Australia sees agriculture output boost as El Nino fades

Reuters News
Posted: Feb 29, 2016 8:04 AM

By Colin Packham and Cecile Lefort

SYDNEY/CANBERRA (Reuters) - Australia's agriculture production is set to rebound as the strongest El Nino in nearly 20 years that wilted crops and triggered bush fires subsides, the country's official commodity forecaster said on Tuesday.

Production of staples such as wheat, cotton and milk are all expected to rise during the 2016/17 season, according to the Australian Bureau of Agriculture, Resource Economics and Rural Sciences (ABARES), although beef output in the world's third-largest exporter is set to fall due to low supplies.

Australian farmers are expected to sow a near record amount of wheat in the next few months, the bureau said, with global production set to remain at high levels despite benchmark prices falling to a more than 5-1/2 year low last week.

Increased plantings and an expected improvement in seasonal conditions are forecast to produce a crop of 24.5 million tonnes, which would be a three-year high. Australia, the world's fourth-largest wheat exporter, produced 24.2 million tonnes in 2015/16.

"Farmers in Australia have been insulated by the fall in [Australian] dollar, while the depreciation of South American currencies will also incentivise farmers to boost production," said Phin Ziebell, agribusiness economist, National Australia Bank.

The bureau said Australia's wheat crop could top its forecasts if the recent El Nino is followed by a La Nina weather event, bringing higher rainfall to the country's east coast and boosting yields. The Australian Bureau of Meteorology estimates a 50 percent chance of a La Nina materializing.

Elsewhere, Australian canola production is set to rise 11 percent to 3.27 million tonnes in the 2016/17 season, ABARES said.

The increased production will meet firmer European demand, the bureau said, which comes as China is pushing for tougher standards on canola imports from Australia that could curb shipments to that country.

Australian cotton production is set to rise 50 percent to 816,000 tonnes in 2016/17, up from 546,000 tonnes a year earlier when drought deprived farmers of much needed irrigation.

Sugar production is also set to benefit from the improved weather. ABARES pegged output in the world's third largest raw sugar exporter at 5.08 million tonnes in 2016/17, up 6 percent.

Milk production will rise to 9.82 million liters, ABARES said, up from 9.6 million liters in 2015/16.

However, Australian beef production is set to fall to a three-year low as farmers rebuild stocks after the size of national herd fell to at least a two-decade low.

Output surged in the last two years as farmers sent stock for slaughter after drought wilted pasture and dried out dams.

ABARES put beef production at 2.16 million tonnes in 2016/17, down 10 percent from the previous year, heralding what it said could be a prolonged pull-back in supply.

"Assuming seasonal conditions will improve next financial year and beyond, we can expect there will be herd rebuilding activities for the beef cattle industry," said Jammie Penm, the bureau's chief commodity analyst. "It may take several years for the size of cattle herd to increase."

(Reporting by Colin Packham; Editing by Richard Pullin)