2016 AGIC looks at trade opportunities

by Chris Gillies
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Speakers examine challenges Australia faces in its quest to gain greater global market share.
The 2016 Australian Grains Industry Conference (AGIC), held July 25-27 in Melbourne, featured discussion about Australia’s changing role in the global grain market as well as reaction to a surprise announcement that Archer Daniels Midland Co. (ADM) had recently tried to sell its 19.9% interest in GrainCorp. Ltd.


Speaking at a panel session on the final day of the conference, which drew 800 attendees, was Mark Palmquist, managing director for GrainCorp. Palmquist said he was unaware of ADM’s intentions and did not want to speculate on why it had decided to sell. He said GrainCorp would continue to conduct business as usual and remain focused on its diversification strategy.

GrainCorp spokesperson Angus Trigg said regardless of ADM’s intentions, it would remain an important customer and GrainCorp would continue to work closely with the Chicago, Illinois, U.S.-based agribusiness giant.

“GrainCorp’s performance is underpinned by growing demand for our products and strategic assets around the world,” Trigg said. “These strong fundamentals have not changed and are not affected by the speculation. We remain firmly focused on delivering our strategic projects to grow underlying earnings.”

Once that development was addressed, Palmquist joined Andrew Crane, CEO of CBH Group, and John McKillop, CEO, Hassad Australia, on a panel discussion that addressed the need for foreign investment to ensure the Australian grain industry had the capital needed to compete.

Palmquist said the current regulatory environment and mechanizations surrounding foreign investment were good and did not require further tightening, but he was concerned that current Australian political rhetoric was misplaced. Australia, Palmquist said, was an appealing choice to international investors who were looking to diversify their portfolio to manage the cyclical nature of agriculture.

Crane said investment in supply chain assets, such as his organization’s investment in trains, had helped CBH achieve the lowest supply chain costs in Australia. He also warned this benefit may be eroded if, as in the case of rail in Western Australia, access was not competitive — referring to the state’s high rail access fee.

Another theme that emerged during the conference was the need for a single organization that could market Australian grain internationally. Referring to the U.S. Wheat Associates, which performs this role for the U.S. grains industry, there was discussion among the panel of the benefits of this model.

It was suggested the industry may benefit from an organization that could work with the entire industry and international buyers to sell the attributes of Australian grain and invest in research and development to ensure grain was meeting the needs of processors.

This is particularly important considering an emerging idea that grain should be viewed not as a bulk commodity but rather a value-added premium product. Driving this push has been historic low ocean freight rates due to excess shipping capacity and the erosion of Australia’s freight advantage into Asia.

To achieve this, international buyers need to be confident the Australian product is worth the premium. Palmquist said competing with the Black Sea countries and Russia on price would be a race to the bottom, and instead the industry should be focused on producing a product that was worth a premium.

Crane mentioned a Chinese customer who was launching a premium craft beer into the Chinese market. He said this was a good example of Australia supplying malt barley to a premium market that was looking for transparency and quality that was Australia’s competitive advantage over its competitors.

He said Australia could compete on cost of production but would need to lift yield by 10%, adding that such an effort would require investment in plant varieties and the sharing of information among growers across state borders. Crane said Australia needed an organization that could work on government-to-government relations to manage “flare-ups” between trading partners. He said this would help Australia compete.