CROPPING

Grain growers face risk reward dilemma

Tough decisions ahead for grain growers

Kristy Moroney
Grain growers face risk reward dilemma

The Bureau of Meteorology forecasts twice the normal likelihood of an El Niño developing in 2017. According to Weatherzone the Pacific Ocean is currently shifting towards an El Nino-like pattern, with warmer-than-average sea surface temperatures near South America for the first time since June last year. 

Head of sales for Rural Bank and Rural Finance, Simon Dundon, said growers are faced with the risk versus reward dilemma as they settle on crop varieties, rotations and inputs for the season.

“Australia’s most successful farms make decisions rigidly based on what was right for the bottom line,” Dundon said.

Citing the Australian Crop Update commissioned by the bank from AgAnswers, he said high performing farms ran their businesses on fundamentals of keeping operating cost ratios down, farm business profit up, equity up, and financing costs down. 

“On the input side, international fertiliser prices remain close to eight-year lows, despite rises in Diammonium phosphate (DAP) in recent months and urea in the second half of last year. Australia’s successful farmers know how to do what they do well - having honed production practices and systems - and use this expertise to drive high level financial performance,” he said. 

The Rural Bank head of sales said it is likely crop prices will remain steady until the picture for 2017 supply becomes clearer. 

“While strong supply continues to have a significant impact on crop prices, we are expecting prices to stay within recent ranges as global supplies remain strong,” Dundon said.

“Given we’ve seen record levels of global production and stocks in 2016/17 - particularly for wheat and coarse grains - a surge in crop prices in the year ahead seems highly unlikely,” he said. 

The new report also revealed growers may respond to low wheat and barley prices by reducing the area planted, while the early forecast of drier than normal weather conditions is expected to affect yields. 

“While Australian growers saw a bumper 2016/17 season with record production, lower production levels are expected for the 2017/18 season.”

A growing series of reports, each focused on a key discussion point for the farming sector, brought to you by the Kondinin team.

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