Australia is the world’s sixth largest country and the smallest continent. Its vast spaces and diverse climates allow production of a wide range of agricultural, fishery and forestry products.
Among the products in Australia’s agricultural basket, wheat is primary, and Australia is one of the five major wheat exporting countries in the world. Over the past 20 years, Australia’s wheat production increased considerably as farmers adopted agronomic practices that allowed wheat yields to virtually double.
The Australian Bureau of Agricultural & Resource Economics’ long term projection suggests wheat production increasing around 3% a year until 2004-05, with production to plateau at around 25.7 million tonnes from 2004-05 to 2006-07.
Although Australia has a capitalist economy, grain marketing historically has been controlled by a central authority, either at the state or national level. The Australian Wheat Board for decades was designated as responsible for marketing export and domestically traded wheat.
The system began to change in 1989, when the Wheat Marketing Act effectively deregulated the domestic market. But exports remained the responsibility of the AWB as the "single desk" trader.
Further evolution came in 1999, when new legislation ended the statutory authority for the AWB. The law retained a national wheat export monopoly, but theoretically introduced competition for the right to manage the monopoly.
Following that change, the AWB became a privatized entity, AWB Limited. Controlled by wheat growers, the new AWB won the right to continue management and operations of the single desk at least until 2004, when it will come up for re-assessment of its performance.
The past two years have seen the AWB drawn into some controversy on several fronts. First, the AWB faced a battle to retain its export monopoly, based on the Australian government’s overall review of competition throughout the national economy. The review requires monopolies prove a net public benefit to continue.
Under the review, the National Competition Policy committee examined the single-desk wheat marketing system and in late 2000 issued a report calling for partial deregulation. The committee noted that economic analysis showed single-desk system costs "exceeded the benefit from single desk price premia to wheat growers and the Australian community."
The recommendations generated strong opposition from AWB and wheat grower groups. Following intense political lobbying by single-desk supporters, government officials in 2001 declined to make any changes to the system.
AWB privatization continued in 2001 when the company initiated a share offering to the public, with 273 million shares to be traded on the ASX. The AWB today has a two-tiered structure, comprising seven directors voted on by A-class or grower-only shareholders, and five directors — known as B-class directors — who are voted on by public shareholders.
The public listing of AWB provided a new incentive to focus on profitability, but also has created at least a perceived conflict between the goals of public shareholders and wheat growers. The conflict resulted in the ouster earlier this year of long-time AWB Chairman Trevor Flugge, who was defeated as AWB director for Western Australia in a vote by grower shareholders. The vote was said to reflect concern among growers who feared AWB no longer put their interests first.
Although AWB holds the "single desk" export rights for all bulk wheat, bagged and containerized wheat can be exported by other organizations, with the expressed permission of the Wheat Export Authority. Recently, industry sources have noted a dramatic reduction in the tonnage of wheat approved for export in containers, with some exporters complaining that approvals have been as low as 10% of the requested tonnage.
Wheat is not the only Australian commodity facing some policy turmoil, as the barley marketing system is also going through a period of rapid change. The state of Victoria opened export sales of barley to competition on July 1, 2001, completing deregulation of barley in Victoria, but all other states still maintain single-desk trading of export barley.
In New South Wales, the NSW Grains Board, which has state vesting powers over canola, sorghum and malting barley produced in the state, incurred substantial losses in 2000 and awarded its vesting rights for five years to Grainco Australia Ltd. for a reported A$25.2 million.
Recently, Grainco entered into a joint venture agreement with ConAgra, a U.S.-based global grain and food company. The venture is to purchase grain on behalf of both ConAgra and Grainco.
But concern has surfaced over the agreement, which purportedly gives ConAgra access to grain procured under state vesting rights. This possibility has caused some growers to call for the immediate dismantling of NSW coarse grains vesting rights. Recent media reports have indicated that the NSW state government is considering dismantling these rights when the agreement with Grainco ends in 2005.
