Rain Stinks For Bumper Wheat Crop
Rain Stinks For Bumper Wheat Crop
It’s been some 15 years since I lived on a farm. I have become citified, my mother would tell you. A ‘yuppie’, in my father’s language.
It’s true. I feel at home in big cities, not in the bush. But whenever I return to the family farm, the memories come flooding back. For many people sights and sounds invoke memories. For me, it is the smell of the bush.
The smell of a diesel engine finally silent after 12 hours on the go. Freshly baled lucerne hay. Morning dew and the dry air of a summer sunrise. All these things bring back memories of my specialty, night shifts on the round baler, and the satisfaction of a finished paddock, job well done.
More than anything else, though, I remember the different smells of rain. The smell of an approaching storm rolling down the valley. The smell of rain on 40 degree schoolyard asphalt. Or the smell – it only lasted 30 seconds – of the first drops of rain bounding off a dry dirt paddock.
The reason the smell of rain stayed with me is because our livelihood depended on it. It could bring joy – the smell of a drought breaking before your nose – or heartache, as tens of thousands of dollars worth of hay rotted in the paddock.
For most of 2010, farmers in Australia’s eastern states have been rejoicing at the smell of drought breaking rains. For 10 years they have suffered the worst drought conditions in living memory. This year, it has rained, and rained, and rained, to the point where dams that many thought would never be full again are at capacity.
At the moment Australian Crop Forecasters are holding firm with their forecast of a 23.9m tonne wheat harvest this year, up about 10% on last year’s crop. With Western Australia only producing half last year’s 8m tonnes, the eastern states are expecting a bonanza and, even better, prices are also the best they have been in years. With many family operations taking on substantial amounts of debt to survive the past decade, 2010 was shaping up as the bumper season everyone so desperately needs.
If that is to happen, they need the rain to stop. Now.
Too much rain at this time of year makes it impossible to operate harvesting machinery without getting bogged. Contract harvesters begin the season in Queensland and Northern NSW and work their way south. They are already more than two weeks behind where they are supposed to be.
Worse, ready-to-harvest wheat that gets too much rain can become ‘shot and sprung’. This is when the grains germinate while still on the stalk, reducing its value from something like $280 a tonne to $100 per tonne, if you’re lucky.
Combined with a forecast wet November, all of the anecdotal evidence is pointing to a serious downgrade of the national harvest. That will be bad news for Graincorp and AWB. For our farmers, the smell of another failure is the last thing they need.
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Steve, thanks for the nostalgia. I was a wheat and sheep farmer for thirty years, but now live in a big Ukrainian city, so my life is radically different. But I will always be a farmer in my heart, and your description tugs so many heart-strings. I had exactly the same thoughts about the coming harvest, which for my neck of the woods (Urana) starts with Canola on Nov 12th, Barley on the 20th, and Wheat about the 26th, or as soon as the Barley is finished. I was wondering about the price, and it is unusual to see it so good, especially considering the very high Aussie dollar and the expected abundance of grain? Your notes also betray the fact that you still have a farmer's mind, because you are worrying already, and of course, to complete the cycle you must now start winging! :)
I wouldn't put any more confidence in weather forecasts of more than four or five days than I would in interest rate forecasts, or short-term stock price forecasts.
There is a book by John Gribbin that I read earlier this year called "Deep Simplicity" that basically puts Chaos Theory into terms that the laity can understand.
The book very nicely explains why it is effectively impossible to make long-range weather forecasts.
When investing in Ag stocks, the only thing that an investor should go on should be very long term average yields and very long term average prices.
I'm glad the laity can understand that book. Citified folf might be more interested in the latté. I wonder what latté's are like in Ukranian cities?
Talking about farming, water... this triggers a couple loosely related thoughts... Jared Diamond says (in "Guns, Germ and Steel", if I remember correctly) Australia isn't a natural place for civilisation to develop because of its weather pattern isn't ideal for agriculture. And Alan Beattie reasons in "False Economy" Egypt imports half of its staple food even though its ancient kingdom used to be the Fertile Crescent, because there is better use of its available water -- for human consumption. In other words, it is importing water embedded in the crops.
