Australia begins wheat planting season as drought continues

AUSTRALIAN farmers kicked off this year's wheat planting season on Anzac Day in bone-dry soil conditions as a third consecutive year of drought across the country's key growing regions casts a pall over production prospects.

In a further blow to Australian farms wilting under the drought, planting season comes even as crop-friendly growing conditions in the northern hemisphere are expected to boost world supplies, keeping a lid on international prices.

"Last season was terrible," said Neil Westcott, a grain farmer in Parkes, nearly 360km west of Sydney. "If we do not get rains soon … a bad crop will cost me my farm that has been in my family for six generations. I will sow but we are in desperate need of rain."

The planting season traditionally begins on the April 25 Anzac Day holiday, which commemorates Australians and New Zealanders killed in wars, conflicts and peacekeeping operations.

Farmers have a window of four to six weeks to plant wheat across the country, typically the world's fourth-largest exporter. Wheat is Australia's biggest rural export and overseas sales of the grain were worth an estimated A$5.5 billion (S$5.25 billion) last year.

But data from the Australian Bureau of Meteorology shows nearly the entire country has seen less than half the typical rainfall over the last three months.

As a result, soil moisture in the key grain-growing states of New South Wales, Victoria, South Australia and Western Australia are at historically low levels, according to Refinitiv data.

Australian farmers are already postponing buying fertiliser and other products they use to protect their crops as the drought darkens the outlook.

Even though Australia's chief commodity forecaster last month said wheat production is expected to jump 38 per cent in 2019/20 to 23.9 million tonnes from a year ago – when drought greatly depressed output – analysts are expecting a much lower crop.

"We expect a crop of 17-18 million tonnes, looking at the current conditions," said Ole Houe, director of advisory services at brokerage IKON Commodities. "The country's average is 24-25 million tonnes."

Meanwhile Australia's traditional customers have already turned to the Black Sea region to secure supplies.

Indonesia, the world's second largest importer which relied on Australia for much of its wheat supplies, has bought a record volumes from Russia and Ukraine.

Wheat production in the Black Sea region, Europe and North America is expected to rise for the 2019/20 crop, to be harvested around the middle of this year, likely depressing prices.

The most-active wheat contract on the Chicago Board of Trade, which was one of the best-performing commodities contracts in 2018, has already lost almost 13 per cent this year.

businesstimes.com.sg