Australian wheat prices are forecast to increase by the end of 2017, which will come as welcome news to grain growers who have so far seen the benefits of a record harvest tempered by very low prices.
The latest winter crop harvest update from NAB Agribusiness is predicting wheat prices will rise by about 12 per cent, largely due to NAB’s forecast of the Australian dollar falling to 70 US cents.
NAB Agribusiness economist Phin Ziebell said while 2016-17 winter crop production was exceptional, the world was awash with wheat and prices remained generally poor.
‘‘We’re not expecting much improvement due to global supply of major crops tracking at near record levels, but a lower Australian dollar would push prices northward,’’ Mr Ziebell said.
‘‘The USDA’s latest estimates point to stocks posing a particular issue, with ending stocks pegged at almost 250 million tonnes.
‘‘Ultimately, it’s hard for prices to rise when, globally, production is rising more than consumption.’’
Wheat production in Australia in 2016-17 was exceptional, with Victoria production up an incredible 150 per cent on the previous year, NSW production up 52 per cent and South Australia on track for big yields.
While it is arguably too early to assess the coming season with any certainty, the Bureau of Meteorology’s models point to the emergence in winter this year of El Niño, which is associated with hotter and drier conditions in eastern and northern Australia.
According to Mr Ziebell, the wet winter and spring last year that resulted in massive crop yields was consistent with the near La Niña conditions recorded throughout the year.
‘‘This year, unfortunately, the bureau’s outlook is very different and we seem to have a much drier season ahead of us,’’ he said.
‘‘Last year was an unprecedented crop. ABARES latest estimates put the wheat crop at over 35million tonnes, which is more than five million tonnes higher than the previous record set five years ago.”
Victorian wheat production has swung wildly over the past few seasons. After a disappointing two million tonnes in 2015-16, production surged nearly 150 per cent to 5.2million tonnes this season — a new record.
Barley has also seen excellent production.
Victoria has seen some of the most volatile year-on-year grain production changes among Australian states.
The huge yields this year have caused particular problems, especially when combined with V/Line’s increased heat restrictions on major north-west Victorian grain lines.
The Murray Basin Rail Project will see substantial investment in grain rail infrastructure, although continued heat restrictions will make moving grain via rail much harder.