Purely from an economics perspective, I have been wondering if we, as a nation, have been fooling ourselves about our comparative advantage in agriculture and allocating our resources (water, money, labour, etc) the wrong way.
(I am definitely aware of the social impact of moving away from agricultural activities.)
J Mako. My grandfather successfully managed his farms through many seasons, droughts, wets high prices and low prices. The thing I learnt from him is that its not about suitable weather its more about adapting to the circumstances, and managing your conditions wisely, don't waste your money in the good times so you can survive during harder times, keep debt low etc sounds a little like value investing really. He was a simple man but I learnt a lot from him. Not sure there are many places that have perfect weather. Its all just cycles. You have to adapt and learn.
Russias having there droughts now as we come out of them while the US is enjoying good crops after large floods. Brazill is booming now but it too has had its cycles!
Anyway just my thoughts. Great article Steve. Miss the old Farm.
JMako, from an historical perspective your answer is obvious, and from an efficiency angle our Aussie farmers are the best in the world (we also have to include NZ farmers here), in terms of produce per man, by a long margin. So I would be hesitant to reallocate resources too quickly. Agriculture is not quite dead in Oz yet. Labour wise, we are already on top of the pile. Water wise, you may have a point, although we are getting more efficient rapidly in agriculture.
And the latte's in Ukrainian cities are fantastic, if you are sitting accross the table from one of the local sorts, who truly are the most beautiful in the world!! My apologies to all Australian women (I have two very beautiful daughters). But these beauties make your jaw drop regularly for no apparent reason, at which time you must recompose yourself quickly and push it back up manually, and pretend you are concentrating on the latte!!
Damn, even far flung Ukraine is being citified and yuppified...
I am harvesting oats in WA at the moment, and it is going 1.2tns per ha ,av year 3 to 4tns per ha , some parts of the paddock have actually died. So not all parts of Australia have had a wet year,WA has been unusually dry.
Shane and wambo,
Thanks for chiming in.
What I have in mind is mainly about water. Agriculture pays less for its water consumption. Effectively the entire nation is subsidising it. Can our agricultural products still be competitive in the global market if we take away this subsidy?
JMako,
Thanks for the reply. Actually the great majority of Agriculture in Australia is dry land. I don't know how much farmers have to pay for water in other countries, but I suspect we would not be anywhere near competitive if we were not subsidised into water. It all depends on the 'mix' you apportion between recreation, agriculture, and household usage (better not forget the environment!). For example, as I understand it we are the highest users of household water in the world per capita, and most of that goes on little green patches around our houses just to make them look pretty.
Wambo, you are dead right about the good farmers being good value investors. This is where the value investing mindset really started to gel with me. The conservative farmers survive, and sometime along the track they usually end up comfortably wealthy. I watched many of my neighbors go broke over the years. They were often hard workers (perhaps harder workers than me), but they were either shoddy managers, bad agronomists, or borrowed too much money to spend on huge machinery. Often they try to get too big too quickly. It's the old story of getting rich slowly! Particularly in farming. It can be very cruel to you if you make too many wrong moves. Most of the wealth is stored in the land. If you can make a living by your farming, the increase in the land price over time will set you up for later.
Who said farmers were subsidised in water? It depends how look at it, but there is no direct subsidy. If you mean the government owns the infrastructure and allocates accordingly, then the same can be said for roads.
Hi Shane, does not surprise me you ended up in Ukraine,you mentioned how good looking the women were there{or Russia} years ago.You had a pretty attractive wife yourself years ago.Hopefully she has found a really nice guy.Harvest here is shaping like a disaster here with constant rain 360 mls over the last 3 months,with shot canola,wheat & barley & paddocks saturated .c ya Peter
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