The combination of El Niño developing and current crop prices could lead to tough decisions ahead from grain growers, Rural Bank is indicating.
Their latest finance report shows despite reasonable soil moisture conditions for the season ahead, growers must think carefully about crop varieties, rotations and inputs ahead of sowing.
Simon Dundon, Head of Sales for Rural Bank and Rural Finance, said Australia’s most successful farms make decisions based on what was right for the bottom line.
According to new research commissioned by the bank, he said high performing farms run their businesses on fundamentals of keeping operating cost ratios down, farm business profit up, equity up, and financing costs down.
“Australia’s successful farmers know how to do what they do well – having honed production practices and systems – and use this expertise to drive high level financial performance.
“When weighing up the variables heading into the season, successful farmers will take into account all aspects of their business, including the up and downside for the season, and what risk the business can or should take,” he said.
With wheat and barley prices remaining under pressure due to strong levels of supply, Mr Dundon predicts crop prices will continue this trend until the picture for 2017 supply becomes clear.
“While strong supply continues to have a significant impact on crop prices, we are expecting prices to stay within recent ranges as global supplies remain strong.
“Given we’ve seen record levels of global production and stocks in 2016/17 – particularly for wheat and course grains – a surge in crop prices in the year ahead seems highly unlikely,” he said.
Yields are also expected to be lower than the 2016/2017 bumper crop, with AgAnswers Crop Update detailing “a drier than normal season ahead” due to a drift towards an El Niño later this year.