australian wheat barley production surplus/deficit...point that they invest in a summer crop. early...
TRANSCRIPT
2
Cha
nce
of e
xcee
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med
ian
rain
fall
(%)
Estimates of total Australian winter crop production for 2018/19 are 30 ±2 million tonnes at mid-October, a decrease of around 30 per cent compared to the previous season and the smallest crop in a decade.
In the eastern states dry conditions have affected winter crops. Rainfall has been very much below average in 2018, with September 2018 being the driest September on record for Australia. Consecutive dry years have led to root zone soil moisture in 2018 falling to some of the lowest levels on record in major east coast cropping regions, with obvious consequences for crop performance. In the space of two seasons, the east coast has gone from producing its largest crop on record to its smallest in 10 years.
Rainfall outlook, November to January 2018
Growing season rainfall, 2017 Growing season rainfall, 2018
Root zone soil moisture, 2018
Source: Bureau of Meteorology, 2018 Source: Bureau of Meteorology, 2018
Source: Bureau of Meteorology, 2018Source: Bureau of Meteorology, 2018
Rainfall Decile Ranges
Rainfall Decile Ranges
Root zone soil moisture
Highest on record
Very much above average
Above average
Average
Below average
Very much below average
lowest on record
Highest on record
Very much above average
Above average
Average
Below average
Very much below average
lowest on record
Highest 1%
Very much above average
Above average
Average
Below average
Very much below average
Lowest 1%
80
75
70
65
60
55
50
45
40
35
30
25
20
10
8-9
4-7
2-3
1
10
8-9
4-7
2-3
1
Summary
32
The outlook for the remainder of 2018 is for drier and warmer conditions to persist, particularly for parts of eastern and southern Australia. Early October rainfall in southern Queensland and New South Wales has raised hopes for a sorghum crop this summer, however further rainfall is needed to give growers confidence to plant. Looking further ahead, growers around Australia will be hoping for late summer rain to restore soil moisture and confidence for the 2019/20 season.
Nationally, less area was sown to crops in the 2018/19 season, especially wheat (-13 per cent), canola (-27 per cent) and chickpeas
(-63 per cent). As the season has progressed, production estimates have been cut and cut again as dry and drought conditions have affected expected yields and caused some growers to abandon crops or cut crops for hay, especially in the eastern states. On the other hand, growers in Western Australia have been fortunate with the timing of rain this season and expect state crop production to be at or above average. Despite the dry conditions, Australia will produce enough grain this year and combined with stocks will satisfy domestic demand. However, there is a marked difference between where the crop is produced (Western Australia) and where it is needed (east coast).
Winter crop production will be lower year-on-year in Queensland (-61 per cent), New South Wales (-55 per cent) Victoria (-23 per cent) and South Australia (-18 per cent), while increasing in Western Australia (+11 per cent). At the time of writing, there is very little scope for upside in production in winter crops this late in the season. There is still potential for downside risk as frost, rain, wind and storms could all impact final crop development and harvest.
In Queensland there are some pockets around the Darling Downs that may achieve an average yield having been among the fortunate few to catch some timely storm rainfall. For the most part, the winter cropping season is a failure. For these growers, decent rain within the next month is required to restore soil moisture and confidence to a point that they invest in a summer crop.
New South Wales has had a very poor season. A fortunate few caught isolated rainfall from storms, but on the whole, it has been extremely dry. Early October rain has brought short term relief, particularly around Dubbo and Orange, however rainfall at this stage
is too late to make a difference to winter crop production and some crops will be cut for hay.
In Victoria, crops in the Mallee and northern Wimmera are generally in poor condition and further rainfall will make little difference to the performance of these crops. Frost has also caused some crop damage in parts of the Wimmera. With reports of a lot of crop being cut for hay, rainfall from this point will impact hay quality. That said, at the time of writing there are pockets of good crops and these would certainly benefit from further rainfall especially to boost grain quality. South of Horsham, crops are in better condition and rainfall would be a welcome boost.
