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Drought hits world stocks

By Greg Ansley

Australian farmers are again casting anxious eyes at the sky as they gamble on good rains to soak fields that, across vast tracts of the continent, continue to be gripped by one of the worst droughts in recorded history. They are not alone in their anxiety. At home, concern runs from the nation’s economic managers to households struggling with rising inflation and soaring food bills; abroad, the world desperately needs Australian grain. With the United States, the European Union and Canada, Australia is among the world’s four biggest wheat exporters. Together, they account for about 75 per cent of the total traded internationally. Its rice crop, although much less significant internationally, is still large enough to place Australia among the world’s top 10 exporters and sufficient to provide one meal a day to almost 40 million people. Almost a decade of drought has hammered the nation’s ability to help feed the world.

From long-term average annual foreign sales of 17 million tonnes, wheat exports plunged to just over 11 million tonnes in 2006-07 and a low of 6.4 million tonnes the following year.

Even with a hoped-for return to average rainfall and forecast record plantings of 13.4 million hectares, the Australian Bureau of Agricultural and Resource Economics predicts wheat exports in 2009-09 will reach only 15.3 million tonnes.

For rice the outlook is much bleaker.

From average annual exports of 620,000 tonnes a year, the nation’s rice farmers will be struggling to send 70,000 tonnes overseas for the next two years.

Further uncertainties threaten the winter grains harvest. Australia’s booming economy is exhausting the nation’s labour market, choking the supply of workers needed to harvest, transport and process the expected bumper winter crop.

The Australian Wheat Board has already said that some of its traditional customers could not afford its prices in a world where demand has pushed markets through the roof.

The good news is that rain is expected, and even with full recovery expected to take time as groundwater and soil moisture levels are replenished, ABARE forecasts wheat exports to rise to 18.6 million tonnes in 2009-10, and 21.4 million tonnes by 2012-13.

This will be a relief to consumers as well as global food managers.

OECD figures show that food price inflation has been higher in Australia over the past few years than in most other industrialised nations, in large part because the prolonged drought has affected a far wider range of produce than most other dry periods.

But beyond the drought there are deeper, disturbing trends in Australian food production.

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