La Nina outlook offers boost to Australian agriculture

Market: Agriculture
16/05/24

The outlook for Australia's crop and beef production is turning more positive in 2024-25, with the country's Bureau of Meteorology (BoM) updating its climate forecast towards a La Nina weather trend forming at the end of this year.

BoM updated its El Nino-Southern Oscillation (Enso) outlook to a La Nina Watch alert on 14 May, with indicators suggesting this phase developing in late 2024. Approximately half of all watch alerts have followed with the projected Enso event occurring.

Crop production and grazing conditions will likely benefit from increased rainfall should the weather trend eventuate. La Nina is associated with higher than average winter-spring rainfall from the northwest to southeast of Australia.

Grain yields and production in Australia's eastern cropping regions typically increase with a La Nina. Australia experienced record production during La Nina events that occurred during 2020-23. Winter crop production peaked at 69mn t and 63mn t in the 2022-23 and 2021-22 fiscal year respectively, according to Australian Bureau of Agricultural and Resource Economics (Abares) data.

The La Nina Watch alert comes as the US Department of Agriculture projected Australia's wheat production to increase by 3mn t from a year earlier to 29mn t in the 2024-25 marketing year, according to data released in its World Agricultural Supply and Demand Estimates on 10 May. Coarse grain production is also projected to rise by 4pc to 14.87mn t.

But Enso weather events have limited impact on southwest Western Australia (WA). A potential La Nina is unlikely to aid WA cropping zones currently experiencing very low soil moisture levels.

Increased rainfall from a La Nina developing in late 2024 may not coincide with the growing season of east Australia's wheat crops, which are typically sown during April-June and harvested in November–January. Too much rain around the harvest can damage crops and degrade quality. Floods in late 2022 damaged harvests in New South Wales, resulting in Abares at the time downgrading the state's production projections by 2mn t.

Increased rainfall in east Australia will boost pasture availability for cattle producers. Increased capacity of feed may encourage producers to increase herd sizes, potentially supporting future slaughter and beef production.

But the agriculture industry may be wary of the BoM's latest outlook. BoM was widely criticised after last year's El Nino declaration in September, which promoted some producers to pre-emptively destock at low prices in fear of dry conditions that did not occur.

By Edward Dunlop

Australia winter-spring rainfall during La Nina years (deciles)

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