In South Australia crops on the Eyre Peninsula south of Cummins, as well as much of the Yorke Peninsula, are in good condition but are running out of moisture so rain is needed. Similarly, crops in the Upper South East and around Naracoorte have plenty of potential if they receive further rain. Elsewhere in South Australia crops are fairly poor.
Australian wheat barley production surplus/deficit
milli
on to
nnes
0
1
-5
2
-4
3
-3
4
-2
5
-1
Data: Australian Crop Forecasters
Western Australia NationalNew South Wales Victoria East CoastQueensland South Australia
2017/18 2018/19
4
Despite a drier than normal season in Western Australia, timely rainfall has set up crops that will yield close to average for most cropping regions. The widely publicised frost events in mid-September were very damaging to some at the local level, however the impact on Western Australian production potential does not appear to have been as widespread as was thought at the time. To maintain yield potential in Western Australia, more rain to finish the crop would be ideal, and then transitioning to drier weather for an uninterrupted harvest.
The impact of below average production this season has been the overwhelming driver behind the strong growth in domestic crop prices so far in 2018. Over the coming month, finishing conditions will be a key determinant of just how much grain makes it in the bin and therefore the direction prices take from here. Without a significant turn in seasonal conditions, an average or better summer sorghum crop, pasture rejuvenation, and significant easing of domestic demand for stock feed, it is difficult to see a reason for price pressure to ease ahead of the 2019/20 crop.
Australian winter crop production falls to the lowest level in a decade
milli
on to
nnes
0
10
20
30
40
50
60
Data: Australian Crop Forecasters, ABARES Western Australia New South Wales Victoria Queensland South Australia
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2017-18 2018-19 F2016-17
Wheat price
AU
D/t
onne
AP
W1
del
. Por
t Ade
laid
e
0
199
619
9719
98
199
92
00
02
001
20
02
20
03
20
04
20
05
20
06
20
072
00
82
00
92
010
201
12
012
201
32
014
201
52
016
201
72
018
50
100
150
200
250
300
350
400
450
500
Data: Profarmer AustraliaSpot APW1 Decile 2 Decile 8
54
Australian wheat production for the 2018/19 season is expected to be the lowest for 11 years. Estimates of national production range from 16 to 19 million tonnes, a decrease of 25 per cent compared to the previous season.
The drop in production is due in part to year-on-year reductions in the area planted to wheat, and to lower yields due to ongoing dry and drought conditions in the eastern states. Dry conditions and a failed autumn break saw partial or entire planting intentions abandoned across parts of Queensland and New South Wales, while a late break saw this trend continue to a lesser extent in Victoria and South Australia. Dry conditions across large swathes of Queensland and New South Wales, Northern Victoria and parts of South Australia have reduced national average yield expectations to less than 1.5 tonnes per hectare.
In Queensland and New South Wales there are some pockets that may achieve an average yield having been among the fortunate few to catch some timely storm rainfall during the growing season, for example around the Darling Downs. However, for the most part winter crop production will be very poor due to the combined impact of abandoned planting programs, failed crops and some cutting of crops for hay. For growers in that situation, decent rain during October and November is required to restore soil moisture and confidence to a point that they invest in a summer crop.
Early October rain is largely too late to change the fortunes of crops, although in southern regions it may have helped to finish some crops.
Overseas, global wheat production is expected to be three per cent lower in 2018/19 compared to the previous season. This will be the first year in five that global wheat production will not increase and moreover, not increase to a new record high. Even so, at an estimated 730 million tonnes produced in 2018/19, global wheat production is still historically high and three percent above the 10 year average. Smaller wheat crops in the European Union, Russia, Ukraine and Australia are driving global wheat production lower. Chinese production is expected to be unchanged year-on-year while a small increase in wheat production is expected in North America (USDA, 2018).
