Optimism for Australian grain growers, despite uncertainty
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Optimism for Australian grain growers, despite uncertainty

While COVID-19 continues to create chaos across global markets and industries, Australian grain growers are quietly preparing for one of their most promising seasons in recent years.

With the winter grain planting window just weeks away and soil moisture profiles across many regions finally replenished, Rabobank senior grain and oilseeds analyst Cheryl Kalisch Gordon said that, even considering the COVID-19 market upheaval, Australian farmers were justified in their optimism.

Speaking in a recent Rabobank webinar, ‘What Covid-19 means for the Australian grains sector’, Dr Kalisch Gordon said there were a number of factors insulating the sector from the strong price falls being experienced by many other commodities on the world market.

The low Australian dollar remained a key driver – trading weaker than many major rival exporters, bolstering export opportunities and supporting local prices.

Global pricing

A spike in wheat prices in the second half of March was attributed largely to “a recovery of overselling in the first half of the month which had resulted following the oil price crash and a general downturn in sentiment globally due to COVID-19”, Dr Kalisch Gordon said.

But the recovery was also driven by consumer stockpiling, as heightened demand increased production of items such as noodles, flour and pasta. Overall, however, she said, the demand lift would not remain long-term.

“Despite some substitution towards wheat product over the year being possible, the market purchases pushing up prices now will be offset by lower purchases once COVID-19 concerns pass,” she said.

A more significant impact on global wheat pricing would be a restriction of exports out of the Black Sea, a region that represents 30 per cent of the global wheat exports.

“Considering the depreciated Russian ruble and the country’s history of limiting exports to manage domestic inflation, this is a material concern within the global market and would lift local prices even further if limits placed on exports were restrictive,” Dr Kalisch Gordon said.

Kazakhstan, she said, had already restricted the export of flour, while Russia and Ukraine have put in place wheat exports limits, but those were not restrictive on current export expectations.

Also coming into play – regardless of COVID-19 – currently drier conditions in the Black Sea and drought in parts of North Africa have lifted demand, especially for durum, while the US/China trade deal has also been price-positive.

Local pricing

The low Australian dollar remains the key driver of a favourable outlook for Australian wheat and other grain prices, trading weaker than most, though not all, major rival exporters – bolstering export opportunities and supporting local prices.

Dr Kalisch Gordon said local farm gate wheat prices would remain above average, with the now much lower Australian dollar and higher global prices year on year. And, with manageable increases in input costs, she said, Australian grain farmers could still have a good year in 2020.

“We forecast CBOT wheat will remain about 550USc a bushel over the next 12 months, keeping in mind that in this range we get about an AUD5 per tonne lift in local prices for every cent lower that the Australian dollar trades,” she said.

Rabobank currently forecasts the Australian dollar to trade at around US60c for the next 12 months, even dropping to US55c in the near-term.

Globally, risks beyond pricing include export container availability, supply chain disruptions at port and the availability of labour, crop chemicals and fertiliser.

“In some nations there may be challenges to the movement of grains from farms to ports due to localised restrictions, border congestion or choke points and, for more niche grain markets with higher labour needs, loading and unloading containers could prove difficult,” she said.

With agriculture deemed an ‘essential service’ in most countries, Dr Kalisch Gordon said movement challenges could be minimised, “however, where we do see disruptions, we could see pricing volatility and short-term upside in pricing”.

Downside risks

Concerns for the industry also remained regarding the potential COVID-19 infection rate for regional Australia.

“If Australia does suffer a high infection rate in the regions it may impact on the ability to plant or harvest crops, the results of which could be devastating,” she said.

“Other watch points include re-infection in China, which would again disrupt ag chem supply and create a larger demand shock, and an increasing Australian dollar. Our low dollar is imperative to our position this season.”

A global economic downturn greater than currently estimated would also drive higher-than anticipated demand shock, further negatively impacting the sector.

Dr Kalisch Gordon said while demand growth for grain may lift slightly due to small substitutions in consumption, demand would stay relatively stable, with the current increase due to stockpiling not expected to endure throughout the year.

Demand for grains and oilseeds used in the biofuel industry – such as corn, soy and canola – would however decrease, she said, due to COVID-19 travel restrictions and lower fuel consumption.

This, she said, was expected to translate to downside for canola pricing.

Dr Kalisch Gordon said the outlook for pulses also remained uncertain, with some short-term price lifts likely due to stockpiling and supply in India coming in below targets, but with longer-term downward pressure on prices depending on how badly COVID-19 would impact subcontinent incomes.

“India, the world’s largest pulse importers, is also particularly sensitive to income volatility, which may be a negative for pulse pricing, so we will be keeping a close eye on this market over the next month,” she said.


Locally, after years of drought, Dr Kalisch Gordon said, the outlook for the Australian season was the most positive it had been in years.

“There’s been widespread rain and the three-month forecast continues to look promising – so the Australian supply outlook is much improved,” she said.

Despite an expected supply-based price softening coming into harvest, Dr Kalisch Gordon said wheat prices would remain above 10-year and even five-year averages.

High incoming barley stocks globally, coupled with lowered demand for corn to produce ethanol, would likely soften corn prices in the feed complex, she said, and therefore remove support from the already soft global barley market.

“There’s also now a lot less beer being consumed in China, where 67 per cent of consumption is through food service, and as such demand for malting barley will also decrease,” she said.

With the cancellation of the Olympic Games and other significant events, this downturn in consumption was now a global phenomenon, contributing, Dr Kalisch Gordon said, to barley’s soft outlook.

“Despite the prospect of lower prices, many Australian farmers will look to plant barley this season as a low-risk option to establish cash flows after the drought,” she said.

While labour needs for the approaching season remained uncertain in many places, a recent arrival of ag chem key ingredients into Melbourne should ease input pressures.


Rabobank Australia & New Zealand is a part of the global Rabobank Group, the world’s leading specialist in food and agribusiness banking. Rabobank has 120 years’ experience providing customised banking and finance solutions to businesses involved in all aspects of food and agribusiness. Rabobank is structured as a cooperative and operates in 38 countries, servicing the needs of approximately 8.4 million clients worldwide through a network of more than 1000 offices and branches. Rabobank Australia & New Zealand Group is one of Australasia’s leading agricultural lenders and a significant provider of business and corporate banking and financial services to the region’s food and agribusiness sector. The bank has 93 branches throughout Australia and New Zealand.


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Denise Shaw
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Rabobank Australia & New Zealand 
Phone: 02 8115 2744 or 0439 603 525 
Email: denise.shaw@rabobank.com  

Georgina Poole
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Rabobank Australia & New Zealand 
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Email: georgina.poole@rabobank.com