February 21, 2017

In Focus: Grain harvest February 2017

For the 2016-17 season, we developed a new wheat production forecast model, based on regional rainfall and state yields going back to federation, with an allowance for technological change.

Key Points:

  • Harvest of the 2016-17 winter crop has now essentially drawn to a close and all signs point to an unprecedented crop. ABARES’ latest estimates put the wheat crop at over 35 million tonnes, more than 5 million tonnes higher than the previous record of 29.9 million tonnes, set in 2011-12. Massive yields were driven by a much wetter than average winter and spring in eastern Australia. Western Australia saw a perfect start to the season but a much dryer winter with elevated frosts. Nonetheless the west still managed to produce an above average crop.
  • While production has been exceptional, prices remain generally moribund. The world is awash with wheat and inventories remain extensive, despite the USDA downgrading global carryover stocks by 4.7 million tonnes this month. While we note yield downgrades in parts of the Black Sea and lower US winter wheat plantings, it remains unlikely that USD prices will rise significantly this year. Our forecast is for Australian wheat prices to increase around 12% by the end of calendar year 2017, although this is based largely on our expectations of a lower AUD. If the AUD stays higher, local wheat prices are likely to remain lower.
  • While 2016-17 saw a bumper year, the outlook for the coming season is somewhat more concerning. While it is arguably too early to assess the coming season with any certainty, the Bureau of Meteorology’s models point to the emergence of El Niño in winter this year. El Niño is associated with generally (but not always) hotter and dryer conditions in eastern and northern Australia. The impact of any El Niño event is highly variable and the impact on Australian crop yields ranges from relatively minor to extremely severe.

For further analysis download the full report: