Rabobank noted the end to the growing season had been affected by record high Antarctic temperatures in August and September that caused a rare phenomenon known as “sudden stratospheric warming”.

The last and only other such “sudden” event was recorded during the 2002 Australian drought and the Bureau of Meteorology is forecasting the strongest stratospheric warming on record this year.

Rabobank senior grains analyst Cheryl Kalisch Gordon said there was no sugarcoating the fact the grains industry was suffering the severe impact from three years of drought-affected production.

“This means that the tough times are getting tougher and the tail of enduring impacts of the drought is getting longer,” she said.

“And these impacts don’t just apply to cash flow for growers – they also relate to stymied expansion plans, as well as growing soil and resource management challenges."

Losing exports

Australia has already lost its grip on key export markets such as Indonesia, where the Black Sea and Argentina have stepped up, and Rabobank warned it was a long way back.

“Regaining market positioning will be increasingly difficult with every year that Australia does not have a buoyant export surplus,” Dr Kalisch Gordon said.


“This tough time for the Australian grains and oilseeds sector has reached the point where a break in the drought will just be the start of a now long road to recovery.”

Rabobank expects wheat production to fall to 15.84 million tonnes, 8 per cent down on last year and 32 per cent below the five-year average.

National Australia Bank has also sharply downgraded its wheat production forecast after unfavourable conditions in spring.

A break in the drought will just be the start of a now long road to recovery for the grains industry. Supplied

NAB is tipping a 15.5-million-tonne wheat crop, down from 20 million tonnes in September, after hopes of a reasonable crop in Western Australia fizzled to about 6.2 million tonnes and growers in NSW started cutting crops for hay.

Rabobank predicts Australia to export about eight million tonnes of wheat, 3.9 million tonnes of barley and less than a million tonnes of canola. This would amount to a 15 per cent fall from last year’s exports.

GrainCorp port terminals on the east coast exported next to no grain in the past 12 months, when its trading and marketing arm suffered huge losses.

However, the diminishing production forecasts put GrainCorp in line for a payout of more than $40 million in the first year of a deal with insurance giant Aon designed to smooth out cash flow and earnings.

Dr Kalisch Gordon said the drought meant Australian grain prices would stay high and at the above-average basis levels that have made it uncompetitive on international markets.

The cost of grain to feed livestock has put pressure on meat, milk and eggs prices, but Rabobank said grain prices were likely to be capped by the increased imports.

Rabobank is tipping the dollar to depreciate to 66¢ against the greenback by September 2020 and make whatever Australian grain that is available more competitive in export markets.