Inputs pressure remains
The wet conditions over most of Australia not only in recent months, but over the past few years, has proved there can be too much of a good thing.
While strong water availability suppresses water prices, rainfall over saturated soils has caused devastating flooding in almost every dairying region.
The good news is climate models from the Bureau of Meteorology suggest La Niña may be over soon, however, the impacts of its influence may be longer lasting.
After a very wet three years, there appears to be some sign of changing conditions ahead for central and eastern Australia.
A recent spell of dry weather in southern Australia has provided a much-needed moment of reprieve for several flood-affected regions.
With the current La Niña event predicted to end sometime in the near future, this will bring a welcome change for many, despite being a key driver of continually improving water availability over the past three years.
Over this time period, strong water availability has led to temporary water prices falling significantly and remaining below long-term averages.
Water levels in all monitored water storages across northern Victoria and the NSW Murray have reached 100 per cent capacity, or are being actively managed through controlled releases.
With such an abundance of water available, temporary water prices from both the northern Victoria and Murray Irrigation systems sit 95 per cent and 98 per cent below January 2020, respectively.
Additionally, seasonal determinations have reached 100 per cent across northern Victorian systems so far this season, boding well for water availability and pricing moving into the 2023-24 water year.
While the above average rainfall has supported such strong water availability, it has also caused repeated flood events over the past 12 months.
Occurring throughout numerous dairying regions, this brought varied impacts to feed markets across the country and saw hay prices rise significantly post-harvest, as expected.
With many farmers unable to produce home-grown feed during this time, there is currently higher than usual demand for purchased feed.
Fodder prices showed the greatest increase between December and January, as damages and needs became clearer.
In other regions, however, good pasture growth under irrigation is helping to mitigate reliance on purchased hay, keeping prices stable in these areas.
Fodder was not the only feed type affected by the floods, with grain harvest delayed and yields in jeopardy.
After initially rising in the lead-up to harvest, grain prices have fallen with strong yields recorded in some areas.
While this is a typically seen at this time of year, such declines have been relatively marginal due to strong international demand for Australian grain.
This is despite substantial quality downgrades to most harvested grain – a result of the wet weather conditions.
Fertiliser continues to wait for changes in the global supply and demand environment.
Global indicative prices for both diammonium phosphate and urea fell over the past month, with urea recording the most marked decline of 17 per cent.
At the current time, this has largely been a result of quieter demand from buyers around the world and increased production coming out of Europe after a slow few months.
However, despite prices continuing to trend down over the past few months, they remain well above long-term averages.
China continues to limit its fertiliser exports and continued conflict in Ukraine still weighs on product availability.
As such, a material and sustained decline in domestic prices here in Australia is unlikely in the short-term.
Despite some changes within the input markets, grain and fertiliser prices continue to sit above longer-term averages, with fodder now joining in.
Rising input costs continue to provide challenges on-farm, and the addition of adverse weather conditions to contend with doesn’t assist.