THE AUSTRALIAN cropping sector is already showing some signs of recovery, with Rural Bank reporting a solid year on year increase in wheat exports.
A Rural Bank Insights report found a 36 per cent year on year lift in wheat exports, with key destinations including the Philippines, South Korea and Japan.
Southern and western Australia have provided the bulk of the wheat for export.
However, Australia's relatively high wheat prices, fuelled by the drought-driven domestic demand, have meant price conscious customers such as Indonesia have cut back their purchases of Australian wheat and are buying more from low-cost producers.
Greg Kuchel, regional agribusiness manager for western Victoria for Rural Bank, said Australian sales to Indonesia were running some 75pc behind average.
Looking ahead, Mr Kuchel said both domestic and international factors pointed to downward pressure in Australian prices.
He said the good rainfall over much of the Australian cropping belt in the first two months of 2020 meant confidence was rising of a return to more normal production, while internationally, forecasts are for record production on the back of a 2pc rise in global area planted to wheat.
However, while prices will fall in global terms, Mr Kuchel said the declining Australian dollar, now at multi-year lows against the US dollar, would insulate grain producers from some of the losses.
The Insights report highlighted the big X-factor in terms of wheat markets as the coronavirus, saying the sector was not immune to the chaos the virus has brought to broader financial markets.
Australia's smaller exportable wheat surplus due to the drought means the sector will be less exposed to coronavirus, with half of the estimated 8 million tonne exportable surplus already gone.
The grains sector has been spared some of the heavier losses seen across world stock exchanges, but the full fallout of the outbreak is yet to seen.
In terms of local production, Mr Kuchel said the east coast, encompassing drought hit NSW and Queensland, was looking to bounce back after good rainfall in many key grain growing regions.
An improved season will not just be a factor in terms of grain production, but the assistance to pasture growth could mean a reduction of demand for feed grain, meaning the strong basis in eastern Australia is likely to ease somewhat.