June 25, 2008 / 12:16 AM / 9 years ago

Buoyed by rain, Australia wheat farmers chase big crops

NARRABRI, Australia (Reuters) - Powerful lights eerily illuminate pitch-black paddocks as farmers sow newly rain-blessed soil with one of Australia’s biggest wheat crops.

<p>Planting rigs seed the ground with wheat near Narrabri, eastern Australia, June 19, 2008. REUTERS/Daniel Munoz</p>

Rigs as big as houses seed fields in one of the most fertile parts of Australia’s eastern grain belts. Farmers are praying they will beat a seven-year drought to fill silos with grain in a year of high prices.

“It’s a nervous optimism,” said farmer Phil Christie near Narrabri, around 500 kilometers northwest of Sydney.

Eastern Australia has been hit hardest by the country’s worst drought in 100 years but good rain has fallen recently to allow long-delayed planting to get underway.

Now farmers are working around the clock to plant, with satellites steering tractors night and day along perfect straight lines.

“We really need this crop. We’ve had no crop for two or three years. If this one fails it will take a lot of people down,” Christie said, standing in his field. “Everyone’s borrowed to the hilt to put this crop in,” he said smiling grimly.

Nearby, Australia’s biggest wheat farmer Ron Greentree is sowing 80,000 hectares with wheat, an area almost as big as Hong Kong. Greentree hopes to produce over 200,000 tonnes of wheat, or 1 percent of Australia’s total.

He smiles buoyantly beneath his battered bush hat as we stand in newly-seeded fields, the crumbling moist black earth marching in straight planting lines to the distant horizon.

“It looks pretty good,” he said. But there is still a long way to go until the crops are ready for harvest towards the end of the year and September spring rains will be crucial.

“It’s up to the laps of the gods and to good old mother nature. There’s been a few false starts in the last few years.”

Last year, farmers lost millions of dollars when they planted large areas with wheat after good rains only to then lose their crops and their investments when drought set in again.

The government, however, is optimistic. Even after a 9 percent cut in its forecast of Australia’s 2008/09 wheat crop on June 17, the government is still forecasting a big crop of 23.68 million tonnes, up by more than 80 percent on last year’s drought-affected crop.

GOOD CROP TO LOWER PRICES

An Australian crop of this size, together with forecast big European crops, will be enough to pull world wheat prices back from recent highs, brokers believe.

“A better rainfall situation in Australia might start to see the markets work their way lower,” futures broker Garry Booth of MF Global said.

This year might be the first time in years that the world produces more wheat than it consumes, Greentree said.

Driven by shortages and strong demand, world wheat prices have been on a roller-coaster ride for a year.

They soared by over 150 percent between mid-2007 and March 2008 after crop failures in Australia and elsewhere, then fell by over 40 percent by the end of May this year as crop prospects improved, then gained over 20 percent on crop-damaging floods in the United States and dry weather in Australia’s planting season.

Even in a calmer market, agriculture is now a hot industry for growers such as Greentree, as corn and rice prices have also soared.

“It has all turned around probably in this last six months. People are starting to realize that it is a very important industry, not only for the economy of Australia but also for society around the world,” Greentree said.

Agriculture in Australia had been seen by governments and academics in the last 10 or 15 years as a sunset industry, he said. Now wheat is as important as steel.

COST CRISIS

Wheat prices may have doubled in the past year, but so have oil prices and other farm costs. Prices of energy-intensive fertilizer alone have risen to A$1,500 a tonne from A$600 and it costs about A$2,000 worth of fuel to run a tractor for 12 hours hauling a seeding rig.

Farmers say it now costs A$500 a hectare to plant and grow wheat, up from the old benchmark of A$250.

Banks have so far supported struggling farmers through two years of failed crops and losses, but there could be foreclosures after a couple of good seasons, Christie fears. Banks could not foreclose so far because nobody had money to buy failed farms.

Greentree, who spent A$100 million this year to nearly double the size of his landholdings to 100,000 hectares, is also hit hard by fuel prices. He uses 3 million liters of diesel a year.

“Its blown our budget to smithereens,” he said.

Greentree is waiting for new-age technology to provide the

answer to high costs and changing weather systems.

Narrabri Mayor George Sevil believes that the recent rains will rescue many farms from bankruptcy.

“Whoever timed it did a good job. This will get everyone back on their feet,” he said.

Editing by Megan Goldin

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