For many graingrowers, 2004 was a heartbreaker. Consultant Neil Clark explains how this needs to be recognised by agribusiness and research institutions in their approach to managing the grains sector in the months ahead.
[Photo: Neil Clark: mining
last year"s data]
Australia"s winter crop farm gate income in 2004 was $1.5 billion less than the average of the preceding four years. This staggering figure underlines just how serious some of the financial returns were for many growers, given the national result also includes districts that enjoyed above-average seasons.
It means cash flow will be a major factor for farmers in many regions this year, and this will influence the extent to which growers can adopt many of the recommendations that will be being urged by advisers, consultants and other support services.
There will be no room for sweeping generalisations. Instead, advisers and marketers may need to mine much deeper than usual into last year"s data, and sensibly differentiate between districts that may be brimming with enthusiasm and those that have been forced into a holding pattern.
We can expect growers in the worst affected regions to make management decisions based on their cash flow and attitude to risk, rather than sound agronomics. Conversely, regions that fared better last year would be ideal targets for products, innovations and ideas. By understanding the circumstances of their customers, rural businesses, and others, will be able to better address growers" needs.
The main influences on 2004 were a combination of low soil-water reserves, hot weather, unseasonal frosts and locusts, all of which stripped the winter grains harvest by 21 percent and undermined the national wheat crop. Added to this were the strengthening Australian dollar, lower commodity prices and grain quality issues (high screenings), to put farmers in many regions under severe financial strain.
The yields in 2004 were significantly higher than the 2002 drought, but the impact of lower grain prices and higher screenings dragged down the farm gate value nationally.
This is despite some regions, such as certain districts of northern NSW, enjoying yields and dollar returns significantly better than the average of the previous four years.
NSW and Queensland were the only states to record growth in the farm gate value of their winter crop, compared to the four-year average. All other states experienced a significant downturn. NSW had the highest winter crop production. This was largely due to excellent results from the northern and north-western regions of the state. These combined shires went against the state average to post returns of 87 percent and 74 percent above the four-year average, while the rest of the state recorded below average returns of between nine percent and 55 percent.
The NSW data is an example of the dangers of treating a large geographical area as a whole unit without analysing the performance of individual shires. Important cropping regions such as the Murrumbidgee and Murray areas in southern NSW were 55 percent and 51 percent below the four-year average.
In Victoria the trend was very poor through most of the winter crop regions, with only the Western Districts recording a farm gate result higher than the previous four-year average. The Wimmera and Mallee, which made up 70 percent of Victoria"s production over the past four seasons, were 40 percent below the average.
The concern in figures from these regions is that there has been a switch to mainstream cropping in recent years away from a mixed livestock enterprise. In many areas, the winter crop harvest now provides a single yearly income.
The 2004 season in SA was consistently below the four-year average. Large cropping regions in the Eyre and York peninsulas were almost 40 percent below that average, in a result that effectively ripped more than half a billion dolaars from SA farm gate returns. Added to this were the devastating Eyre Peninsula bushfires that burnt out 80,000 hectares.
WA was also more than half a billion dollars down on the four-year average with a 28 percent decrease. This followed the record cop in 2003, so did not have the poor lead-up years suffered by some of the eastern state regions. The southern parts of Queensland performed better than the four-year average but were offset by poor results in the central regions.
Looking ahead, low commodity prices and seasonal conditions remain the major threats to a successful 2005. The timing of the autumn break will play a major role in the type and area of crops that are planted.
SA has had a run of reasonable to good years leading up to 2004. Farmers who have not invested heavily in land and machinery will still be cashed up.
For mroe information: Neil Clark & Associates, Bendigo, Victoria (03) 5441 1244, email@example.com