Wheat watch: drought dwindles, blades grow
After a thirsty two years, the long drought has finally ended for the Australian wheat farmer. Favorable rains this fall (or in the northern hemisphere, spring) have permitted farmers to sow their winter wheat in fields not cracked and parched from one of the worst droughts to hit parts of northern New South Wales and southern Queensland for some time.
Although the farmers will still need rain over the five- month winter growing period, the rains have allowed a planting of 12 million hectares of land, an increase of 800,000 hectares over last year.
The rains, combined with the increased planting, have already caused the Australia Bureau of Agriculture to lift its estimate of the wheat crop from an estimate of 13.5 million metric tons to a early July estimate of 15 million tons. Since wheat is the principal source of rural income, as well as the biggest export earner for Australia, providing a 40-45 percent of its export earnings, this is good news for the Aussies.
Sir Leslie Price, chairman of the Australian Wheat Board, the sole marketing authority of Australian wheat, is cheered by the rain, but still cautious. "To have a reasonable crop this year," he tells a visitor in his Melbourne office, "the winter must be wetter than usual."
The Wheat Board in its latest report on June 4 also said "the size of the crop depends on the timing and quantity of rainfall in the next five months."
A disappointing crop this year, Sir Leslie says, could cause some serious problems for the industry since it might not be able to meet the demands of customers it has cultivated as carefully as the wheat in the fields. In fact, before the rainfall the Wheat Board expected to have only 6 million to 7 million metric tons of wheat for export instead of the 13 million to 14 million tons it needed to satisfy its customers.
Long-term contracts alone come to 4 million tons. Normal sales to the USSR and the People's Republic of China represent another 2.5 million tons and domestic usage is 3 million tons. Other traditional customers could absorb another 2 million tons. Thus, total export sales could come to a minimum of 11. 5 million tons.
Says one source in the industry, "We were about to take a bit of a shaking." The Aussies still could have something of a shortfall, but it will be less than originally projected.
The Aussies should be helped somewhat by the USSR's "modestly large" grain crop of 210 million to 220 million tons, of which 98-108 million tons will be wheat. The level of stocks in the USSR is unknown.
China will continue to import large quantities of wheat, depending on the rice crop. Initial estimates place mainland China's demand at 9 million to 12 million tons. All totaled, Sir Leslie expects demand from the importing countries to increase to 88 million to 93 million tons this year compared with about 81 million tons last year.
Another Aussie worry is the expected bumper US and Canadian crops. Australia could lose some customers to US and Canadian farmers, who the Aussies note can be aggressive marketers. "We can be aggressive too," says Mr. Price, "but it's not always in the best interest of the Australian farmer." Instead, he says, it is important the US government understand the effect of its actions on its allies' trade.
The Australian farmers are still grousing over what they consider "a bending" of an agreement by the US not to sell wheat to Australia's traditional customers. Last year, after the US imposed a grain embargo on sales to the USSR because of its invasion of Afghanistan, the US sold large quantities of grain to China, a traditional customer of Australia. Although admitting the Australian farmer wasn't hurt by the sale, Sir Leslie asks, "Was it in the spirit of the agreement?"
Despite the drought and what they considered "poaching" by the US, the Australian farmers had little cause to be unhappy. As one source noted, "The wheat farmer is the nouveau riche of Australia." High production in nondrought areas and high prices last year boosted average income of wheat farmers to $51, 000 compared to $38,000 for sheep farmers and $35,000 for cattle ranchers.
Usually, wheat is grown in rotation with pasture on which sheep are grazed because wheat farms carry about half of Australia's 131 million sheep. Recently farmers have been growing more wheat and cutting back their sheep production because of the higher prices for wheat.
Although the drought may have given some farmers temporary cash flow problems , Sir Leslie concedes, "If a wheat farmer couldn't make it in the last two years , maybe he shouldn't be in the business."