Wheat
Global wheat supply to drop in 2018/19 for the first time in 5 years
milli
on to
nnes
pro
duce
dm
illion tonnes ending stocks
550
600
650
700
750
800
Data: Australian Crop ForecastersChina wheat ending stocks (RHS) World wheat ending stocks (RHS) World wheat production (LHS)
2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2017-18 2018-19 2016-17
0
50
100
150
200
250
300
Wheat production estimates 2018/19
QLD NSW VIC SA WA National
MMT 0.3-0.5 1.6-2.5 2.1-2.9 2.5-3.6 9.4-9.6 16-19
% change (-68%/-23%) (-69%/-44%) (-39%/-23%) (-39%/-10%) (-24%/-21%) (-25%/-10%)
Data: Australian Crop Forecasters, ABARES, USDA, PIRSA
6
Globally, there has been no shortage of wheat in recent years. Global wheat ending stocks had increased each year for the past five years to a high of 274 million tonnes in 2017/18. That trend will also be checked this season as wheat ending stocks are expected to drop by five per cent to 261 million tonnes. However, ending stocks should be considered tighter still as China holds approximately half of the world’s wheat stocks, which are considered largely unavailable to the global
market. Excluding China’s stocks, world wheat ending stocks are expected to be the lowest in five years, dropping to 125 million tonnes.
Global wheat consumption is trending higher at a rate of 1.5 per cent per year, mirroring population growth. Global consumption is expected to reach 743 million tonnes in 2018/19, eclipsing wheat production in the same year for the first time in six years.
Total domestic use is expected to be approximately 7.6 million tonnes in 2018/19, leaving a maximum of 10 million tonnes of wheat for export, which will be a 10 year low in volume terms.
High domestic prices and an east coast supply deficiency have raised the prospect of importing wheat this season. While there is anecdotal evidence that some industry participants have begun discussions with AQIS about import permits, the biosecurity requirements to import wheat will be largely prohibitive. Therefore, Western Australia and
South Australia remain the most likely, and reliable, supplier of wheat to the east coast of Australia this season.
Australian wheat prices have been increasing strongly since April 2018 when it became apparent that it was likely that production would be below average in 2018/19. At the time of writing wheat prices had risen by 85 per cent from the beginning of the year to over 430 AUD/tonne (APW1 delivered Port Adelaide), putting the current market in the 10th decile.
Global wheat production/consumption balance
milli
on to
nnes
0
10
20
-40
30
-30
40
-20
50
60
-10
Data USDA
Australian wheat prices
Jan Feb Mar Apr May Jun Jul Aug Sep Oct
100
0
300
200
400
500
600
Data: Profarmer
AU
D/t
onne
Kwinanna Port KemblaPort Adelaide Newcastle Brisbane Dec 18 CBOT WheatGeelong
20
01/0
2
20
02
/03
20
03
/04
20
04
/05
20
05
/06
20
06
/07
20
07/0
8
20
08
/09
20
09
/10
201
0/1
1
201
1/1
2
201
2/1
3
201
3/1
4
201
4/1
5
201
5/1
6
201
6/1
7
201
7/18
201
8/1
9
76
Wheat price projection based on historical price movement** (wheat APW1 - delivered Port Adelaide)
The domestic market is currently dominating local price trends. The small element of price support from international markets over the past 12 months has come in equal measure from a small increase in CBOT wheat and from a weakening Australian dollar, which has seen offshore values firm in Australian dollar terms.
Our expectations for domestic wheat prices based on an autoregressive model*, in this case illustrated by the price for APW1 delivered to Port Adelaide, are for the wheat price to drift toward the upper boundary of the forecast range** and very likely break above it. The rationale behind this view is that at this stage of the season further downside production risk is much greater than the potential for upside in Australia, the Australian Dollar appears to be in a weakening trend, and international wheat prices may be on the upswing in
most major exporting countries driven by consumption closing in on production and lower ending stocks. In short, it is unlikely that we will see a significant softening trend until the market gets early estimates of the 2019/20 crop. *The autoregressive model uses trends, volatility, seasonality and cyclical patterns observed in the historic data to project a likely range of future values.
