The Australian Wheatbelt

An introduction for investors

All rights reserved. No part of this Report may be reproduced or

transmitted in any form or by any means, electronic or mechanical
including photocopying, recording or any information storage
or retrieval system, without the prior written permission of Land
Commodities as to the form and context in which it may appear.
This Report is for general information purposes only. The Content
is for the use only of the Recipient. No responsibility is accepted to
the Recipient or any Third Party who may use or rely on the whole
or any part of the Content.
This Report is not intended to form the basis of a decision to
purchase securities or any other investment decision and does not
constitute an offer, invitation or recommendation for the purchase
or sale of securities or any other investment. The statements and
opinions contained in the Report are given in good faith but are
not a substitute for further detailed analysis and independent
enquiry on the part of the Recipient.
Much of the Content is provided to Land Commodities by others.
As such, Land Commodities cannot control or vouch for its accuracy
or completeness. Land Commodities makes no representation or
warranty as to the accuracy or completeness of the information in
this Report. We would like to be informed of any inaccuracies so
that we may correct them.
Land Commodities expressly disclaims liability in negligence or
otherwise for representations expressed or implied, contained
in, or omissions from, this Report or any other written or oral
communications transmitted to the Recipient or any Third Party
for any loss or damage suffered by the recipient or any Third Party
resulting from reliance on this Report.

Content means any data and/or information in the Report

and other content and documentation or support materials and
updates relating to the Report supplied by Land Commodities.
Land Commodities
Management AG.

means

Land

Commodities

Asset

Recipient means the recipient of this Report.

Report means this Report.
Third Party means any party other than the Recipient.

Please direct all enquiries to:

Land Commodities Asset Management AG
Blegistrasse 9
CH-6340 Baar
Switzerland
Telephone:
Fax:

+41 44 205 59 70
+41 44 205 59 71

info@landcommodities.com
www.landcommodities.com

Copyright Land Commodities Asset Management AG, 2012

Contents
Contents
Introduction to the Australian Wheatbelt

Crops and Farming Systems in the Australian Wheatbelt

Climate and rainfall in the Australian Wheatbelt

Growing conditions in the Australian Wheatbelt

Climate risk in the Australian Wheatbelt

15

Growing seasons in the Australian Wheatbelt

18

Variations in farm size across the Australian Wheatbelt

20

References and data sources

21

Introduction to the Australian Wheatbelt

As the largest country in the world without land borders, climatic conditions across Australia vary widely from region to region. The
desert and semi-arid central land mass makes Australia the driest continent on earth measured on an average rainfall per unit of area
basis. By contrast, the northern part of the country has a tropical climate, varied between rainforests and grasslands.
Most of Australias agriculture, in particular its grain production, is confined to a relatively narrow band of land to the east, south
east and south west of the country with a temperate or Mediterranean climate, sufficient rainfall and more fertile soils.
This area, known as the Wheatbelt (also sometimes referred to as the Grainbelt), covers only under 6% of Australias total land area
of 7.7 million square kilometres. However, because Australia is such a large country (about 76% the land area of the United States),
at 46 million hectares the Wheatbelt is a huge grain growing region (over three times the total land area of England, for example).
Grain production, in particular wheat, is the most important contributor to broadacre farming profits. From an investment
perspective, commercial scale grain producing farms (or mixed livestock and cropping farms with a strong cropping emphasis) also
generally produce less volatile returns than livestock only or perennial crop enterprises. As a result, Wheatbelt farms are often the
focus of attention for investors in the Australian agricultural sector.
Figure 1: Wheat growing regions of the Australian Wheatbelt

Australia
Crops
andasFarming
an investment
Systemsdestination
in the Australian Wheatbelt

Although referred to as the Wheatbelt, farms in the region produce a range of arable crops in addition to wheat and the majority of
farms also incorporate livestock as part of the enterprise mix. In recent years wheat accounted for over half of the land area planted
to grains (58% in 2011-12).
The range of arable crops grown in the Australian Wheatbelt in addition to wheat include:
1.
2.
3.

Coarse grains - Barley, oats, sorghum, maize (i.e. corn), triticale, millets/panicums, cereal rye and canary seed.
Oilseeds Canola (i.e. rapeseed), sunflower, soybean, safflower and linseed.
Pulses / legumes - Lupins, field peas, chickpeas, faba beans, vetch, peanuts, mung beans, navy beans, pigeon peas,
cowpeas and lentils.

