Australian farmers face a “trifecta of negative factors” for grain prices, and the likelihood of a crop which, while substantial in quantity, will be rain-reduced in quality too, Rabobank warned.

The bank said that pressure on prices from Australia’s winter grains harvest, which usually builds in October, may start “earlier than normal” this year, thanks to the extent of supplies still left over from 2021’s bumper crop.

Prices will fall “as farmers seek to empty grain bins ahead of the new crop”, which for wheat is widely predicted to be a third successive strong harvest, if below last year’s record of 36.3m tonnes.

Indeed, the large carryover stocks, and the prospect of a strong 2022 harvest, were two of a “trifecta of negative factors for local prices” named by Rabobank – the third being trade congestion which has prompted back-ups of crop for export, and reduced pressure on merchants to bid up for supplies.

Australian “port zones are still congested from last year’s carryover”, the bank said.

The US Department of Agriculture, whose estimates set world benchmarks, forecasts Australian wheat inventories ending 2021-22 at a five-year high of 4.83m tonnes, with some other commentators, such as the International Grains Council, foreseeing larger figures.

‘Record price fall’

Further price weakness would follow a dismal July for Australian agricultural commodity values, which according to National Australian Bank tumbled by some 6.9% last month, a decline the bank termed “a record fall”.

“Many commodities have been hit hard by rising fears of an economic downturn as central banks rapidly normalise interest rates in response to high inflation,” NAB said.

“This has spilled over into agricultural commodities, with wheat dropping to below Ukraine invasion levels.”

‘Significant quality issues’

Australian grain growers also face the prospect of the rain which has – as in the previous two years – supported strong crop prospects proving excessive.

Already “excessive rain and waterlogging” has cut crop area on the east coast, where Rabobank reported combined barley, canola and wheat area in New South Wales as 4% below a mid-May estimate, with the figure for Queensland plantings cut by 8%.

“We now expect an Australian winter crop area of 23.54m hectares, down 0.35% year on year and no longer the record area on the cards in May,” the bank said.

The prospect of further rainfall threatens to cut crop quality, with wetness on ripe kernels encouraging sprouting and the loss of milling specifications.

The seasonal outlook from Australia’s Bureau of Meteorology “shows a very high chance of exceeding median rainfall between August and November on the east coast”, Rabobank said, adding that “excess east coast rainfall [is] on the cards during harvest”.

The precipitation “may mean good news for crops during their growth stages, but likely also means we can expect significant quality issues at harvest”.

Separately, the Grain Industry of Western Australia has flagged the potential for dryness setbacks to the Western Australian grain crop, which is usually the country’s biggest.