**This forecast is not a recommendation. The chart projects forward based only on historical price movements. The projected field takes no account of current or likely near or medium-term conditions.
Data: Rural Bank, Profarmer
AU
D/t
onne
0
100
200
300
400
500
Dec
-12
Apr
-16
Apr
-11
Aug
-14
May
-13
Feb
-17
Sep
-11
Jan
-15
Jun
-10
Jan
-10
Oct
-13
Jul -
17
Feb
-12
Jun
-15
Nov
-10
Mar
-14
Dec
-17
May
-18
Oct
-18
Mar
-18
Aug
-19
Sep
-16
Jul -
12
Nov
-15
95% confidence interval68% confidence interval
Wheat - components of price movement September 2017 to September 2018
$ /
tonn
e
0
50
100
150
200
250
300
350
400
450
Sep’ 17 APW @ Pt. Adel
Sep’ 18 APW @ Pt. Adel
FXCBOT Domestic
Data: Profarmer, Barchart, Reserve Bank of Australia
8
Australian barley production for the 2018/19 season is expected to be the lowest in six years. Estimates of national barley production range from 7.8 to 8.3 million tonnes, a decrease of 18 per cent compared to the previous season.
The national area planted to barley is similar to last season. At a state level, less area planted in New South Wales and Queensland is offset by more area planted in Victoria and Western Australia. The drop in barley production is largely due to lower yields expected in 2018/19 particularly on the east coast.
Coarse grain
Australian sorghum production for the 2018/19 season is expected to be just below the five year average. Early estimates of national sorghum production range from 1.4 to 1.9 million tonnes. There is still a lot of variability in sorghum estimates at this early stage of the summer crop season, and early October rain has gone some way towards improving confidence ahead of sorghum planting but more rain is needed. With limited irrigation water to be used for cotton production this year, a boost to sorghum production could come from cotton growers looking to plant an alternate summer crop.
Overseas, global barley production is expected to be 141 million tonnes in 2018/19 (down two per cent) and only just above the 10-year average. This continues a three-year trend of declining global barley production driven by less production in the European Union and Australia.
Global sorghum production is expected to be 59 million tonnes, an increase of two per cent but still below the 10-year average.
Global coarse grain production is largely corn, which is expected to be up by three per cent to 1,068 million tonnes, and will be the second highest level of global production on record.
The volume of corn used in stockfeed is growing by 3.5 per cent per year and is a major factor in the consistent, growing demand observed for coarse grains. Global barley and sorghum consumption has been flat over the past 10 years. Nevertheless, combined coarse grain consumption has been rising at an average annual rate of 2.5 per cent, entirely due to the growth of corn consumption. Australian
domestic barley consumption is growing at 1.9 per cent, per year. Total domestic use is expected to be approximately 4.4 million tonnes in 2018/19, leaving 3.5 million tonnes of barley for export, which will be a 10 year low in volume terms.
