There’s going to be no let up in the upward pressure in food prices from the drought and the lack of water in NSW, South Australia and northern Victoria. The drought continues to extract a terrible toll on winter wheat and other grain crops with the third cut in estimates from the Australian Bureau of Agricultural and Resource Economics (ABARE) in the past five months.

ABARE says the winter wheat crop is now forecast at 12.1 million tonnes, compared with a previous estimate of 15.5 million tonnes and the original estimate of 22.5 million tonnes in June. Exports have also been slashed by 18%. This forecast compares to the one earlier this month from the US Department of Agriculture which estimated Australia’s harvest at 13.5 million tonnes, compared to 21 million tonnes in September and 23 million tonnes in the first estimate in August.

The USDA also slashed its estimates for Australia’s exports to 9.5 million tonnes. ABARE had estimated exports at around 12.1 million tonnes in its crop report in early September. ABARE now says wheat exports will be around 9.85 million tonnes in 2008, compared to the drought hit 8.61 million tonnes exported in 2006-07.

ABARE also said that the barley harvest was now estimated at five million tonnes, against a previous prediction of 5.9 million tonnes and canola at 900,000 tonnes, against 1.1 million tonnes previously. ABARE said with the exception of Queensland, pockets of northern NSW and southern Western Australia, rainfall during the critical September-October period had been below to very much below average throughout the grains belt:

As seasonal conditions deteriorated over the critical September–October period, with little or no worthwhile rain and continued above average temperatures, the forecast size of the major winter grain crops in 2007-08 has been further reduced from the forecasts released in September. Areas particularly affected have been parts of South Australia, northern Victoria and New South Wales.

Livestock have also been affected by the deterioration in seasonal conditions, with farmers continuing to reduce stock numbers. High yardings of cattle, sheep and lambs during September and the first three weeks of October have led to lower saleyard prices.

That might be helping keep meat prices lower than they should be, given the drought. But feedlot costs have soared as the cost of feed has risen with the rise in wheat and oil seeds prices here and around the world. Chicken prices are rising for the same reason. ABARE says the dry is worst in NSW where the large parts of the cropping area received below average rainfall.

“Over a large area of the central northern half of the state, rainfall was the lowest on record, with the remainder of the state receiving very much below average falls.

“This lack of rainfall, combined with hotter than average daytime temperatures and strong winds, has led to the rapid deterioration of crop yield potential and in many areas has resulted in total crop failure,” ABARE executive director Phillip Glyde said.

“Overall it was the fourth driest September on record in New South Wales. Below to very much below average September rainfall was also received in South Australia, and to a lesser extent Victoria. This lack of rainfall has been accompanied by record temperatures, which have exacerbated moisture stress in crops.”

Although the combined total of 18 million tonnes for the three major crops is about 42 per cent below the five-year average, it is still about four million tonnes above 2006-07 production. ABARE said a significant number of winter cereal crops had also been cut for hay in an attempt to recoup some planting costs.

Figures released last Friday by the NSW Government show the extent of the damage the dry is causing to the state’s 2008 wheat harvest. Wheat production this harvest may be 1.67 million tonnes, compared with the 2.26 million tonnes estimated on in late September according to the NSW Department of Primary Industries.

The 2007 crop year harvest was 2.05 million tonnes. ABARE’s first estimate for NSW for 2008 was for more than 8 million tonnes of wheat to be harvested.

“Seasonal conditions have continued to deteriorate across the state from mid-September through October with most regions experiencing little or no rain,” the department said; although some areas got good rains at the end of last week and over the weekend.

And the news from South Australia about the Murray River is worse with the State Government now saying that there are almost no prospects of extra water allocations. It seems growers will be encouraged to let some of their fruit trees die while others would be kept alive by water trucked in, as the government maintained allocations at 16% during the 2007-08 season.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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