Ikon Commodities issued an upbeat forecast for this year’s Australian wheat harvest – pegged at third largest on record - in the latest of a series of brighter signs for farmers, after years of drought-hit results.
The Sydney-based broker forecast the Australian wheat crop to be harvested late in 2020 at 27.89m tonnes – “almost twice of last year’s” result, which the official Abares crop bureau estimates at 15.17m tonnes.
Ikon’s estimate would also be “28% higher than the five-year average”, and would represent the country’s third-biggest result ever, behind only 2011 and 2016 harvests.
It is also larger than other commentators are factoring in, with Abares itself, for instance, forecasting a 21.35m-tonne crop this year, and the United Nations Food and Agriculture Organization a 21m-tonne harvest.
For canola, Ikon issued an upbeat estimate too, at 3.57m tonnes, up more than 50% year on year, and again a figure well above the Abares forecast, of 2.63m tonnes.
However, for barley, the broker’s estimate, at 9.09m tonnes, was in line with the bureau’s forecast.
Ikon also pencilled in a 710,000-tonne Australian chickpea harvest in 2020-21, which would be comfortably below the five-year average, the broker also, although a big improvement on the 281,000 tonnes at which Abares estimates the 2019-20 crop.
‘Large rainfall events’
Ikon said its expectations for Australian grains output to “rebound significantly” next season reflected the return of rains, after three successive drought-depressed harvests in many eastern areas.
“Most of the country has received large rainfall events to date – encouraging farmers in certain regions to plant at near maximum capacity.”
Australia’s winter wheat sowings season is traditionally seen as opening with Anzac day, on April 25, although many growers start earlier, particularly for canola.
Ikon also noted weather forecasts showing prospects for further rains, with “large parts of New South Wales”, which suffered particularly from drought, “to receive between 50mm-100mm over the next few months.
“This will be enough to get yields to be above [the] long-term average.”
Currency market support
Planting prospects are being helped too by the support to local prices from the slide in the Australian dollar – down more than 14% so far in 2020 against the US dollar, thanks to Australia’s exposure to China’s commodity needs, which have been cut by the downturn prompted by Covid-19.
“The falling Australian dollar is the gift that keeps on giving,” said Tobin Gorey at Commonwealth Bank of Australia, highlighting the boost the devaluation offers to local values of assets traded globally in US dollars.
“Just to emphasise how important the falling Aussie is to local prices holding up at high levels,” Mr Gorey highlighted that the Aus$325 a tonne at which the new crop January 2021 east coast Australian wheat futures contract stood at on Tuesday represent “a good price in the view of most growers.
“Yet at the same time that price in US dollar terms is at a contract low.”
The strong crop prospects are fostering a recovery in farm sentiment, with Rabobank on Sunday revealing results of a quarterly poll showing “one of the biggest upswings in confidence in the survey’s 20-year history”.
Of farmers surveyed, 46% were “expecting the agricultural economy to improve over the coming 12 months, up from 17% in the December survey”.
Also on Tuesday, shares in almonds producer Select Harvests rebounded 15.5% from 16-month lows to Aus$6.17 after the Victoria-based group said its “2020 harvest is progressing very well”, and that “management is currently optimistic about crop size and quality”.
Signally, the group - which like other Australian almond growers relies on China as a major export customer - also said that “world demand from major almond importers and domestic customers remains strong”, even amid the Covid-19 outbreak.
“Our Chinese customers have commenced production post the extended lunar new year closure as a result of the coronavirus.”
Bullish cattle market
Cattle prices, meanwhile, remain supported by the boost from rains to pasture condition, which is prompting producers to start rebuilding herds - competing for stock with feedyards, at a time when beef demand from Chinese importers is said to remain decent.
The eastern young cattle indicator set a record 766.75 Australian dollar cents per kilogramme last Wednesday.
While easing back to 761.50 Australian dollar cents per kilogramme as of Monday, that price remains up 58% for 2020 so far.