Special Report: Grains - Granular progress

It’s been three tough years for NSW grain growers but in the wake of the best autumn break for years, in some regions the best autumn break ever, the outlook for grain growers is buoyant despite the shadow of China tariffs and COVID-19 restrictions.

Words DARREN BAGULEY

According to NSW Farmers grains committee chain, Matthew Madden, “On the production side, the outlook is incredibly positive for all of NSW. There are some areas on the Queensland border where the rain is variable, but otherwise, the whole of NSW south to the Victorian border is in very good shape. That’s a huge turnaround from January onwards.”

Most grain growing regions in NSW missed out on the early summer rain and it was looking a bit bleak, Madden explains, but from January the season turned around and a lot of the state received enough good rain to build the subsoil reserves. “All of this could lead to a very promising production year,” he says.

National peak body Grain Growers CEO, David McKeon, is similarly upbeat. “The preceding years – 2018 and 2019 – weren’t great years for east coast grain producers, and then along came 2020! The traditional planting window for winter grain crops is around ANZAC Day and there was widespread rain then. It’s been a great autumn break for Victoria and NSW, and for both states 2020 is shaping up to be a really good year. Queensland cropping areas had some great rain early in the year, but a lot of that moisture has been soaked up,” he says.

McKeon goes on to explain that for South Australia, the last few years have been average, with some areas doing better than others, but that 2020 is also shaping up to be a good year.

“Many growers were able to get their crops in at exactly the right time,” he says. “Planting earlier would have meant crops being hit by frost, and planting later would have resulted in running out of soil moisture. In Western Australia, the northern half of the cropping belt has been fairly dry while southern regions have had a reasonable year. Growers in the west, however, have been planting larger acreages so even though they planted dry this year, Western Australia is moving towards an average season overall.”

According to Madden, in southern NSW concerns about planting dry and an overall lack of soil moisture held most growers back from sowing dual grazing crops such as wheat and canola for the last two seasons but there has been a swing back into both due to the good autumn break.

“The meat sector is doing well so there is strong demand for dual grazing crops, but people have been concerned about planting canola for the last few years with dry starts and lack of subsoil moisture. As a result, there is a bit more confidence there.”

CHICKEN FEED While the demand for malting barley (for beer) was hit hard by the closure of of pubs and restaurants due to COVID-19, feed grain demand remains strong.

Similarly, large parts of NSW from Dubbo to the north have not taken a crop off for a couple of years and producers have responded to good levels of soil moisture with large cereal plantings, wheat and barley. “Some fava beans have gone in as part of the rotation and chickpeas will go in later,” added Madden.

Although the world is looking at another record wheat crop Madden is also upbeat regarding prices for 2020. The USDA has forecast a slight drop in US production but Australia and other major exporters such as Argentina, Canada and Russia, are projected to have larger crops in 2020-21.

“World wheat prices have been holding up reasonably well,” says Madden. “The drought induced high prices, but we can still sell new wheat here for US$280/tonne, which is not a bad price for a normal production year.”

Time will tell whether wheat prices continue to hold up, but most growers are expecting barley prices to come off significantly in the wake of the COVID- 19 shutdown measures followed by the imposition of punitive tariffs by China.

According to McKeon, the tariffs are significant as Australia was looking at a crop of 12 million tonnes of barley for 2020 and China has been Australia’s number one export market.

“It was devastating news, China applying tariffs to Australian barley,” says McKeon. “The announcement came at the same time as demand decreased for Australian malt barley – a prime component of beer – due to COVID-19 restrictions. The Australian market is diversified, Japan, Korea and Vietnam are all markets as is Saudi Arabia; but in some of these alternative markets, growers won’t get a premium because the barley will be going into stock feed rather than being used for human consumption.”

Madden is more optimistic on the outlook for NSW barley growers and grain growers overall.

“A lot of NSW barley production is used domestically. Most beer is domestically produced and the boom in craft beer has created demand. It is a good time to be growing high quality malting barley. With the demand for feed barley as well, we have built up a reasonably resilient domestic demand on the east coast.”

Nevertheless, Madden says that the grains pipeline has been decimated in the last few years due to dry weather. “Stocks are low, but there was a chance to rebuild them. Growers were expecting a fall in price as the world returned to normal production, but it has been exacerbated by the China situation. Growers will need to rejig things while they find alternative markets. Australian barley is generally world renowned for good malt – characteristically clean, dry and white. It could command premium prices in discerning markets.”

Investment in on-farm storage is providing another level of resilience for NSW grain growers.

“Growers large and small have invested a lot in on-farm storage,” says Madden. “The bulk grain handlers are on the export path so farmers that have the opportunity to service the growing domestic market are investing in on-farm storage so they can store and wait for opportunities to arise. Markets go up and down so some growers will take the opportunity to sell parts of their crop or those products that are showing a good return – such as wheat and canola – and store those products that are under pricing pressure at harvest time.”

While demand for malting barley (for beer) has been hit by the closure of pubs and restaurants under COVID-19 restrictions, generally Australian grain demand remains strong.

There has been growing demand for feed grain. The cattle feedlot industry has grown strongly in the last 10 years and there has been a swing to intensive pork and chicken production. These use a lot of grain and it is all produced and consumed in Australia.

When the pub and restaurant trade starts up again, malting barley consumption will obviously resume to a higher level, but Madden is not sure how long it will be before it returns to where it was.

“More tourists come to Australia than leave Australia, so overall demand will stay down until the borders reopen,” he says. “When will that be? Have people changed their habits? Will things go back to the way they were before?” he asks. “My crystal ball is not that good.”

Justin Everett, a grain grower in the Riverina near Brocklesby, is optimistic about the season and sanguine when it comes to the China situation. “We’ve had the best soil moisture I’ve seen in the 20 odd years I’ve been farming, and we’ve stuck to our normal rotation of canola, lupins, barley and grazing wheat over our 800 hectare farm,” he says. “Hopefully it continues to rain. When it comes to barley prices, it’s a long time between now and harvest. We’ll get the crop to harvest before we worry about that stuff.” •