Life in an open market: Australia’s experience

Western Producer reporter Brian Cross is in Australia to meet grain industry experts and talk to farmers in the post Australian Wheat Board era. He will explore how the grain handling industry has fared since it completed its transition from a single desk to an open market in 2008, and whether it holds any lessons for Canadians.

TEMORA, Aus. — Four years after the elimination of single desk grain marketing in Australia, wheat is still firmly enshrined as the country’s top crop.

According to figures from the Australian Bureau of Agricultural Resource Economics and Science (ABARES), wheat acreage easily exceeded the combined acreage of all other grain and oilseed crops in 2011-12.

Australian wheat producers planted an estimated 34.7 million acres of wheat last year.

Total acreage for all other crops, not including sugar cane, cotton and grapes, was less than 25 million acres.

Peter and Pat Allen, who produce cereals, oilseeds and sheep on their farm near Temora, New South Wales, 500 kilometres southwest of Sydney, said farmers in Australia’s eastern states are expanding their rotations to include other crops, most notably canola.

But wheat is still king on most farms in the area and is likely to remain that way for years to come.

This year, the Allens will plant about 2,200 acres of wheat, with expected yields of 50 to 60 bushels per acre.

Another 1,000 acres will be planted to barley and canola and 2,000 more will be used for grazing.

The Allens also have a flock of 1,500 Merino ewes, which produce wool and lambs for slaughter.

When farmland is not producing grain or oilseed crops, it is sown down to lupins and used for pasture.

“We’re starting to see more canola, but it’s only been in the last year or two that canola prices have been high enough to (attract) more acres,” Pat said.

“Because of our climatic conditions, wheat is just a lot more reliable.”

Peter said wheat has been a mainstay of Australian farm incomes for the past century.

Varieties available to producers are well adapted to Australian growing conditions, and the crop can usually be counted on to produce reasonable yields, even in a dry growing season.

Although Australia is known for its arid climate, the Allens’ farm receives 500 to 550 millimetres of rainfall in an average year.

Cereal crops are planted in late April and May and harvest begins in November or December.

The planting of Australia’s biggest winter crops, namely wheat, barley and canola, is timed to avoid the country’s extreme summer temperatures.

There have been years when the Allens harvested wheat crops of 80 bu. per acre or more on dryland production.

Canola yields in the Temora area are far less predictable.

In a good year, with normal rainfall and moderate temperatures, canola yields can reach 40 bu. per acre.

But if moisture is limited and heat stress is an issue, yields can drop to 15 bu. per acre or less, a risk that many Australian farmers are unwilling to take.

The Allens typically follow a five-year crop rotation, which includes three years of wheat production, one of barley and one of canola.

After that, the land is converted to grazing for two or three years.

“Wheat prices, out of all the grain prices, are really what drives the economics of the farm,” said Peter.

“There has been a bit of a spike in the meat side of sheep prices lately, so that has taken some of the wheat land away … but it will take the industry some time to make that adjustment (back into livestock) and the capital required is fairly high, so that’s slowing the change.

“The whole income of the entire region is really driven by the cash flow of wheat, partly I suppose because our research and our history have been such that we’ve adapted our systems toward wheat production and we’ve become very skilled at growing it.”

ABARES executive director Paul Morris said stronger meat prices and lower wheat prices have prompted more Australian farmers to increase livestock numbers.

Nonetheless, Australian wheat acreage should still be 33.5 to 34 million acres in 2012, Morris said.

“We expect that acreage for wheat will remain strong for 2012-13, and with the recent rains throughout much of eastern Australia, we should be looking at another good production year,” he said.

Peter Woods, chief executive officer of Wheat Exports Australia, said Australian wheat growers produced nearly 28 million tonnes in 2010-11.

Of that, more than 18.5 million tonnes were exported.

Speaking at a grain logistics conference in Melbourne last week, Woods said the Australian grain industry must not lose sight of the fact that Australia’s wheat is heavily dependent on foreign markets.

Wheat Exports Australia (WEA) was established in 2008 to monitor Australian wheat exports after the privatization of the AWB, Australia’s single desk marketing agency, and the deregulation of the Australian wheat market.

WEA’s primary objective was to ensure that Australian wheat continued to reach foreign markets in an orderly and competitive fashion.

In addition to issuing certificates to accredited wheat exporters, WEA was also charged with reviewing the financial credentials of exporters, protecting growers from unscrupulous dealers and ensuring reasonable port access for small exporters that did not own their own port facilities.

Australia’s Parliament is now considering legislation aimed at eliminating WEA that could come into force later this year.

“If the legislation is (passed) … there will be no regulation in the wheat industry by the end of the year,” said Woods.

“The industry itself will have to resolve any industry issues.”

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