WHEAT AND FLOUR MILLING
The Australian flour milling industry over the decades has moved from an industry with more than 500 family-owned mills to one featuring 42 mostly large mills owned by diversified companies. Milling interests have moved into areas such as feed milling, bakeries, household flour, packaged cake mixes, pasta and biscuit production, starch, gluten and glucose manufacture and livestock production.
Australian-owned companies produce the majority of the flour milled in Australia. Three major players dominate: Goodman Fielder Limited, Manildra Limited and George Weston Foods Limited. Milling establishments are concentrated in New South Wales, with 49.3%; Victoria is a distant second, at 14.1%.
The decline in the number of flour mills operating in Australia has been largely based on the application of new technology and the search for economies of scale. Another important factor was the steady loss of export flour markets in the Asia/Pacific region when countries in these areas set up their own mills.
The domestic flour market has grown steadily due to rising population, with annual flour use for bread accounting for roughly 80 kg per capita. Currently, around 1.9 million tonnes of flour are milled each year for domestic consumption, including food and industrial use.
Turnover in flour milling in 1998-99 was A$1.3 billion, according to "Australian Food Statistics 2001." IBISWorld, an Australian strategic business information provider, ranks flour milling at 252 out of 500 by industry turnover.
The Australian milling industry’s life cycle is in a decline phase, IBISWorld reports, meaning it is generally growing slower than the economy. The industry’s globalization level is medium, but the trend is increasing, IBISWorld said.
IBISWorld reported the flour milling industry’s 2001 growth rate at a negative 1.73% and forecast static average annualized growth over the next five years.
COARSE GRAINS AND FEED INDUSTRY
Expansion of Australia’s intensive livestock industries has caused increased consumption of wheat and coarse grains domestically. The dairy industry continues to use more feed grains as cow numbers and production per cow increase.
Industry sources expect that the deregulation of the dairy industry should result in higher grain consumption as farmers improve productivity through feeding higher grain rations. The chicken meat industry has also continued to increase production in recent times, adding to feed grain demand.
The cattle industry may face a less bright future, at least in the short term. ABARE reported record cattle on feed numbers in late 2001, with 56% destined for the Japanese and Korean markets.
Australia has prohibited importation of meat and bonemeal for stockfeed purposes since 1966, some 20 years prior to the emergence of BSE in the U.K. This decision, made for reasons other than BSE exclusion, has nevertheless protected Australian animals from BSE risks.
But the BSE situation in Japan has caused a sharp drop in beef consumption in general, which is likely to affect Australian export demand. Some analysts expect that while grain consumption will remain high in the poultry and pork sectors, consumption of grain in the cattle feedlot sector is likely to decline this year.
Australia has seven major players in the feed industry: Ridley Corporation, Bunge Industrial Pty Ltd., Nestle Australia Ltd., George Weston Foods, Effem Foods Pty Ltd., Ricegrowers’ Co-operative and Green’s Foods Limited. Geographically, feed milling establishments are concentrated in NSW and Victoria.
IBISWorld reports that industry turnover in 2000 was A$2.8 billion, ranking it 153 out of 500. The industry’s life cycle is in a "mature" phase, which means that the industry is generally growing at the same rate as the economy.
Australian aquaculture is one of the fastest-growing primary industries. The value of aquaculture production increased by more than 15% each year between 1989-90 and 1998-99, rising from A$188 million to A$602 million.
The major sectors contributing to this growth were pearl and edible oysters, Atlantic salmon, prawns and southern bluefin tuna. The aquaculture sector’s expansion is helped by Australia’s long-standing strengths in shellfish culture. Expertise is developing rapidly with abalone, marine finfish and Crustacea, and freshwater finfish and crayfish — adding to existing high-value products for domestic and world markets.
Responsibility for development aquaculture rests with state and territory governments. Several states have development plans that take into account the needs of multiple user groups, providing clearly defined conditions and constraints for access to the water and land that aquaculture requires.