SYDNEY (Reuters) – Just a few months after the rains damaged a three-year drought that paralyzed Australia, wheat fields sprung up, raised the wheat harvest forecast and revived the agricultural sector that was hit through roaring tractor sales and increased lending.
FILE PHOTOS: Wheat is growing on the farm at sunset in the town of Forbes, Australia’s south-western central New South Wales, Australia, September 27, 2016. REUTERS / Jason Reed / Photo file
Mid-season crops in some of the country’s main grain-producing regions in the east are as fertile as those recalled by some industrial veterans, representing one of the few bright spots in the economy of a pandemic-affected country.
“I moved here 30 years ago, and I’ve never seen it this good. Extraordinary. “It’s wheat, wheat, everywhere as far as your eyes can see,” tractor dealer Roger Moylan said this week from Quirindi, the main grain growing area in the state of New South Wales (NSW).
Moylan, from North West Farm Machinery, said sales of tractors and augers, which are used to move grain from trucks to silos, are booming.
“If auger sales pass through the roof, that tells you one thing – there will be wheat everywhere,” he said.
Australia was one of four global wheat exporters before the incessant drought began to cut production.
The country’s main commodity forecaster recently raised its forecast for wheat production for 2020-21 to 26.7 million tons, more than 75% above the previous year’s level and the highest since Australia’s record of 35.13 million tons in 2016-17.
Australia’s 10-year average is only more than 24 million tons.
(GRAPHICS – Australians stare at the ‘extraordinary’ wheat crop after the rains that end in drought: here)
Production this year could rise to 30 million tons if export-focused Western Australia receives drenched in the next two months, said a Singapore-based trader at an international trading company that supplies Australian wheat to Asia.
Since most farmers will not start harvesting until the earliest October, there is still uncertainty over crop production, especially in Western Australia which currently does not have a high level of NSW soil moisture.
Western Australia and NSW are the two best wheat producing countries in the country.
Lyndon Mickel, who owns a 6,000 hectare farm near Esperance in Western Australia’s southern wheat belt, told Reuters that the recent rains had been uplifting after the start of a dry season.
“We sat at the tip of the knife,” he said.
“If we can get a decent decline across the states next month we can get a decent result.”
(GRAPHIC – Estimated level of soil moisture and wheat production in Australia: here)
Wv1 benchmark wheat prices earlier this year reached 18-month highs amid concerns about global supply. While that fear has subsided, prices continue to linger near these highs.
Australian wheat exports this season are estimated to nearly double from last year, the Australian Bureau of Agriculture and Economics and Resources and Agricultural Sciences said in June.
But deteriorating diplomatic relations between Canberra and Beijing have also created a stumbling block for some grain farmers, after China effectively banned imports of Australian wheat in May at an 80.5% tariff.
China accounts for more than a fifth of agricultural exports from Australia, taking almost double its production as the second largest destination, Japan.
“Australia may need to diversify its trading partners especially into the Southeast Asian economy, where the population is growing rapidly,” wrote Natixis economist Alicia Garcia-Harrero in a note.
AUSTRALIA, SMALL CITY
The long-awaited economic activity emerging in many small towns is a boon to the rural sector which is still recovering from one of Australia’s worst drought crops and forcing some communities to transport drinking water in the east of the country.
Grant Cairns, head of agribusiness at the Commonwealth Bank of Australia (CBA.AX), told Reuters demand for equipment financing jumped 27% in June from last year while demand for land purchases was also strong.
“Our customers have been trying to sow crops and replenish the animals they must have because of the drought,” Cairns said.
NSW farmers have significantly expanded the size of the area they are sowing to push the total winter crop area of the country above the long-term average, the government plant report said.
Tractor sales broke the 2,000 mark in June, according to the Australian Tractors and Engine Association, the first time since 1981.
“This shows how resilient and how quickly farmers returned to the saddles and started buying equipment,” said the association’s executive director, Gary Northover.
“Many dealers even talk about increasing employment – not many industries do that in a pandemic.”
Reporting by Jonathan Barrett and Swati Pandey; additional reporting by Colin Packham and Naveen Thukral; Editing by Raju Gopalakrishnan
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