Winter crop production in Australia expected to fall

Australia's grain production in the new financial year is expected to fall sharply as higher fertilizer costs linked to the Middle East conflict weigh on growers, the government and industry forecasts indicate.

National winter crop production is forecast to fall by 21 percent in 2026-27, reflecting an expected decline in the total area planted and lower yields, with the figure 12 percent below the five-year average, the Australian Bureau of Agricultural and Resource Economics and Sciences, or ABARES, said in its latest June crop report.

Wheat production is forecast to fall by 26 percent, 23 percent below the five-year average. Barley, canola and chickpea output are expected to decline by 15 percent, 20 percent and 51 percent, respectively. Meanwhile, summer crop production is estimated to have fallen by 15 percent in 2025‍-‍26.

Barley production is expected to fall in 2026-27, despite the planting area being forecast to increase by 4 percent, driven by strong cereal grain prices and its comparatively lower fertilizer requirement compared to wheat and canola, the report said.

The current forecast was affected by both climatic conditions and agricultural input costs, with fertilizer supply and prices becoming important factors in crop production for the new season, ABARES said.

It said the Middle East conflict had caused significant disruption to global fuel and fertilizer supplies. Australian broadacre cropping is exposed to this disruption due to its reliance on imports and limited capacity to use substitutes.

If the conflict continues, input costs are likely to remain elevated for longer, which could weigh on production, the bureau said, adding that in some extremely dry regions, farmers are expected to significantly reduce the area planted to winter crops or not plant a crop at all.

It also noted that while growers are expected to have their fertilizer requirements for the sowing period, there is more uncertainty around their willingness to purchase fertilizer at elevated prices, particularly urea for top-dressing crops in July and August, which could affect yields.

Prime Minister Anthony Albanese said on Monday that Australia welcomed a peace agreement between the United States and Iran. He said the reopening of the Strait of Hormuz is "essential to easing pressure on energy prices and economies".

Fertilizer Australia, the industry association representing Australia's fertilizer supply chain, said more than 60 percent of the urea fertilizer imported into Australia travels through the strait.

Rabobank, an international agribusiness banking cooperative, said in its latest winter crop forecast that Australia's winter crop planting area is expected to decline this year, impacted by mixed weather conditions and high input costs.

The report said rising farm input costs, particularly higher global fertilizer and diesel prices linked to the Middle East conflict, are increasing production costs for Australian growers and influencing planting decisions this season.

The report's author, Vitor Pistoia, a senior grains and oilseeds analyst, said the higher costs are prompting growers to shift "toward lower-input crops and contributing to a reduction in total cropping area".

The decline in planting area is expected to be concentrated on wheat. Pistoia said barley plantings are expected to increase from last year, as the crop could offer growers stronger profit margins than wheat.

The report also noted that barley exports have remained strong so far, supported by demand from China. The National Farmers' Federation said farm businesses are facing challenges.

"The combination of higher operating costs, seasonal pressures and declining production forecasts leaves little room to absorb additional costs," the federation's Chief Executive Officer Michael Guerin said.

xinxin@chinadaily.com.cn