AUSTRALIA is set for a second consecutive bumper winter harvest, with total production forecasted to be just five per cent shy of last year's near-record crop, according to Rabobank.
In its just-released Australian Winter Crop 2021/22 Production, Price and Inputs Forecast, the specialist agribusiness bank estimated the nation will harvest 52.87 million tonnes of winter grains, oilseeds and pulses this season.
While down 5pc on last year's crop, it is still a hefty 25pc above the five-year average.
Canola is the standout mover, with production estimated to reach a new record of 5.16mt (up 14pc on last year and a stellar 48pc above the five-year average), driven by increased planting and favourable growing conditions in many regions.
Australia's wheat production is expected to come in at 31.9mt (down 4pc cent on last year, but still 35pc above the five-year average).
Barley production is forecasted to be down 10pc on last year to 11.mt, though also still up on the five-year average by 7pc.
Rabobank agriculture analyst and report co-author Dennis Voznesenski said Australia's second consecutive very large winter crop came at an opportune time for local growers, with global shortages and high prices for grains and oilseeds.
"Short global supplies of grains and oilseeds will continue to support Australian prices over the year ahead," Mr Voznesenski said.
"Although global prices can be expected to soften as new crops in different regions around the world come into play, the uncertainty that exists around seasonal conditions in grain-growing areas and the process of global grain stocks re-building will keep prices at least above the range of the past six to seven years."
The report noted favourable growing conditions in Australia have seen expectations of increased amounts of high-protein wheat in Queensland, South Australia and Western Australia this harvest, which have timed perfectly with a global shortage of high-protein wheat, due to drought in North America.
Other factors of note for this year's winter crop included a lower supply of malt-quality barley - due to a reduction in barley planting and particularly malt varieties - and less grain baled for hay because of export concerns due to a largely-closed Chinese hay market.
"There is also a proportion of last year's record east coast harvest - 10pc to 15pc - that remains onfarm," Mr Voznesenski said.
"This will compete with the coming crop for storage space and mean more delivery and price pressure during harvest."
Rabobank forecasted Australia's total grain exports will increase again this year, by 5pc year-on-year (YOY), to include 24.5mt of wheat, 7.8mt of barley and 4.3mt of canola.
"A second, very large harvest means that Australia's stocks will be replenished after the drought, so we will be able to lift exports in 2021/22, despite production coming in lower than last year," Mr Voznesenski said.
"We expect Australia will again be able to deliver a strong export performance into South East Asia, with Australian wheat continuing to be the price setter across the region.
"This is due to lower prices in Australia as a result of the substantial surplus that will be available, but also favourable freight costs compared with grain from further afield - an advantage that increases in times of high-cost freight like we have and expect to continue in 2022."
Rabobank forecasted 2021/22 winter crop production to be up by 18pc in both WA and Queensland - off the back of improved rainfall over the growing season in both States.
New South Wales' production is expected to be down 14pc on last year's record harvest in the State, but still nearly 70pc above the five-year average.
South Australia's crop is forecasted to decline 10pc YOY, due to less favourable planting conditions and patchy rainfall, while Victoria is set to record the largest decline in production - down 24pc on last year, primarily due to drier conditions in the western part of the State.
For wheat, the Rabobank report noted that low world stocks will keep global prices at high levels.
Rabobank senior commodities analyst and report co-author Cheryl Kalisch Gordon said global wheat stocks had fallen, particularly in exporting nations and were on-track to decline materially over the next nine months, exerting upward pressure on Chicago Board of Trade (CBoT) wheat prices in the year ahead.
"This has been driven by high usage of wheat in animal feed, substituting for corn, which is in low supply and also due to downgraded wheat quality in the European Union relegating it stock feed use, while there has also been steady growth in food consumption," Dr Kalisch Gordon said.
The bank expected CBoT wheat to trade in the 725-740 US cents per bushel range until the second quarter of 2022, when it is forecasted to decline as northern hemisphere new crop supply becomes available, but continuing above USc700/bu for the balance of 2022, given the stock rebuilding that will be required.
For local wheat prices, the bank expected to see price resilience during the remaining months of 2021, despite harvest pressure and the favourable harvest volume.
"This is due to the strong demand we expect as the world searches for wheat after the northern hemisphere harvest finishes and with some assistance of further softening of the Australian dollar," Dr Kalisch Gordon said.
"This should especially be the case for higher-protein wheat."
The bank expects the Australian dollar will remain in the low USc70 range, supporting Australian wheat values during the year ahead.
For Australian barley, while Rabobank does not expect China to return as a market to a material degree even in the mid-term, the tight global corn market is set to support barley demand over the coming year.
"Prices will be supported as buyers, especially in South East Asia and the Middle East, continue to find good value in barley as a substitute for corn in livestock feeding," Dr Kalisch Gordon said.
"Local demand for feed barley is also expected to remain steady, with the number of cattle on feed in Australia remaining above one million head and demand for export beef staying buoyant, along with steadily growing demand from the poultry sector.
"Malt barley demand is also improving, with recovering beer demand globally as the world opens after COVID-19."
Local barley prices are forecasted to appreciate marginally after harvest and in the first half of 2022, before softening at the back end of 2022, however remaining at above-average levels.
For canola, the report stated that record high prices off the back of low global stock levels - due to poor seasons in Canada and the EU - should see expanded production in the northern hemisphere next season.
This will lead to a substantial re-supply in global canola stocks in 2022, however the affect of the low global stock situation will be felt over the coming year.
"With the deep hole in global canola stocks and still some resupply uncertainty, global prices are expected to remain elevated into the second quarter of 2022, before softening, but remaining materially above five-year averages for the balance of next year," Dr Kalisch Gordon said.
"Locally, we expect the same pattern with Australian canola prices, though with some harvest pressure in quarter four this year, with the forecast record canola harvest that is expected."
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