Coarse grain production estimates 2018/19
QLD NSW VIC SA WA National
Barley MMT 0.05-0.10 0.3-0.5 1.1-1.6 1.2-1.9 3.6-3.8 6.2-8.3
% change -50% -75% -43% -42% -4% -30%
Oats MMT 0.01-0.02 0.14-0.30 0.19-0.22 0.09-0.12 0.57-0.95 1.05-1.57
% change -6% -17% -4% 25% 43% 18%
Sorghum MMT 0.99-1.07 0.47-0.49 1.46-1.95
% change -7% -8% -7%
Data: Australian Crop Forecasters, ABARES, USDA, PIRSA
98
Data: USDACorn Sorghum Oats Course grain ending stocks (RHS) Barley Millet Rye
Global coarse grain production/consumption balance
Global coarse grain production/consumption edges higher while ending stocks drop
milli
on to
nnes
0
10
20
-40
-50
30
-30
40
-20
50
60
-10
Data USDA
20
01/0
2
20
00
/01
20
02
/03
20
03
/04
20
04
/05
20
05
/06
20
06
/07
20
07/0
8
20
08
/09
20
09
/10
201
0/1
1
201
1/1
2
201
2/1
3
201
3/1
4
201
4/1
5
201
5/1
6
201
6/1
7
201
7/18
201
8/1
9
milli
on to
nnes
pro
duce
d
0
500
1,000
1,500
2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2017-18 2018-19 2016-17
0
100
200
300
million tonnes ending stocks
10
Australian barley prices have tracked similarly to wheat in 2018, increasing strongly through the year in response to expectations of below average production. At the time of writing, feed barley had risen by 64 per cent from the beginning of the year to almost 390 AUD/tonne (F1 delivered Port Adelaide), which puts the current market in the 10th decile.
Sorghum prices have risen by 34 percent this year, to over 400 AUD/tonne in early October.
Our expectations for domestic barley prices, in this case illustrated by the price for F1 delivered to Port Adelaide, are for barley prices to drift towards the higher end of the forecast range*. Unless we see enough rain to make for a big summer crop, it appears domestic feed barley values will remain supported at around current values, at least in the short term.
The outlook for sorghum values depends a lot on spring and summer rainfall. Domestic supply and demand are very tight this year, so every tonne of feed grain produced on the east coast is one less tonne that has to be imported from South Australia or Western Australia.
With a reasonable amount of sorghum planting, and reasonable yields, we would expect to see the drawing arc of grain into the key feed sinks in southern Queensland and northern New South Wales reduce and some pressure come out of the domestic feed grains market.
On average, Queensland and New South Wales combined produce around 1.5 million tonnes of sorghum, which could meet 20-30% domestic feed grain demand in North Eastern Australia. However, particularly in a year as dry as this, growers need the rain for confidence before a summer crop goes in.
Australian feed barley prices
Jan Feb Mar Apr May Jun Jul Aug Sep Oct
50
0
200
250
100
150
300
400
350
500
450
Data: Profarmer
AU
D/t
onne
Kwinanna Port KemblaPort Adelaide Newcastle BrisbaneGeelong
1110
Feed barley projection based on historical price movement* (barley F1 - delivered Port Adelaide)
Sorghum projection based on historical price movement (sorghum - delivered Brisbane)
Data: Rural Bank, Profarmer
Data: Rural Bank, Profarmer
AU
D/t
onne
AU
D/t
onne
0
0
100
100
200
200
300
300
400
400
500
600
500
Jun
-16
Dec
-12
Apr
-16
Oct
-14
Apr
-11
Feb
-18
Aug
-14
Nov
-16
May
-13
Feb
-17
Mar
-15
Sep
-11
Jul -
18
Jan
-15
Dec
-13
Jun
-10
Jul -
13Ja
n -1
0
Apr
-17
Oct
-13
Jul -
17
Aug
-15
Feb
-12
Dec
-18
May
-19
Oct
-19
Jun
-15
May
-14
Nov
-10
Sep
-17
Mar
-14
Dec
-17
May
-18
Oct
-18
Mar
-19
Aug
-19
Sep
-16
Jan
-16
Jul -
12
Nov
-15
95% confidence interval
95% confidence interval
68% confidence interval
68% confidence interval
*This forecast is not a recommendation. The chart projects forward based only on historical price movements. The projected field takes no account of current or likely near or medium-term conditions.
12
Oilseeds
Australian canola production this season is expected to be the lowest for nine years. Estimates of national production range from 2.0 to 2.9 million tonnes, a decrease of 47 per cent compared to the previous season.
