourable growing conditions in many regions.

Wheat growers tried their best, but production is expected to come in at 31.9 million tonnes, down a mere 4% on last year, but still 35% above the five-year average. 

Barley growers appeared to lose faith during the season as production forecasts were trimmed down to 10% less than last year to 11.7 million tonnes, though also still up on the five-year average, by 7%.

And while the crop volumes will count for a healthy income for growers, it will play second fiddle, to the state of the world market where an acute shortage will see local grain and oilseed prices reach very high peaks.

Report co-author, Rabobank agriculture analyst Dennis Voznesenski said our second consecutive very large winter crop “comes at an opportune time for local growers, with global shortages and high prices for grains and oilseeds”.

“Short global supplies of grains and oilseeds will continue to support local prices over the year ahead,” he said. 

“And although global prices can be expected to soften as new crops in different regions around the world come into play, the uncertainty that exists around seasonal conditions in grain-growing areas and the process of global grain stocks re-building will keep prices at least above the range of the last six to seven years.”

This graph highlights the strong position local growers have attained with high harvest levels and a world market showing severe shortages for some grain and oilseeds

The report notes favourable growing conditions in most regions have seen expectations of increased amounts of high-protein wheat in Queensland, South Australia and Western Australia this harvest – “timed perfectly” with a current global shortage of high-protein wheat, due to drought in North America.

Other factors of note for this year’s winter crop include a lower supply of malt-quality barley – due to a reduction in barley planting, and particularly malt varieties – and less grain baled for hay because of export concerns due to a largely-closed Chinese hay market.

There is also a proportion of last year’s record east coast harvest – 10 to 15% – that remains on farm,” Mr Voznesenski said. “And this will compete with the coming crop for storage space and mean more delivery and price pressure during harvest.”

Exports will be increased

All forecasts lean towards our total grain exports to increase again this year – by 5% year on year (YOY) and to include 24.5 million tonnes of wheat, 7.8 million tonnes of barley and 4.3 million tonnes of canola.

“A second very large harvest means that stock will now be replenished after the drought so we will be able to lift exports in 2021/22 despite production coming in lower than last year,” Mr Voznesenski said.

“We expect local produce will again be able to deliver a strong export performance into South-East Asia, with wheat continuing to be the price setter across the region. This is due to lower prices in Australia as a result of the substantial surplus that will be available, but also favourable freight costs compared with grain from further afield – an advantage that increases in times of high-cost freight like we currently have and expect to continue in 2022.”

Winning states get income surge

Forecasts for the 2021/22 winter crop production include an 18% surge in both Western Australia and Queensland – off the back of improved rainfall over the growing season in both states. 

New South Wales production is expected to be down 14 per cent on last year’s record harvest in the state, but still nearly 70 per cent above the five-year average.

South Australia’s crop is forecast to decline 10% YOY, due to less favourable planting conditions and patchy rainfall, while Victoria is set to record the largest decline in production – down 24% on last year, primarily due to drier conditions in the western part of the state.

Wheat outlook includes price increase 

For wheat, the Rabobank report says, low world stocks will keep global prices at high levels.

Report co-author, Rabobank senior commodities analyst Cheryl Kalisch Gordon says global wheat stocks have fallen, particularly in exporting nations, and are on track to decline materially over the next nine months, exerting upward pressure on Chicago Board of Trade (CBOT) wheat prices in the year ahead.

“This has been driven by high usage of wheat in animal feed, substituting for corn, which is in low supply and also due to downgraded wheat quality in the EU relegating it stock feed use,” she said, “while there has also been steady growth in food consumption.”

The bank expects CBOT wheat to trade in the UScents725-740/bu range until the second quarter of 2022, when it is forecast to decline as northern hemisphere crop supply becomes available, but continuing above UScents700/bu for the balance of 2022, given the stock rebuilding that will be required.

For local wheat prices, the bank expects to see “price resilience” during the remaining months of 2021, despite “harvest pressure and the favourable harvest volume”, Dr Kalisch Gordon said.

This is due to the strong demand we expect as the world searches for wheat after the northern hemisphere harvest finishes and with some assistance of further softening of the Australian dollar,” she said. This should especially be the case for higher-protein wheat.

The bank expects the Australian dollar will remain in the low UScents70 range, supporting local wheat values over the year ahead. 

Barley will hold its ground

For barley, while Rabobank does not expect China to return as a market “to a material degree even in the mid-term”, the tight global corn market is set to support barley demand over the coming year. 

“Prices will be supported as buyers, especially in South-East Asia and the Middle East, continue to find good value in barley as a substitute for corn in livestock feeding,” Dr Kalisch Gordon said. 

Local demand for feed barley is also expected to remain steady, with the number of cattle on feed in Australia remaining above one million head and demand for export beef staying buoyant, along with steadily growing demand from the poultry sector.  

“Malt barley demand is also improving, with recovering beer demand globally as the world opens after COVID-19,” she said. 

Local barley prices are forecast to appreciate marginally after harvest and in the first half of 2022, before softening at the back end of 2022, however remaining at above average. 

Canola growers are the biggest grinners with a double whammy of a bigger harvest and a strong price with demand expected to outstrip supply worldwide

Canola growers found a gold stash 

For canola, the report says, record high prices off the back of low global stock levels – due to poor seasons in Canada and the EU – should see expanded production in the northern hemisphere next season. 

This will lead to a substantial re-supply in global canola stocks in 2022, however the impacts of the current low global stock situation will be felt over the coming year. 

“With the deep hole in global canola stocks and still some re-supply uncertainty, global prices are expected to remain elevated into the second quarter of 2022, before softening, but remaining materially above five-year averages for the balance of next year,” Dr Kalisch Gordon said. “Locally, we expect the same pattern with local canola prices, though with some harvest pressure in quarter four this year, with the forecast record canola harvest that is expected.”