Figure 2: Australian production ratio for grain and oilseed (2011-12 tonnage produced)

Wheat
Barley
Canola
Grain sorghum
Oats
Cottonseed
Rice
Lupins
Triticale
Chickpeas
Maize
Field peas
Soybeans
Sunflower seed
Other oilseeds

Whilst wheat is usually the most reliable earner for farmers and is the mainstay of most cropping enterprises, long-term farm output
is optimised by rotational cropping of different grain types. Crop rotation is practiced to assist with pest and disease management,
enhance soil health and nutrition and spread the risk of crop failure.
Barley (averaging 20% of grain production between 2007-08 and 2011-12) is the most common rotational crop grown as an
alternative to wheat but the nitrogen fixing capabilities of pulses are also beneficial, with lupins being the most popular rotational
pulse. Besides the agronomic benefits, diversifying production over different types of grains can also have the benefit of hedging
farmers exposure to fluctuating commodity prices and stabilising farm income.
Although most farms have a stronger emphasis on grain production (due to the higher return on capital it offers), most Wheatbelt
farmers operate an integrated cropping-livestock farming system. This often produces a whole-farm financial outcome that is more
effectively buffered against fluctuations in input prices, commodity prices and weather.

The physical and financial stability of mixed cropping-livestock

production systems arises from the complementary interactions
between components of the production systems (e.g. crop waste
can be used to feed livestock) and the fact that producers are
afforded greater flexibility to respond to market conditions.
Mixed systems also help in the management of weed and disease
build-up and undesirable soil conditions such as reduction in
organic matter content and increases in salinity and acidity. The
resurgence of livestock prices in recent years has also helped to
enhance the overall financial benefits.
The optimal cropping to livestock balance varies depending on the
specific conditions associated with each enterprise (in particular,
with respect to soil type and rainfall). But where conditions allow,
high intensity cropping enterprises with a greater focus on food
and feed crops generally produce better returns. As such, farms
with soil types allowing more intensive cropping regimes generally
command a premium.
Over the past two decades new crop varieties, improved machinery
and agronomic management practices have allowed Australian
farmers to increase the area sown to arable crops at the expense
of livestock production (particularly sheep). These developments
have also allowed a gradual migration of cropping enterprises into
more marginal areas that would have been considered unsuited
to crop production only 20 years ago.
The overall impact has been a rise in the area planted to crops
and a steady increase in grain production. The annual cropping
area over the last decade (1991-92 to 2000-01) averaged 23
million hectares, up from a level of 19 million hectares in the
previous decade. Over the same period Australias sheep herd
decreased from 125 million to 88 million.

Australian farmland is attractive

to investors because it combines
the benefits of first world
governance and stability with the
scale and prices of developing
nations.
Citi Private Bank, Wealth Report, 2011

Figure 3: Trends in cropping area and sheep numbers, 1991-92 to 2010-2011

Area cropped
30

Number of sheep
160

140

Area cropped (million ha)

120
20
100

15

80

60
10
40
5
20

Number of sheep (million head)

25

Climate
Australiaand
as an
rainfall
investment
in the Australian
destinationWheatbelt

The rainfall pattern over Australia is strongly seasonal with the summers in the south being mostly dry and hot and the winters being
wet and cooler. By contrast, the tropical regions to the far north have wet summers with the October to April monsoon driving
rainfall patterns in the northern part of the Wheatbelt.
Figure 4: Climate map of Australia

The majority of the Australian Wheatbelt averages 300 to 600 millimetres of rainfall annually with production timetables varying
from region to region depending on the timing of growing season rainfall. Generally, farms closer to the coast receive higher and
more reliable rainfall, with conditions becoming drier and more volatile further inland.
Within each of the Wheatbelt regions agricultural productivity and land prices are determined primarily by the level of rainfall.
Hence, it is common practice for Australian farmers and agricultural investors to categorise farms according to the level of rainfall
they receive. The three commonly used rainfall categories are:

1. Low rainfall farms: <350 mm of annual rainfall

2. Medium rainfall farms: 350 mm to 450 mm of annual rainfall

3. High rainfall farms: >450 mm of annual rainfall

Figure 5: Long-term average annual rainfall

Due to the relatively low levels of rainfall over much of the

Wheatbelt, river flows and underground water resources
available for irrigation are minimal. As a result, almost all
grain in Australia is produced under a dryland cropping
system (i.e. crops are rainfed as opposed to irrigated).
The north is home to most of Australias irrigated crop
production (although this is predominantly cotton and sugar
country, so much of the irrigated area would not be classified
as Wheatbelt territory). When irrigation dams are at full
capacity, more than 400,000 hectares can be irrigated, but
given the high variability of rainfall in the north, irrigated crop
production is actually more volatile over the long term than
some of the more reliable rainfed regions of the Wheatbelt.