The drop in production is due in part to less area planted to canola this season (down 27% year-on-year) and dry and drought conditions
in the eastern states which will impact yields. Due to the dry and late start in Western Australia, canola tended to be sown as a normal part of crop rotation but less so as an opportunistic crop, contributing to the drop in area. In the eastern states, some canola crops have been abandoned and others are being cut for hay owing to the dry season, frost and strong prices for hay.
Overseas, global canola production is expected to be two per cent lower in 2018/19 compared to the previous season. Production in the European Union is expected to be the lowest since 2008/09. Nevertheless, growth in the production of other oilseeds will see total oil seed production increase to a new record high of 604 million tonnes, led by a 10 per cent increase in global soybean production to almost 370 million tonnes (USDA, 2018). Total global oilseed stocks will rise with the boost in soybean production.
Oilseed production estimates 2018/19
QLD NSW VIC SA WA National
Canola MMT 0.3 0.43-0.46 0.3 1.47-1.64 2.52-2.90
% change -50% -36% -18% -27% -32%
Soybean MMT 0.01 0.03 0.04-0.05
% change -36% -27% -28%
Data: Australian Crop Forecasters, ABARES, USDA, PIRSA
Production
million tonnes
Data: USDASoybean ending stocks (RHS) Canola ending stocks (RHS) Soybean production (LHS) Canola production (RHS)
Growth in global soybean production is driving total oilseed production higher
milli
on to
nnes
0
50
100
150
200
250
300
350
400
2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2017-18 2018-19 2016-17
0
20
40
60
80
100
120
140
1312
Global consumption of oilseeds is growing steadily higher at an average annual rate of 3.7 per cent over the past decade. Looking just at canola, global consumption is growing at 2.2 per cent. Demand is expected to continue to rise at a similar rate owing to the acceleration of the use of oilseeds in food and especially the steady expansion of livestock industries.
Domestic consumption has averaged 1.7 million tonnes in recent years, leaving very little for export this season. On the east coast, local canola production is expected to fall below the volume of canola required by the domestic crush.
Australian canola prices have been trending higher since the beginning of the calendar year. Canola delivered to Port Adelaide has risen by 35 per cent to 620 AUD/tonne, a 10th decile price at the time of writing. Low and uncertain production this season is clearly giving support to local prices. Particularly on the east coast where 85-90 per cent of the domestic crush capacity is located.
milli
on to
nnes
0
5
10
-20
-25
15
-15
20
-10
25
-5
Data USDA
20
01/0
2
20
00
/01
20
02
/03
20
03
/04
20
04
/05
20
05
/06
20
06
/07
20
07/0
8
20
08
/09
20
09
/10
201
0/1
1
201
1/1
2
201
2/1
3
201
3/1
4
201
4/1
5
201
5/1
6
201
6/1
7
201
7/18
201
8/1
9
Canola Soybean
Australian canola prices
Global oilseed production / consumption balance
Jan Feb Mar Apr May Jun Jul Aug Sep Oct
450
400
550
500
600
650
700
Data: Profarmer
AU
D/t
onne
Kwinanna Port KemblaPort Adelaide Newcastle Nov 18 Matif RapeseedGeelong
14
Canola - components of price movement September 2017 to September 2018
$ /
tonn
e
490
500
510
520
530
540
550
560
570
580
590
Sep’ 17 canola @ Pt. Adel
Sep’ 18 canola @ Pt. Adel
FXEURO Domestic
Overseas, oilseed markets have been less robust this year with canola ICE January 2019 back to the same level as the start of the year around 500 CAD/tonne. Similarly, European February 2019 futures values are close to October 2017 value at 376 EUR/tonne. Soybean values (CBOT January 2019) have dropped by 11 per cent over the past year in anticipation of a large soybean harvest in North and South America and ongoing trade tensions between the US and China. Despite a softer tone in some offshore oilseed markets, a weakening Australian Dollar combined with strengthening domestic premiums have pushed Australian canola values higher.
