by Professor Ross Kingwell, AEGIC Chief Economist
For Australian farmers, wheat and barley prices are either at or near historic highs and crop yields are high. It might seem that this is as good as it gets; but there’s still room for improvement.
Current wheat, barley and canola prices are very high and yield prospects again seem favourable. But farmers with long memories tell their grandchildren that there was a time in Australia when wheat prices were so low that Australian wheat production had to be restricted to help drive up prices. At the instigation of the Australian wheat industry, in 1969 restrictions were placed on the quantities of wheat delivered to the Australian Wheat Board. Each wheat grower was given a quota to reduce the build-up of excessive carryover stocks after the record 1968–69 Australian wheat harvest that coincided with increased world wheat stocks suppressing global wheat prices.
But the current high prices shown in Figure 1 are not necessarily being observed at the farm-gate; with grower organisations calling for an inquiry into grain marketing, claiming that farmers are getting less for their grain than international prices would imply. But as outlined in a recent blog, sea freight costs are high and as farmers well know land transport costs are very high, lessening their farm-gate prices. In addition, often reported is how Australia’s grain supply chains have struggled to handle Australia’s record 61.9mmt winter crop harvest from 2021/22 and bring that grain to customers keen to pay the prices observed in Figure 1. Finally, even though higher prices could be achieved, some farmers obviously are prepared to sell at prices they reckon are already sufficiently attractive.
History tells us that high prices coinciding with high yields are rare events. So, should grain farmers in Australia just savour the moment or is there still room for improvement? The struggle with cost-effectively conveying grain from farm to final customers suggests there is further room for improvement. So maybe this is not quite as good as it could get. We can do more to increase the cost-efficiency and execution capability of our grain supply chains. Then we might be able to say: this is as good as it gets.
Having said all of that; spare a thought for Ukrainian farmers struggling to safely grow a grain crop, let alone also then having to work out how and where to sell it.
Expert grains industry analysis and commentary from AEGIC’s Economics and Market Insight Team on a range of big-picture topics that affect Australia’s export grains sector.