Farms & Farm Machinery #385

INDUSTRY NEWS
state of play
Far left: Rabobank senior grain and
oilseeds analyst Cheryl Kalisch Gordon
Left: Rabobank agricultural analyst
Wes Lefroy
Above: Rabobank senior animal
proteins analyst Angus Gidley-Baird
Threats to chemical
supplies could pose a
challenge to graingrowers
going forward, even as
analysts predict steady
supplies and strong
commodity prices in 2020
In the majority of cases,
growers will have enough
inputs to commence
sowing as planned.
Supplies of urea, agrochemicals and other inputs will be
adequate for the year ahead, despite concerns about the
impact of COVID-19 on supply chains, Rabobank agricultural
analyst Wes Lefroy says.
Qatar and Saudi Arabia, Australia’s largest sources for urea
imports, are producing the material with little interruption at this
point, he says.
“On average, 60 per cent of our yearly imports of urea arrive on
Australian shores during the April-July window,” he says.
“And Australia typically imports 90 per cent of its total urea
requirements, so we are heavily reliant on global supply chains.”
Even if supplies from the Middle East were interrupted,
supplies from China, Indonesia and Malaysia could take its
place, he says.
But while urea supplies look stable, supplies of chemicals
glyphosate and triflu alin, among others, are facing a ‘perfect
storm’.
Lower chemical production and higher local demand is being
compounded by COVID-19 disruptions to production and
logistics in China, which supplies 90 per cent of Australia’s
agricultural chemicals.
Lefroy says growers would be prudent to maintain regular
contact with suppliers about the availability of ag chemicals
in their region and to consult with their agronomists about
“plan B and plan C should adequate ag chem and fertiliser
not be available”.
“Depending on the availability of particular chemicals, some
growers may be forced to change the suite of chemicals used
on a crop,” he says.
But current observations are that Chinese ag-chem production
is ‘ramping-up’ and logistics chains have started to move
supply out of China to export markets, which will help address
shortages, Lefroy says.
“In the past couple of weeks, a number of major suppliers
have reported arrival of new shipments and product on the
water,” he says.
“Some retailers have more stock than others and this varies
from region to region. In the majority of cases, growers will have
enough inputs to commence sowing as planned.”
HIGH GRAIN PRICES
At the same time, widespread rain and a positive three-month
forecast means the outlook for Australian grain growers is the
best it has been in years, Rabobank senior grain and oilseeds
analyst Cheryl Kalisch Gordon says.
“We forecast CBOT wheat will remain about US$5.50 a bushel
over the next 12 months – keeping in mind that in this range
we get about an A$5 per tonne lift in local prices for every cent
lower that the Australian dollar trades,” she says.
Despite an expected supply-based price softening coming into
harvest, Kalisch Gordon says global wheat prices will remain
above 10-year and even five-year ave ages.
Locally, wheat prices will remain above average due to the
lower Australian dollar and higher global prices, Kalisch Gordon
says – adding that Australian farmers could have a good year
with manageable increases in input costs.
The outlook is soft for barley, due to high stocks and lower
demand due to lower levels of beer being consumed in China
and the cancellation of significant event .
“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 ” Kalisch Gordon says.
Demand for grains and oilseeds used in the biofuel industry
– such as corn, soy and canola – will also decrease due to
COVID-19 travel restrictions and lower fuel consumption; leading
to a lower canola price.
Kalisch Gordon adds the outlook for pulses also remained
uncertain, with some short-term price lifts likely due to
stockpiling and supply in India coming in below targets, but with
longer-term downward pressure on prices depending on how
badly COVID-19 would impact subcontinent incomes.
STRONG DOMESTIC CATTLE MARKET
Like grain growers, Australian cattle producers have been
buoyed by recent rains, Rabobank senior animal proteins analyst
Angus Gidley-Baird says, with producers moving to restock
herds reduced following years of drought.
“We estimate the Australian cattle slaughter will fall 14 per cent
in 2020 to 7.29 million head, with a further decrease of two per
cent in 2021,” he says.
Production is expected to drop to 2.1 million tonnes – among
the lowest volumes seen in 15 years – and beef exports are
forecast to drop 17 per cent in 2020 to one million tonnes.
Gidley-Baird said breeding numbers in some areas of southern
Queensland were expected to be 75 per cent below normal,
yet, despite tough conditions, well-priced sales had generated
solid returns, placing producers in a strong position to start the
recovery. Breeding cattle numbers were also significantly down
in central and northern New South Wales, while higher breeder
numbers and calf availability out of the south of the state
remained closer to normal.
With the exception of east Gippsland, breeding numbers were
normal in Victoria, South Australia and Tasmania, while dry
conditions in Western Australia’s cattle-producing regions had
increased slaughter rates and would curb 2020 production,
Gidley-Baird added.
Forecasts suggest a dramatic contraction in global economic
growth in 2020 resulting from COVID-19 that will be worse than
experienced in the global financial crisis (GFC) of 2009, with large
economic declines expected in key Australian beef markets
such as the US, China and Japan.
At the same time, Gidley-Baird says, a weaker Australian dollar,
China’s reduced pork availability due to African swine fever, and
the US-China trade deal were all positive offsetting factors.
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