SunRice bosses are not panicking, yet, but as droughty conditions linger across much of eastern Australia they are bracing for a possible scramble for irrigation water in Australia’s rice farming heartland.
With southern NSW’s major irrigation storages only about half full, a dry winter and spring could have concerning consequences for the area planted to rice later this year.
The recently completed harvest shrank back to yield about 625,000 tonnes (down from 800,000t last year) as other summer crops, particularly cotton, challenged rice farmers to weigh up where their water would grow the best returns.
Growers have increasingly been looking to SunRice to provide attractive forward sale price options for their crops as they budget how to get the best value from summer water allocations.
Competition for water was so intense two years ago the national marketer took the unusual move of promising a $415/t guaranteed forward pool price, despite depressed global market trends, so it could secure enough Australian-grown crop to service its premium paying customer base overseas and locally.
Obviously we need to plan well ahead for what the season throws up
- Rob Gordon, SunRice
That crop yielded only about 240,000t, but it guaranteed SunRice enough supply to ensure the big processor did not lose key customers.
Supplies were also topped up by the company’s US SunFoods subsidiary and an emerging Vietnamese supply to service SunRice’s longstanding Pacific region markets.
“We would certainly love to see more rain and dams filling in NSW this winter,” said SunRice managing director, Rob Gordon.
“Obviously we need to plan well ahead for what the season throws up.
“We are prudent about what we hold as carryover stock for the year ahead to ensure we have some supplies on hand, but if there are shortfalls we’ll have to rely on backup sources again.”
Fortunately, the Californian crop, which has also had its share of drought stresses in recent years, was set for a “fairly normal harvest” in September.
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Planning for price prospects
To calculate their cropping budgets and planting intentions SunRice growers traditionally relied on a pool price minimum forecast which invariably lifted as the selling season evolved.
However, to help farmers manage their budget options more precisely, the company also offers a fixed price across a range of rice varieties, which is locked in early in the growing season, but does not rise if sales revenues improve later.
Mr Gordon said while many farmers still put their faith in the pool delivering a safe averaged price, growers were increasingly fixing at least a portion of their crop sales early in the season.
We have to put forward a competitive offer which gives them the best commercial return from their land and water resources
- Rob Gordon
“For various reasons, including the weather and commodity options, they’ve all had to change their farming strategies,” he said.
“People are taking a bit of a hedge now – some will go with the pool, some like to lock in entirely with a fixed price, others are taking a bit of both.”
“I guess we are pleased to be able to give them a choice, especially as farmers are generally looking at more commodity markets to pick from.
“We have to put forward a competitive offer which gives them the best commercial return from their land and water resources.”
Dam levels lift a little
Storage levels in the major dams servicing SunRice’s southern NSW irrigated rice regions have made some improvement of late, but remain well below full.
Burrinjuck on the Murrumbidgee River started the week at 39 per cent, Blowering on the Tumut River was at 67pc and Hume on the Murray at 43pc.
“We still expect plenty of export demand so we’re hoping for dam-filling weather and an easing in water prices so farmers can increase planting intentions in spring,” Mr Gordon said.
Meanwhile, the past 12 months of widespread dry weather has had an upside for SunRice, with its stockfeed division, CopRice, posting a pre-tax net profit turnaround of $7 million after revenue grew 12pc to $111m in the year to April 30.
As pasture conditions deteriorated, rising supplementary feeding activity triggered increased demand for CopRice’ direct-to-farm sheep products.
Comparison trials involving pelleted Coprice feed concentrate products and conventional grain-based feeds has highlighted the weight gain benefits of mixed rations for sheep, which in turn has generated sales momentum with producers running lot feeding or supplementary feeding programs to fill market contracts, particularly in areas hurt by dry seasons.
A “back to basics” strategy also saw CopRice reinvigorate its engagement with key retail partners in the past year.
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