Foreign investors are afforded

exactly the same freehold
ownership rights as Australians.

Growing conditions in the Australian Wheatbelt

The Wheatbelt is split into three agroecological grain growing regions, each with its own broadly similar climate systems and soil
types: the northern, southern and western region. There are wide variations in the productivity of farms within each of these regions
(primarily due to differences in the extent and reliability of rainfall), but some generalisations are still possible.
Figure 6: Wheatbelt regions

The Australian Wheatbelt is

a vast grain growing region
covering an area three times
the size of England.

Rainfall is the most important determinant of grain yields in dryland farming, with all three of rainfall dimensions having an
impact:

1. Extent - Total rainfall received in the average year.

2. Timing - Proportion of rainfall received during the growing season; excessive rainfall damaging crops during the
growing season; and untimely rainfall causing crop damage at harvest time.

3. Reliability Variability of rainfall from year to year.

It is the interaction between these factors which dictates both average yields and the annual variability of yields in different
regions of the Wheatbelt.
Figure 7: Major agroecological zones of the Australian Wheatbelt

As the long-term climate maps at the end of this section show, in broad terms, the further east the more volatile and less conducive
to yield reliability climate conditions become. Western Australia has the most reliable rainfall of any Australian state and also receives
the highest proportion of this during the growing season. Indeed, even medium or low rainfall areas of the Western Australian
Wheatbelt can be more reliable producers than some high rainfall areas in the south east.
Furthermore, Western Australia also has the lowest incidence of crop damage due to summer rainfall occurring at harvest time, the
lowest incidence of frost damage during the growing season and the lowest incidence of extreme weather events.
As a consequence of its favourable climatic conditions Western Australia has the most reliable yields of any major grain producing
state. This is of vital importance to agricultural investors, because yield reliability (as opposed to average yield extent) is one of the
most important factors determining farm profitability.

Figure 8: Proportion of annual rainfall received during the early growing season

Figure 9: Proportion of annual rainfall received during the late growing season

Figure 10: Annual rainfall variability

Figure 11: Early growing season rainfall variability

Figure 12: Late growing season rainfall variability

Figure 13: Harvest season rainfall variability

Figure 14: Frost susceptibility

Australias robust economy,

strategic location and
investment friendly business
environment have made the
country one of the worlds
top destinations for foreign
investment

Climate
Australiarisk
as an
in the
investment
Australian
destination
Wheatbelt

Much of the variability in Australias climate is connected with the atmospheric phenomenon known as the Southern Oscillation, a
major see-saw of air pressure and rainfall patterns between the Australian/Indonesian region and the eastern Pacific. The Southern
Oscillation gives rise to two major weather phenomena: El Nio, generally associated with dryer conditions in Australia, and its
opposite twin, La Nia, generally associated with wetter conditions.
Given the challenges of accurately predicting weather conditions over the longer term, agricultural planning and decision making is
usually focused on the short-term; namely the current crop or pasture growing season and periods out to a maximum of one year.
These timescales are exactly those impacted by the extremes of the Southern Oscillation - La Nia and El Nio - both of which often
last for about 10 -12 months, and typically have the biggest impact in the Australian winter and spring; a key period agriculturally
given the primarily winter to spring growing season of the Australian Wheatbelt.
Figure 15: Schematic maps indicative of typical rainfall tendencies during El Nio and La Nia events

El Nio
In Australia, El Nio events are often associated with severe drought conditions. Since rainfall variability is the dominant factor
causing year-to-year fluctuations in Australian wheat yields, El Nio is the most significant climate phenomenon with respect to
volatility in farm operating income (and hence landowner and operator risk).
The relationship between El Nio and Australian rainfall is particularly significant in eastern and southern parts of Australia. Whilst
some parts of the extreme south of the western part of Australia receive below average rainfall during El Nio growing seasons, the
risk of drought is higher in the eastern, southern and northern regions. The more extreme negative effect of El Nio on other parts
of the Wheatbelt is the primary reason for the more reliable wheat yields achieved in the Western Australian Wheatbelt.
Figure 16: Average growing season rainfall anomalies (deciles) during the 12 most extreme El Nio years in the last century