Our expectations for domestic canola prices are to move in the upper half of the charted forecast range*. The main drivers behind that view are lower Australian production this season, steadily growing international demand, weather related delays to shipments from Canada, weakening Australian Dollar and wet weather delays to the US soybean harvest combining to push progress behind the five-year average pace.
*This forecast is not a recommendation. The chart projects forward based only on historical price movements. The projected field takes no account of current or likely near or medium-term conditions.
Data: Profarmer, Barchart, Reserve Bank of Australia
Canola projection based on historical price movement*(canola - delivered Port Adelaide)
Data: Rural Bank, Profarmer
AU
D/T
onne
0
100
200
300
400
600
500
700
Dec
-12
Apr
-16
Apr
-11
Aug
-14
May
-13
Feb
-17
Sep
-11
Jan
-15
Jun
-10
Jan
-10
Oct
-13
Jul -
17
Feb
-12
Jun
-15
Nov
-10
Mar
-14
Dec
-17
May
-18
Oct
-18
Mar
-18
Aug
-19
Sep
-16
Jul -
12
Nov
-15
95% confidence interval68% confidence interval
1514
Australian pulses production is expected to be the lowest since the 2014/15 season. Estimates of national production are close to 1.7 million tonnes, a decrease of 36 per cent compared to the previous season. The decline in production this season is particularly apparent for chickpeas and field peas, which are estimated to drop by 66 and 19 per cent, respectively. The production drop for chickpeas appears stark in the context of recent ramping up of production just three years ago.
Pulse production estimates 2018/19
QLD NSW VIC SA WA National
LupinsMMT 0.05 0.03 0.05 0.41 0.55
% change -35% -22% -7% 17% -4%
LentilsMMT 0.01 0.12 0.23 0.35
% change -25% -43% -13% -22%
ChickpeasMMT 0.21 0.09 0.04 0.02 0.004 0.37
% change -65% -85% -24% -16% 8% -66%
Faba beansMMT 0.02 0.07 0.11 0.01 0.20
% change -44% -28% -17% 18% -24%
Field peasMMT 0.03 0.04 0.11 0.04 0.23
% change -26% -20% -24% 10% -19%
Australian Crop Forecasters, ABARES, USDA
Pulses
The decline in Australian production in 2018/19 is due to a large drop in the area sown to pulses (chickpea -63 per cent, field peas -13 per cent, lentils -29 per cent, lupins, -13 per cent, faba beans -13 percent) as well as dry seasonal conditions that will impact yields. Being export exposed to the extent that 75 per cent (five year average) of Australian pulse production is exported, the area sown to pulses this season has much to do with Australian growers responding to changes in export markets. For chickpeas and lentils India plays a particularly important role.
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India is the largest producer, consumer and importer of pulses in the world. The Government of India plays an interventionist role in its agricultural markets seeking to maintain minimum prices for Indian farmers. Changes to price support in recent years have boosted support for pulses ahead of other crops. Despite growing demand for human consumption of pulses, and use in stockfeed, the new policy setting has seen production and stocks of pulses increase putting pressure on domestic prices. The Government of India has favoured restricting imports over allowing domestic pulse prices to soften. That’s little consolation for Australia’s pulse producers, who now face price and demand uncertainty from the world’s largest importer of pulse crops. What we can be certain about is the Indian Government’s propensity to pull and push the tariff lever in an attempt to manage Indian domestic prices.
Movement in Australian pulse prices has been mixed in 2018. The market for chickpeas (desi), has found some support since the lows set earlier this year immediately following the introduction of tougher Indian tariff measures. These tariff measures continue to see Australia sidelined from this market, leaving Australian chickpeas to find homes in Pakistan and Bangladesh markets. Poor availability of chickpeas (desi), owing to the poor condition of the Australian crop, is providing some support to chickpea (desi) markets.
