41 – Drought in 2018 and 2019 has affected grain flows in Australia

19 February, 2020

by Professor Ross Kingwell – AEGIC Chief Economist.

Key message: The severe 2018/19 drought in eastern Australia forced NSW, Qld and Vic to import over 3 mmt of grain, mostly from WA. Eastern Australia became a major market destination for WA grain. Drought continued into 2019/2020 in NSW and Qld and so grain imports from other regions continued. As Australia’s population grows and Australians’ appetite for grains remains, interstate grain flows may increase in magnitude when occasional widespread severe drought restricts grain production in eastern Australia.

The Story

Dorothea Mackellar’s famous poem, My Country, sums up Australia as a land “of droughts and flooding rains”, with “Her pitiless blue sky…”. Written over a century ago, even then Australia’s seasonal extremes were well-known. Droughts, floods and fires were, and remain, acknowledged serious disruptions to Australian agriculture, affecting livestock and grain production, and lessening exports of agricultural commodities.

Figure 1: Rainfall deficiencies across Australia in 2018 (up until Nov 30)

In recent years, eastern Australia has once again been gripped by drought; a drought that emerged in 2018 (Figure 1) and remained throughout 2019 in many parts of NSW and Qld (Figure 2).

Figure 2: Rainfall deciles across Australia in 2019

The severity of the drought in 2018 and 2019 greatly affected grain production in eastern Australia and forced NSW and Qld to import large volumes of grain, rather than be key grain exporters as is often the case (Figure 3).

Figure 3: The impact of the 2018/19 drought: NSW, Qld and Vic became grain importers.

Source: Based on data in an appendix in ACCC (2019) Bulk grain ports monitoring report 2018–19, Canberra.

Where did Qld and NSW import grain from? The answer is, nearly all from WA and SA, with WA supplying over 3 mmt and SA supplying 0.4 mmt (Figure 4).

Figure 4: Coastal shipping flows from or into each State in 2017/18 and 2018/19
Source: Based on data in an appendix in ACCC (2019)

Australia’s growing population mostly resides in eastern Australia. As this population grows, with Australians maintaining their appetite for grains, then interstate grain flows are likely to increase in magnitude when occasional widespread severe drought restricts grain production in eastern Australia.

Dorothea Mackellar was correct in pointing out that Australia is a land “of droughts and flooding rains”. But fortunately Australia is large and diverse enough such that rarely is the whole country in drought or flood. Usually there is some state or region that escapes these events and that region becomes a source of grain for the nation.

In 2018 WA was not drought-affected and so it became a principal source of grain for eastern Australia. In 2019 the drought-affected regions in NSW and Qld again needed to import grain from other regions like Vic, SA and WA that had production surplus to their local needs.

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