Positive outlook for grain growers

By Country News

Australian grain growers are preparing for one of their most promising seasons in recent years, with winter grain planting just weeks away.

Rabobank senior grain and oilseeds analyst Cheryl Kalisch Gordon said Australian farmers were justified in their optimism.

She said the low Australian dollar remained the key driver of a favourable outlook for Australian wheat and other grain prices, trading weaker than most major rival exporters — bolstering export opportunities and supporting local prices.

“Despite some substitution towards wheat product over the year being possible, the market purchases pushing up prices now will be offset by lower purchases once COVID-19 concerns pass,” she said.

A more significant impact on global wheat pricing would be a restriction of exports out of the Black Sea, a region that represents 30 per cent of the global wheat exports.

However, Dr Kalisch Gordon said local farm gate wheat prices would remain above average.

Concerns for the industry remained regarding the potential COVID-19 infection rate for regional Australia.

“If Australia does suffer a high infection rate in the regions it may impact on the ability to plant or harvest crops, the results of which could be devastating,” she said.

“Other watch points include re-infection in China, which would again disrupt agriculture chemical supply and create a larger demand shock, and an increasing Australian dollar.”

Demand for grains and oilseeds used in the biofuel industry — such as corn, soy and canola — would decrease due to COVID-19 travel restrictions and lower fuel consumption.

Despite coronavirus concerns, Dr Kalisch Gordon said the seasonal outlook was the most positive it had been in years.

“There’s been widespread rain and the three-month forecast continues to look promising, so the Australian supply outlook is much improved.”

She said wheat prices would remain above 10-year and five-year averages.

High incoming barley stocks globally and lowered demand for corn to produce ethanol, could soften corn prices in the feed complex and remove support from the already soft global barley market.

“Despite the prospect of lower prices, many Australian farmers will look to plant barley this season, as a low-risk option to establish cash flows after the drought,” she said.