In contrast to the majority of Australia, the eastern edge of the Western Australian Wheatbelt region can receive above average
rainfall during the summer months in El Nio years. Whilst this can increase the risk of crop damage if excessive and persistent
rainfall is received during the early summer harvest period, more often than not the effect is positive with these rains resulting in
higher residual soil moisture which acts to boost yields by mitigating the risk of lower rainfall in the following growing season. This
may explain the tendency of low rainfall far eastern districts in the Western Australian Wheatbelt to produce above average yields
in some dryer years when higher rainfall districts to the west produce below average yields.
Figure 17: Average summer rainfall anomalies (deciles) during the 12 most extreme El Nio years in the last century

La Nia
La Nia years occur with broadly similar frequency to El Nio. Although generally associated with increased rainfall, the effect on
wheat yields can be either positive or negative depending on the extent and timing of the rainfall. If additional rainfall is experienced
during the growing season this can have a positive impact on yields, however, if excessive rainfall results in waterlogging, or in
extreme cases flooding, the effects can be detrimental.
As with El Nio, the effects of La Nia differ spatially and temporally in their manifestations and impacts. Whilst some parts of the
south west receive above average rainfall during La Nia growing seasons, the risk of flooding is predominantly associated with
the northern, central, southern and eastern regions. Recent La Nia years include 197374, Brisbanes worst flooding of the 20th
century, the 19982000 period which saw flooding across parts of northern and eastern Australia and the 2011 floods which
resulted in more than AU$2 billion of damage to the agricultural sector.
Figure 18: Average growing season rainfall anomalies (deciles) during the 12 most extreme La Nia years in the last century

Additionally, excessive and persistent rainfall during the harvest season can damage crops, negatively impacting yields. Although
the Western Australian Wheatbelt generally benefits from increased growing season rainfall during La Nia years, it is less likely
than other regions to be negatively affected by flooding during the growing season or excessive rainfall during the harvest season.
Figure 19: Average summer rainfall anomalies (deciles) during the 12 most extreme La Nia years in the last century

Since yield reliability (rather than average yield levels) is one of the most important determinants of farm profits, rainfall reliability and
extreme weather events have a major impact on investment returns. Historical climate data shows that for the majority of extreme
weather years occurring in Australia over the last century, owning farms in different parts of Western Australia, as opposed to
different parts of Australia as a whole, would have been a more effective diversification strategy from the perspective of mitigating
climate related risk.

Growing seasons in the Australian Wheatbelt

Most of Australias grain is grown in the winter season in the temperate regions of the west, south and east, and relies on the winter
dominant rainfall patterns in these regions. The timing of growing seasons varies from region to region and planting and harvesting
dates can vary from year to year depending on the timing of rainfall.
All states can commence seeding opportunistically in mid-April if there is sufficient moisture but usually farmers wait till late April
when daytime temperatures start falling to more optimal levels. Seeding is usually finished in most regions by mid-June but some
wetter areas can seed opportunistically well into July if required.
The harvest commences early to mid-October in Western Australia and Queensland, with the lower rainfall farms generally starting
earlier than the higher rainfall farms. Sometimes the harvest in Queensland can be earlier, but generally only in a poor season. Other
states (and higher rainfall regions of Queensland and Western Australia) would get the harvest underway in late October or early
November. The harvest in wetter years can commence as late as mid November and finalise as late as late January, but in a typical
year most regions will be at peak harvest in mid to late November.
Figure 20: Winter growing season by state

State

Sowing Period

Harvesting Period

New South Wales

April June (ave. late May)

November January (ave. mid-November)

Victoria

April June (ave. late May)

October - February (ave. late November)

Queensland

April June (ave. mid-May)

September December (ave. early November)

Western Australia

April June (ave. late May)

October January (ave. mid-November)

South Australia

April June (ave. late May)

October December (ave. mid-November)

The summer rainfall reaching the north eastern part of the Wheatbelt varies markedly from year to year, but can allow
opportunistic double cropping in some years. The great majority of Australian grains are, however, grown in a single winter
growing season, with roughly 90% of Australias annual wheat harvest being winter cropped.

There is a strong focus amongst

investors on large scale Wheatbelt
farms.

Given the different climate in the northern part of Australia closer to the tropical climatic zone, Queensland produces the highest
proportion of its wheat in the summer growing season (approximately half of production), with New South Wales also doing
some summer cropping. Victoria, Western Australia and South Australia are almost exclusively winter cropping states.
Figure 21: Comparison of average annual areas sown in the winter and summer growing season, 1991-92 to 2010-11
Winter crop

Summer crop

8,000

7,000

Annual area sown ('000 ha)

6,000

5,000

4,000

3,000

2,000

1,000

0
New South Wales

Victoria

Queensland

Western Australia

South Australia

Australia has lower farmland

prices than any other large
agricultural exporter.

