Thursday 15 December, 2016
- A bumper Australian crop has pushed farm production value sky high.
- However, AEGIC is cautioning Australian growers to remember our competitors also had large harvests.
- Price pressure and competition may intensify in 2017.
- Australian growers should carefully manage profits from 2016.
The gross value of Australian farm production will surpass $60 billion in 2016-17 for the first time ever*, but Australian grain farmers have not been the only ones to receive a Christmas harvest bonus.
Australian Export Grains Innovation Centre (AEGIC) Chief Economist Professor Ross Kingwell said most of the increased farm production value in Australia in 2016-17 was a result of greater crop production.
“The United States Department of Agriculture (USDA) estimates Australia’s 2016-17 wheat crop to be a record 33.0 million metric tonnes, up 8.5 mmt or 35% from last year. Barley production is estimated at a record 10.6 mmt, up 7 percent from last year,” he said.
“Even in the important grain-growing state of Western Australia – where frost damage caused significant losses of wheat – production of canola and other crops has increased greatly.”
However, Professor Kingwell said large harvests had also occurred in Europe, the Black Sea region and North America, and Australian growers should remain careful and strategic.
“The USDA estimates a third record global wheat harvest of 751.26 mmt in 2016-17, which will send carryover to a record 252.14 mmt,” he said.
“Russia’s wheat harvest in 2016 was a record 71.9 mmt, over twice the size of Australia’s wheat crop.
“In recent months, Russia has increased its area planted to winter wheat by about 1%, and similarly Ukraine has increased its area planted to wheat by around 4%. So next year, weather permitting, large harvests of Black Sea wheat will be available for sale.
“Considering all this, Australian wheat farmers will need to be careful how they spend their profits from season 2016. There will potentially be continued pressure on many grain prices in season 2017 and competition from the Black Sea region may only intensify.”
The Black Sea region is emerging as an important competitor to Australian wheat in several markets. AEGIC has produced two major reports analysing the challenges posed by Russia and Ukraine which are available via the below links:
- Russia’s wheat industry: Implications for Australia
- Ukraine – An emerging challenge for Australian Wheat Exports
* Source: Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES):