SYDNEY (Reuters) – Just months after rains broke Australia’s crippling three-year drought, fields of grain have sprung to life, lifting forecasts for a bumper wheat harvest and reviving the beaten up agricultural sector through roaring tractor sales and increased lending.
The mid-season crops in some of the country’s major eastern grain-growing areas are as lush as some industry veterans can remember, representing one of the few bright spots in the country’s pandemic-affected economy.
“I moved here 30 years ago, and I’ve never seen it this good. It is magnificent. It is wheat, barley, everywhere as far as your eye can see,” tractor dealer Roger Moylan said this week from Quirindi, a major grain-growing area in New South Wales (NSW) state.
Moylan, from North West Farm Machinery, said sales of tractors and augers, used to move grain from trucks into silos, were booming.
“If auger sales are through the roof, that tells you one thing – there is going to be grain everywhere,” he said.
Australia was one of the top four global wheat exporters before the unrelenting drought started slashing production.
The country’s chief commodity forecaster recently lifted its wheat production forecasts for 2020-21 to 26.7 million tonnes, more than 75% above the prior year’s level and the highest since Australia’s record 35.13 million tonnes in 2016–17.
Australia’s 10-year average is just over 24 million tonnes.
(GRAPHIC – Australia eyes ‘magnificent’ wheat crop after drought-ending rains: https://fingfx.thomsonreuters.com/gfx/ce/yzdpxnxgrpx/AustraliaWheatOutputandMap.png)
This year’s production could rise to as high as 30 million tonnes if export-focused Western Australia receives a good drenching in the next two months, said one Singapore-based trader at an international trading company that supplies Australian wheat to Asia.
RISKS REMAIN
Given most farmers won’t start harvesting until October at the earliest, there remains uncertainty over crop production, especially in Western Australia that does not currently have the high soil moisture levels of NSW.
Western Australia and NSW are the top two wheat-producing states in the country.
Lyndon Mickel, who has a 6,000 hectare farm near Esperance in Western Australia’s southern wheat belt, told Reuters that some recent rain had lifted spirits after a dry start to the season.
“We are sitting on a knife edge,” he said.
“If we can get some decent falls across the state in the next month we could come into a decent yield.”
(GRAPHIC – Australia soil moisture levels and wheat production estimates: https://fingfx.thomsonreuters.com/gfx/ce/qmypmkaympr/AustWheatSoil.png)
Benchmark wheat prices earlier this year hit an 18-month high amid concerns about global supplies. While those fears have abated, prices continue to linger close to those highs.
Australian wheat exports this season are expected to nearly double from last year, the Australian Bureau of Agricultural and Resource Economics and Sciences said in June.
Yet souring diplomatic relations between Canberra and Beijing have also created a stumbling block for some grain farmers, after China effectively banned Australian barley imports in May via an 80.5% tariff.
China accounts for more than one-fifth of agricultural exports from Australia, taking almost twice as much produce as the second largest destination, Japan.
“Australia would probably need to diversify its trading partners especially to south-eastern Asian economies, where population is growing rapidly,” Natixis economist Alicia Garcia-Harrero wrote in a note.
SMALL TOWN AUSTRALIA
The long-awaited economic activity emerging in many small towns is a godsend for a rural sector still recovering from one of Australia’s worst-ever droughts that wilted crops and forced some communities to truck in drinking water in the country’s east.
Grant Cairns, head of agribusiness at Commonwealth Bank of Australia , told Reuters demand for equipment finance surged 27% in June from a year ago while demand for land purchases were strong too.
“Our customers have sought to sow crops and replenish livestock that they’ve had to de-stock through the drought,” Cairns said.
NSW farmers have significantly expanded the size of their sown areas to push the country’s total winter crop acreage to above long-term averages, a government crop report said.
Tractor sales breached the 2,000 mark in the month of June, according to the Tractor and Machinery Association of Australia, the first time it has done so since 1981.
“It shows how resilient and how quickly farmers got back into the saddle and started buying equipment, said the association’s executive director, Gary Northover.
“Many dealers are even talking about increasing employment – there aren’t many industries doing that in a pandemic.”
(Reporting by Jonathan Barrett and Swati Pandey; additional reporting by Colin Packham and Naveen Thukral; Editing by Raju Gopalakrishnan)
OTTAWA – Finance Minister Chrystia Freeland says the government is making some changes to mortgage rules to help more Canadians to purchase their first home.
She says the changes will come into force in December and better reflect the housing market.
The price cap for insured mortgages will be boosted for the first time since 2012, moving to $1.5 million from $1 million, to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
On Aug. 1 eligibility for the 30-year amortization was changed to include first-time buyers purchasing a newly-built home.
Justice Minister Arif Virani is also releasing drafts for a bill of rights for renters as well as one for homebuyers, both of which the government promised five months ago.
Virani says the government intends to work with provinces to prevent practices like renovictions, where landowners evict tenants and make minimal renovations and then seek higher rents.
The government touts today’s announced measures as the “boldest mortgage reforms in decades,” and it comes after a year of criticism over high housing costs.
The Liberals have been slumping in the polls for months, including among younger adults who say not being able to afford a house is one of their key concerns.
This report by The Canadian Press was first published Sept. 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales rose 1.4 per cent to $71 billion in July, helped by higher sales in the petroleum and coal and chemical product subsectors.
The increase followed a 1.7 per cent decrease in June.
The agency says sales in the petroleum and coal product subsector gained 6.7 per cent to total $8.6 billion in July as most refineries sold more, helped by higher prices and demand.
Chemical product sales rose 5.3 per cent to $5.6 billion in July, boosted by increased sales of pharmaceutical and medicine products.
Sales of wood products fell 4.8 per cent for the month to $2.9 billion, the lowest level since May 2023.
In constant dollar terms, overall manufacturing sales rose 0.9 per cent in July.
This report by The Canadian Press was first published Sept. 16, 2024.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.
“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.
Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.
But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.
Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.
“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.
“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.
A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.
It would also be “counter to what they’ve signaled,” he said.
More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.
“That’s going to be more important than the size of the cut itself,” he said.
In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.
“Here, the labour situation is worse than what we see in the United States,” he said.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 13, 2024.