While the spread between desi and kabuli chickpeas has opened up, chickpeas (kabuli) are holding up reasonably well with new crop sitting at around 580-600 AUD/tonne delivered to Port Adelaide. Given that there will be some inflexible demand for Australian chickpeas that needs to be filled this season, the less than favourable production outlook does continue to bring support to local chickpea (kabuli) values. On the other hand, the global supply and demand balance for chickpeas points towards more downside than upside for prices.
Data: ABARES & Australian Crop ForecastersBeans Peas Chickpeas Lentils Pulses/nes Lupins Total Australia (RHS)
Global pulse production is trending higher and Australian production returns to average
Glo
bal p
rodu
ctio
n (m
illion
tonn
es)
Aust
ralia
n pr
oduc
tion
(milli
on to
nnes
)
0 0.0
201.0
40
2.0
80
4.0
5.0
60
3.0
100 6.0
20
06
-07
20
07-0
8
20
08
-09
20
09
-10
201
0-1
1
201
1-1
2
201
2-1
3
201
3-1
4
201
4-1
5
201
5-1
6
201
6-1
7
201
7-18
201
8-1
9
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Local new crop faba bean prices have taken off over the last two months with values increasing by 75 per cent since the start of August. Faba beans have found support from strong export demand for faba beans of human consumption quality, tightening supplies in Europe and deteriorating prospects for the Australian crop. On the demand side, strong export demand for human consumption quality into Egypt continues to be a source of price support. However, this demand does tend to slow once Ramadan begins, and is likely to impact Australian markets from mid to late March 2019. However, the level of price support seen for the food grade products means that faba beans are no longer competitive for use as stockfeed, and so we expect to see heavy discounts for feed grade faba beans whilst high prices persist.
In comparison to faba beans, lentils have found a much more modest level of price support with nipper lentils currently sitting at around 450 AUD/tonne and 430 AUD/tonne delivered to Melbourne and Adelaide, respectively. However, given the dry conditions across South Australia and Victoria this season, local demand is keeping lentil prices relatively firm. Lentils are increasingly being used in stock feed as the price for other grains has increased. Export demand remains weak due to ongoing tariff pressure from the Indian market and continues to make for sideways price movement for lentils.
Lupin values across the country have been underpinned by ongoing demand for protein in east coast stock feed markets. Western Australian lupin values have firmed by around 30 per cent from March to October, placing the current prices in the 10th decile. Shipments into the east coast are providing another source of demand for Western Australian lupins, adding to existing opportunities in export markets.
Kwinanna lupins Port Adelaide Faba Beans Port Adelaide Lentils Brisbane Chickpeas
Mixed trends in pulse prices in 2018
09-11-11 09-11-12 09-11-13 09-11-14 09-11-15 09-11-16 09-11-17
200
0
600
400
800
1200
1600
1400
1000
Data: Profarmer
AU
D/t
onne
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This report is intended to provide general information on a particular subject or subjects and is not an exhaustive treatment of such subject(s).The information herein is believed to be reliable and has been obtained from public sources believed to be reliable. Rural Bank Limited, ABN 74 083 938416 AFSL / Australian Credit Licence 238042 makes no representation as to or accepts any responsibility for the accuracy or completeness of information contained in this report. Any opinions, estimates and projections in this report do not necessarily reflect the opinions of Rural Bank and are subject to change without notice. Rural Bank has no obligation to update, modify or amend this report or to otherwise notify a recipient thereof in the event that any opinion, forecast or estimate set forth therein, changes or subsequently becomes inaccurate. This report is provided for informational purposes only. The information contained in this report does not take into account your personal circumstances and should not be relied upon without consulting your legal, financial, tax or other appropriate professional.© Copyright Rural Bank Ltd ABN 74 083 938 416 and Bendigo and Adelaide Bank Ltd ABN 11 068 049 178 (RBL19282) (10/18)
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