Variations in farm size across the Australian Wheatbelt

Of all farms in Australia with grain in their enterprise mix, the national average for the annually cropped area per farm is just over
800 hectares. At 9.7 million hectares, Western Australia has the largest area of cropland of the major Australian Wheatbelt states
(i.e. excluding Tasmania and Northern Territory). This is despite only having just over 8,000 cropping farms (i.e. farms for which grain
is an important component of the enterprise mix), the smallest number of any Australian state.
Figure 22: Number of cropping farms and total cropland per Australian state, 2011
Number of cropping farms

Total cropland (ha)

25,000

12,000,000

10,000,000

20,000

8,000,000
15,000
6,000,000
10,000
4,000,000

5,000

2,000,000

0
New South Wales

Victoria

Queensland

South Australia Western Australia

Tasmania

Northern
Territory

At an average of 1,201 cropped hectares, Western Australian farms are over twice the size of farms in South Australia (517 ha)
and New South Wales (458 ha) and roughly four times the size of farms in Victoria (337 ha) and Queensland (270 ha).
Alongside rainfall and yield reliability farm size is the most important determinant of farm profits. The lower land prices in
Western Australia and the higher rate of return achieved by farms there is due in large part to the larger size of their farms.
Figure 23: Comparison of cropping farm sizes in different Australian states, 2011
1,400

Cropland per per farm (ha)

1,200

1,000

800

600

400

200

0
New South Wales

Victoria

Queensland

South Australia Western Australia

Tasmania

Northern
Territory

References and data sources

Australian Bureau of Meteorology, Historical Climate Data, 2012

Australian Bureau of Statistics, Agricultural Land Use and Selected Inputs Data Series, 2012
Australian Bureau of Statistics, Australian National Accounts, National Income and Expenditure Data Series, 2012
Australian Bureau of Statistics, Crops and Pastures Data Series, 2012
Australian Bureau of Statistics, Livestock and Livestock Products Data Series, 2012
Australian Bureau of Statistics, Selected Agricultural Commodities Data Series, 2012
Australian Bureau of Statistics, Value of Agricultural Commodities Produced Data Series (chain volume measure), 2012
Australian Government Department of Agriculture, Fisheries and Forestry, Australian Bureau of Agricultural and Resource Economics and Sciences, Agricultural
Commodities Statistics, 2012
Australian Oilseeds Federation, Sydney
Mason, S.J. and L. Goddard, 2001: Probabilistic precipitation anomalies associated with ENSO. Bulletin of the American Meteorological Society. 82(4), 619-638.
McBride, J. L. and N. Nicholls, 1983: Seasonal relationships between Australian rainfall and the Southern Oscillation. Monthly Weather Report. 111(1822), 1998-2003.
ODonnell, C 2010, Measuring and decomposing agricultural productivity and profitability change, Australian Journal of Agricultural and Resource Economics, vol. 54.
pp. 527560.
Pittock, A.B. 1975: Climatic change and the patterns of variation in Australian rainfall. Search. 6(11-12), 498-504.
Potgieter, A. B., G. L. Hammer, H. Meinke, R. C. Stone, L. Goddard, 2005: Three Putative Types of El Nio Revealed by Spatial Variability in Impact on Australian Wheat
Yield.J. Climate,18, 15661574.
Potgieter, A.B., G.L. Hammer and D. Butler, 2002: Spatial and temporal patterns in Australian wheat yield and their relationship with ENSO. Australian Journal of
Agricultural Research. 53, 77-89.
Pulse Australia, Sydney
Ropelewski, C.F. and M.S. Halpert, 1987: Global and regional scale precipitation patterns associated with the El Nio/Southern Oscillation. Monthly Weather Review.
115, 1606-1626.
Stone, R.C., G.L. Hammer and T. Marcussen, 1996: Prediction of global rainfall probabilities using phases of the Southern Oscillation Index. Nature. 384, 252-255.

Land Commodities Asset Management AG

Blegistrasse 9
CH-6340
Baar
Switzerland
t. +41 44 20 55 970
f. +41 44 20 55 971
info@landcommodities.com
www.landcommodities.com

Land Commodities Asset Management AG