‘Against all odds’ that Australian winter crop will hit five-year average: Rabobank

Rabobank has warned of another lower-than-average winter crop in Australia thanks to ongoing drought conditions and also cautioned that Australian cotton prices are set to dip.

In its Australian 2019 Winter Crop Outlook, Rabobank said a combination of below-average rainfall in the eastern and southern states at the start of the season, record-low soil moisture and an unfavorable outlook for future rainfall mean that it is “against all odds” that Australia will be able to return to its average level of grain and oilseed production in 2019-20.

The report forecast that 18.4 million hectares would be planted with crop this winter – up 1 percent on last year, but still almost 14 percent below the five-year average.

Rabobank predicted that wheat production would be around 18 million tonnes based on the current rainfall outlook, with exports at around 11-12 million tonnes – up on last year but more than 30 percent below the five-year average.

Western Australia has had some rainfall since the report was published last week, fueling hopes the region will be able to produce a crop around average levels. Victoria and parts of southern New South Wales have also had some rain and are hopeful of their best start to the cropping season since 2016-17, Rabobank said.

But conditions remain challenging in other areas, with parts of South Australia experiencing their driest start to the cropping season in more than 150 years.

A high rate of dry sowing coupled with opportunistic use of storm rainfall explained the 1 percent year-on-year rise in area planted, the report’s author Cheryl Kalisch Gordon said, senior grains and oilseed analyst at Rabobank.

“Despite this marginal recovery in planted area, currently forecast seasonal conditions support below-average yields for most areas,” she said.

“The hottest summer on record and below-average rainfall – on top of two years of below-average rainfall – mean large areas are experiencing well-below to the lowest-on-record root-zone soil moisture and there has been no widespread autumn break in most areas.”

Meanwhile, the cotton industry is also set to find a tougher market this year, with prices predicted to soften as global pressures begin to be felt in the Australian market.

In its Australian Cotton Price Forecast – The Start of Softer Cotton, Rabobank predicted that a combination of rising global supplies and lower demand will see prices in Australia decline from their highs in mid-May this year.

Prices should remain high enough to provide positive profit margins for domestic growers, the bank said, with demand from China and the weakness of the Australian dollar helping keep prices higher than they otherwise might be.

Rabobank forecast that Australian ex-gin cotton cash prices would sit at just over A$600 ($415; €367) per bale through Q3 2019, falling to A$576 per bale by Q2 2020.