LA Private

Big long dry spell on the cards for local farmers

El Nino is coming and the growing chance of a ‘big dry’ later this year and early next has seen the federal government’s chief rural analysis and forecasting group cut Australia’s winter crop production and exports forecasts.

According to the June crop report from the Department of Agriculture, Fisheries and Forestry, total Australian winter crop production is forecast to fall 34% to 44.9 million tonnes in 2023-24, around 3% below the 10-year average to 2022-23 of 46.4 million tonnes.

The forecasters blamed the predicted El Nino event, now developing after a record three years of above average rainfall brought on by back-to-back the lengthy La Nina weather patterns.

The El Nino weather pattern and the dry weather it causes are threatening food producers across Asia, with Australian wheat, barley and canola joining palm oil and rice production across southeast Asia as being at most risk.

The June quarter crop report was prepared before the Bureau of Meteorology upgraded its El Nino warning from a ‘watch’ status which means one is possible, to an ‘alert’ which means there’s a 70% chance of one happening.

According to BOM Senior Climatologist Catherine Ganter.

“While the models show it’s very likely the tropical Pacific Ocean temperatures will reach El Nino levels during winter, we have seen some movement in the atmosphere towards El Nino conditions,” Ms Ganter said this week.

“While our El Nino “alert” criteria have been met, these changes will need to strengthen and sustain themselves over a longer period for us to consider an El Nino event.”

El Nino largely affects Eastern Australia and brings dry weather as well as warmer than usual temperatures for the southern two-thirds of the country.

The BOM’s long-range forecast for winter includes drier and warmer conditions “across almost all of Australia” according to Ms Ganter.

And that’s behind the downgrades in the latest crop report from the federal government.

Agricultural exports are also forecast to drop from record levels, falling an estimated 17% to $A65 billion in 2023-24 due to lower production and easing global prices for grains and oilseeds.

Prices and revenues for various sectors will see widespread falls for cereals, especially wheat and barley, meat, dairy but the value of horticulture (especially nuts) and wine grapes are forecast to rise.

This will have an impact on listed rural focused companies like Elders, GrainCorp, Treasury Wine Estates, Costa Group, Select Harvests, Bega Cheese and Australian Agriculture Company (AAC).

So far as investors are concerned, they seem to be well aware of the looming pressures, judging by the sharemaket performances of these rural leaders in 2023.

Elders shares are down 36% (the news that CEO, Mark Allison is staying in that role until at least 2025 might help lift the price), TWE shares are down 13% (most of that linked to problems in the US wine market) and shares in AAC are down 11%.

Costa Group shares are off 2.5%, but might rise if the dry weather ends the problems of the past two years and yields improve for the country’s largest horticultural group; Bega shares are off 6.8% for the country’s largest listed food company.

GrainCorp shares are up 5% with its solid trading update last month under its belt – it has outperformed the ASX 200 so far in 2023 which is up 2.2%.

The rural star, though, is Select Harvests – the loss warning in late May was expected but the better news on the prospects for the company’s almond crop has helped push the shares nearly 12% higher since the start of January

Barley group, United Malt is in the process of being bought by a French rival at $5 a share so its performance is not of interest.

Rural suppliers like Incitec Pivot (down nearly 24% year to date and lost its CEO this week) and Nufarm (down nearly 15%) have been hit by higher inflation and cost pressures for their inputs and higher financing charges.

(NB All price movements up to Thursday’s close.)


The Crop report said summer crop production, which includes sorghum and cotton, is estimated to fall 8% to 5.1 million tonnes over the same period, but remain well above the decade average.

Wheat and barley production will drop by 34% and 30% to 26.2 million tonnes and 9.9 million tonnes, respectively.

Both estimates are below the 10-year average. Canola is forecast to fall 41% to 4.9 million tonnes but remain 15% above the decade average, according to the report.

The forecasters say the lower tonnages will be due to falling crop yields due to the high chance of below average rainfall across cropping regions between June and August, with the potential for the El Nino conditions associated with drier weather.

Area planted to winter crops will fall but remain historically high at 23.3 million hectares, with wheat and canola plantings down by 2% and 11%, respectively. Barley plantings are set to rise 4% to 4.3 million hectares because it can better handle drier conditions, the forecasters said.

Lower yields will pressure the total value of agricultural production, which is forecast to fall by 14% to $A79 billion in 2023-24, still the third highest on record, according to the June agricultural commodities report from the department.

The Weather Bureau has said the El Nino event, should it develop, could be more intense than some previous ‘Big Drys’ that could see the 2024-25 crop season pressured if the dry extends through into early 2024.


The June report said “About half of the decrease in value of crop output is expected in wheat, falling by $6 billion to $A9.7 billion in 2023–24; Canola and barley are also expected to see sizeable decreases in value, falling by $A3.1 billion and $A1.6 billion respectively while the value of pulses, sorghum, sugar and cotton are also expected to fall, with a combined decrease of $A2.3 billion.

The report said the fall in the value of crop production is expected to be partially offset by increases in the value of horticulture and wine grape production:

Horticulture is expected to increase by $A1.5 billion to reach a record $A18 billion, “reflecting strong growth in nut production and increasing domestic fruit and vegetable consumption.

That’s why Costa Group looks well-placed, as does Select Harvests. But that assumes the economy remains out of recession and there’s no significant surge in unemployment and people moving from wages to welfare which might see demand shocks for products such as berries, exotic fruits and more expensive vegetables.

“For wine grapes, the expected drier conditions in 2023–24 should reduce the instance of disease which substantially lowered the 2022–23 crop. This is expected to increase the value of wine grape production by $174 million to reach just over $1 billion,” according to the forecast – a small glimmer of light for TWE but its big problems remain in the US wine market.

“Conversely, livestock production is expected to increase as livestock turn-off rates increase with reduced pasture availability forecast for later in 2023–24. Beef and veal production is forecast to rise by 6% and sheep meat production by 2%.

“A small increase in milk production is also expected despite lower dairy cow numbers, as good pasture quality and falling fodder prices increase milk yields and drier conditions support better dairy cow health.

Despite higher production volume, the value of livestock production is expected to edge lower by 2% to $35 billion in 2023–24 because of lower prices.

“Livestock prices are forecast to fall because of lower domestic restocking demand and higher global supply of beef and sheep meat in 2023–24. Milk prices are also expected to decrease as dairy export prices ease. The forecast decrease in the value of livestock production is mainly driven by:

Beef and veal production values falling by $319 million to $14.7 billion;

Sheep meat production value falling by $146 million to $4.3 billion;

Milk production falling by $279 million to $5.6 billion.

The total fall in the value of livestock production is expected to be partially offset by rising wool production values.

Strong demand for Australian wool from China is forecast to increase wool prices, with production values expected to increase by $175 million in 2023–24.

“Strong demand from China is expected to support higher export volumes and prices following the lifting of pandemic restrictions in December 2022,” the report commented about the prospects of Chinese demand.

If this El Nino is anything like the last one (which ended in early 2020 and lasted for more than 2 years), Australian farmers will be feeling the pinch in late 2024 and into 2025 and become another headache for the banks and governments.