07/10/2010 - 00:00

Prices, drought hit WA wheat earnings

07/10/2010 - 00:00


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WEAK prices and lower volumes have eroded the value of Western Australia’s largest agricultural commodity, the wheat crop.

Prices, drought hit WA wheat earnings

WEAK prices and lower volumes have eroded the value of Western Australia’s largest agricultural commodity, the wheat crop.

WA farmers took a battering in 2009-10, with lower wheat prices and poor weather leading to a $1 billion drop in the value of exports.

In 2008-09, wheat exports contributed $2.7 billion to the state’s economy, but only $1.7 billion in 2009-10, a decrease of about 40 per cent.

Production in WA was relatively unchanged, with 8.27 million tonnes in 2008-09, compared to 8.25mt for the past financial year.

The value of total Australian wheat exports for the year was $3.6 billion.

“The eastern states had one of the best starts to a winter cropping season in years,” according to The Australian Bureau of Agricultural and Resource Economics.

“In contrast to the favourable seasonal conditions in eastern states, the Western Australian cropping regions received below average rainfall in autumn, following on from the relatively dry conditions over summer.”

ABARE said next year’s nation-wide crop figures would largely depend on weather conditions in WA, which normally produced up to half of the country’s wheat.

In particular, the bureau warned that lower world prices and the stronger Australian dollar would affect Australian exports in 2010-11.

“The value of [Australian] wheat exports in 2010-11 is forecast to fall by 11 per cent to $3.2 billion because of lower world wheat prices,” ABARE said.

The slump in wheat exports was the primary reason for a $1 billion drop in WA exports by CBH Group grain exporter Grain Pool, to $2.2 billion, after including exports of other grain such as barley, canola and lupins.

Poor rains are also expected to savage CBH’s WA wheat harvest to just 4.2mt this financial year.

The value of live animal exports from WA also fell in 2009-10, by 9 per cent. The state exported $448 million worth of livestock in the period, down from $489 million.

Total Australian live animal exports were on a par with the previous year at $1.16 billion in 2009-10.

Indonesia has traditionally been the largest customer for WA cattle, but livestock exporter Wellard Rural Exports said new import restrictions meant emerging markets had increased in importance to the beef industry.

Wellard managing director Steve Meerwald said two cattle shipments had been sent to Egypt earlier this year.

“Our Egyptian customers were impressed with the quality of the cattle, which is a testament to the professionalism of the Australian cattle industry,” he said.

“The shipment to Egypt, and the associated marketplace competition Wellard has been able to provide to producers, has underlined the importance of our market diversification and development program.

“Although we are still exporting cattle to Indonesia, out shipments are at reduced volumes and tighter weight ranges.”

Elders, another significant livestock exporter, also noted the decrease in sales to Indonesia, which factored heavily in a $45 million cost reduction strategy announced in June.

Elders has revised earnings expectations as market conditions have reduced sales revenue and margin generation,” the firm said.

“We believe conditions will eventually improve ... and live exports to Indonesia will recover. But we are not prepared to wait until that time when a substantial realignment between our costs and our income is clearly required now.”

In its most recent results for the six months to March 31, Elders suffered from the temporary closure of Indonesian ports, with a $1.8 million, or 3 per cent, drop in livestock revenue.

However, the company’s wool revenue for the six months was up 16 per cent, or $4.2 million.

While the wool industry is no longer a large contributor to the WA economy, ‘wool and other animal hairs’ was one of the most improved commodities for the WA agricultural sector in 2009-10.

Wool exports jumped 27 per cent, from $306 million to $389 million.

Listed agribusiness ABB Grain was Australia’s largest exporter of wool when it was taken over by Canadian grain handler Viterra in 2009.

Viterra is the largest buyer of Australian wool and an exporter to key markets such as China, India and Italy.

As a result of the takeover of ABB, Viterra reported operating income from wool sales of $C218 million in the nine months ending July 31 2010.

The WA Meat Marketing Co-operative, one of Australia’s largest exporters of lamb meat, reported export revenue of $78.5 million in 2009-10, down from $87 million in 2008-09.

“For the first 10 months of 2009-10, the volume of Australian sheep meat exports fell year on year by 11 per cent, following lower domestic production,” ABARE said.

‘‘However, unit export values of both lamb and mutton remain high in historical terms, which reflected continued strong demand for Australian sheep meat in key export markets, including those in Asia and the Middle East.

“As a result, the total value of sheep meat exports over this period fell year-on-year by only 7 per cent.

“[In 2010-11] the total value of sheep meat exports is forecast to fall modestly, to around $1.3 billion.”

WA’s exports of crustaceans and molluscs dropped about 11 per cent in the past year, bringing in $264 million, compared with $295 million in the 12 months prior.

The Geraldton Fishermen’s Co-operative, WA’s largest lobster exporter (with 90 per cent of its catch heading overseas), produced export revenue of $120 million in 2009-10, up 50 per cent on the year before.

The fall reflects the significant difficulties faced by the rock lobster industry due to regulatory and environmental pressures, which have resulted in catch quotas being slashed by more than 15 per cent.




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