Rain and grains: it rhymes but is an accurate assessment of how forecasters are judging the most important winter grain crops for some time.
Originally the outlook was for a big crop of wheat, barley, canola and other oilseeds.
Then dry conditions in some growing areas in April and May, and expectations of more to come this month, saw doubts raised about the size and the ability of the growers to withstand a third year of drought.
May was the driest month on record: NSW had little rain as well and the wheat crop, originally forecast at around 26 million tonnes, was wound back by some commentators to around 20 million tonnes in unofficial forecasts.
That helped wheat prices enjoy their biggest rise in five weeks in Chicago on Monday.
July wheat futures rose 21 USc to $US7.825 a bushel on the Chicago Board of Trade in May, the best gain since late April.
But the next day, Tuesday, it fell to around $US7.50 a bushel, as commodities were sold off on a major policy switch by the US Federal Reserve towards one promoting a stronger US dollar. Wheat traded around $US7.53 a bushel in Chicago Wednesday night, our time.
That’s after commodity prices were easier for a second day in a row.
Wheat prices are still down 44% from the peak of $US13.495 a bushel reached on February 27.
But then spreading rains this week along the East Coast from Queensland into NSW and out into some grain growing areas have raised hopes again of a crop reaching to full potential.
Global wheat harvests are forecast to reach record levels in some countries in the coming year, with the US hitting a 10 year peak as growers respond to those record prices.
There is still optimism at ABARE, the Australian Bureau of Agricultural and Resource Economics, that our growers will have the first good year in three years.
ABARE yesterday released a report on grain prospects and experiences over the past couple of years. It said that Australian grain growers are in a strong position to expand output and incomes if seasonal conditions improve.
Australia’s worst drought on record has slashed wheat output in the past two harvests by well over 50%, helping drive world prices to record levels, as we saw in February.
ABARE said the area sown to grain in the current crop year could increase "markedly” should seasonal conditions permit, as farmers favor cropping over livestock to boost incomes after drought.
"With grain prices remaining high the area sown to winter crops in 2008-09 could increase markedly if seasonal conditions permit.
"Many livestock producers reduced animal numbers during 2007 as drought continued in many parts of Australia.
"As prices of replacement livestock are likely to be high during 2008, where seasonal conditions permit, producers are likely to place placing more emphasis on cropping in 2008-09 to secure a quicker recovery in incomes.
"The areas planted to the different winter grain crops will depend on the timing and amount of autumn rainfall, expected returns from each crop, and crop rotational issues for individual growers," ABARE said.
"The improvement in seasonal conditions since spring in much of Australia’s agricultural zone is also projected to result in a marked increase in the quantity and quality of pasture production in 2007- 08," the ABARE report said.
"Many producers expect to reduce livestock turnoff in response to the improvement in seasonal conditions.
“Broadacre cropping producers are projected to increase the numbers of both sheep and cattle in 2007-08, rather than purchasing additional animals."
Looking out over the next few years, the report forecast that under the assumption of average seasonal conditions," the area sown to grains and oilseeds is projected to average 23.6 million hectares over the five years to 2012-13, compared with an average 22.2 million hectares in the previous five years.
"The increased cropping area reflects projected higher prices for grains and oilseeds over the medium term.
"Competition for cropping land in Australia comes largely from the sheep industry, particularly in the wheat–sheep zone. Since the 1990s the number of sheep in Australia has fallen from around 167 million to an estimated 85 million in 2007-08.
"Over the same period, the area sown to crops has increased from around 15 million hectares to an estimated 21.4 million hectares.
“The majority of Australia’s sheep are located in the wheat–sheep zone and it is estimated that numbers in this zone have fallen by around 45 per cent since the 1990s.
“In the pastoral and high rainfall zones, sheep numbers are estimated to have fallen by 69 per cent and 42 per cent respectively.
"Over the medium term the number of sheep in Australia is projected to increase to 96 million by 2012-13. However, at this level, numbers will still be below the number during the early 2000s.
“The competition for land in the wheat–sheep zone will remain high, as grain prices are projected to remain at relatively high levels over the medium term.
"Continued productivity improvements in the grains industry over the medium term mean total grains and oilseeds production is projected to be 48 million tonnes by 2012-13.
“GM crops are likely to become more widely grown in Australia toward the end of the projection period, following the removal of the ban on GM crops in New South Wales and Victoria.
"The introduction of GM crops could increase yields for some grain and oilseed crops over time.
"The projection of grain production incorporates a small improvement in yields from long
