Low Prices, Frost Affect Profits for Western Australia Farmers

Frosted hawthorn berriesWestern Australia farming businesses recorded a lower operating surplus in the 12 months to February 2017, due to low prices and extreme frost, according to the Planfarm Bankwest Benchmarks report.

The average operating surplus of 550 broad acre farming businesses fell to $667,816 from $680,227 in the previous 12-month period. These businesses posted lower profits despite a record grain harvest of 16.6 million tonnes of wheat.

Weather & Prices

Frost damage countered the record grain harvest with some farmers such as Ron Creagh describing the frosty weather as ‘one in a 10-year event.’ Domestic grain prices also declined 10%, following four years of increases in global wheat harvest and stocks. Low levels of rainfall throughout 2017 made it more difficult for farmers, according to Creagh.

The Department of Primary Industries and Regional Development expects that the fourth quarter would only have a less than 40% probability of exceeding the median rainfall in the southwest. This would likely affect overall production this year, as production is predicted to drop 41% to 35 million tonnes compared to 59 million in 2016.

Different Temperatures

While a power harrow in Australia improves soil cultivation, farmers can only do so much in solving frosted wheat. Volatile weather in country’s east and west has challenged businesses to match record-high harvest last year. In 2017, farmers should expect poor production as 2017 has been ‘a disappointing year,’ according to Rabobank agricultural analyst Wes Lefroy.

Lefroy cited a dry start of weather conditions in Western Australia, which was the main reason for a four percent drop in planted hectares nationwide. On the other hand, frost on the east coast will partly affect the upcoming harvest to be eight million tonnes short of the national five-year average.

Rainfall significantly affects production and Australian farmers can only hope that the last quarter of 2017 would not be a dry one.