Focus on Australia
Feb. 3, 2014
Australia’s overall grains production is relatively small, but so is its population. Thus, most of its crop is exported, making it one of the most important players on the world market. Its position in the southern hemisphere increases its importance, as its supplies become available when the northern exporters may be running low.
According to the International Grains Council (IGC), Australia’s total grains production in 2013-14 is projected at 36.6 million tonnes, compared with 32.6 million the year before. Its total wheat production in 2013-14 is 25 million tonnes, up from 22.1 million the year before. Its production of corn is put at 400,000 tonnes, down from 500,000, while its barley production is put at 7.5 million tonnes, up from 6.8 million.
Australia’s 2013-14 sorghum production is estimated at 2.1 million tonnes, up from 1.7 million the year before. Production of oats is put at 1.2 million tonnes, up from 1 million.
The IGC forecast for Australia’s total grains exports in 2013-14 is 25.5 million tonnes, down from 27.2 million tonnes the year before. That total includes 20 million tonnes of wheat, down from 21.3 million, and 4 million tonnes of barley, down from 4.4 million the year before. It also includes 1.25 million tonnes of sorghum, down from 1.28 million, and 150,000 tonnes of oats, up from 130,000 tonnes.
Australia is also a rice producer, although production is highly sensitive to the water supply. In an update published at the end of October, the USDA attaché was cutting estimates for the 2013-14 crop. “The lack of winter rainfall across rice production areas has failed to top up irrigation water storages with the result that some irrigation areas have less than 50% allocation available between November and January,” the report said. “Long-term weather predictions are for less than average rainfall and higher than average temperatures over the Australian summer, which is likely to reduce rice plantings as growers are discouraged by potentially high water prices.”
On the basis of forecast conditions, the report cut its estimate for 2013-14 rice production to 917,000 tonnes from an earlier estimate of just over 1 million tonnes. The previous year’s crop was 1.16 million tonnes.
“Updated trade data indicates that rice imports for 2012-13 have been higher than previously forecast,” the report said. “As a result, total imports for 2012-13 have been revised up by 40% to 140,000 tonnes. Domestic consumption is expected to remain stable in 2013-14, thus imports for 2013-14 have also been revised upward to similar levels. In line with the reduced production, rice exports for 2013-14 have been revised down by 4% to 500,000 tonnes.”
Increasing concentration after deregulation
Australian grain trading has been through a long process of deregulation.
“Between 1939 and 2008 the export of wheat from Australia was conducted exclusively by the Australian Wheat Board (AWB),” the attaché explained in a report on the subject. “Single-desk arrangements for wheat exporting were introduced in 1939 in response to falling export demand due to the worldwide depression, global oversupply and the resulting dramatic decline in world commodity prices.
“In 1999 AWB became a private company owned by wheat growers,” the report continued. “In 2005, it became mixed up in a scandal over exports to Iraq. Largely as a result of these events, in 2008 the AWB lost its monopoly export rights,” the report said. “In 2010 AWB was acquired by the Canadian company, Agrium, which then sold it to Cargill in 2011.”
The grain trade is becomingly increasingly concentrated as the market’s players adapt to a new long-term situation following the liberalization of the market.
“Bulk export terminals in Australia are owned by six large companies but as the wheat export industry is now fully deregulated these companies are required to provide access to their port facilities for other grain exporters,” the attaché said in another report on the sector. “In Western Australia (which is predominately export oriented) and South Australia, an auction system has been designed in which grain exporters bid to secure terminal space for a particular period.
“The exporter must then purchase grain to fill the allotted ‘slot’ or pay a penalty fee. However, the auction process has proven to be cumbersome and time consuming. In Western Australia the auction was only resolved after several delays while the South Australian system collapsed altogether and reverted to a ‘first-come, first-served’ basis.
“In the eastern states, GrainCorp also allocates the majority of space on a ‘first-come, first-served’ basis but does sell some capacity up to three years in advance. The cost and risk of reserving this space is seen by some as a barrier to smaller exporters. Under the Wheat Export Marketing Amendment Act 2012, which finalized deregulation of the Australian wheat export industry, a voluntary code of conduct for allocating export capacity is to be developed. However, there is still disagreement among the industry as to the best way to achieve this and recommendations from the appointed committee are not due until July 2014.”
With improved technology, larger mills and less overseas demand for the milled product (as developing countries established their own facilities), the number of mills in Australia has now declined to 28 spread across all states and situated in both metropolitan and country areas, according to the Australian Technical Millers Association (ATMA).
“This continuous trend of fewer but larger capacity mills with fewer employees is common to countries with highly mature milling industries,” the ATMA said. “However, with the growth in Australia’s population, demand for flour products at home has increased steadily.”
It puts annual domestic human consumption of flour at about 1.5 million tonnes. With exports, total production has risen by 26% in a decade to reach a figure ATMA describes as “in the order of 2.1 million tonnes.
ATMA lists Allied Mills, George Weston Foods and Manildra as the biggest milling companies in Australia. According to Manildra, its expanded Manildra mill is one of the 10 largest mills in the world.
Allied Mills says on its website that it “has a diverse flour milling operation in all mainland states. Allied Mills operates seven state-of-the-art milling facilities that are designed to offer the customer the highest quality and consistent products.” (see feature on its newest milling facility on page 28).
George Weston Foods owns Weston Milling. George Weston Foods is itself owned by Associated British Foods.
Australia is also a major producer of canola, although the latest report from the Australian Bureau of Agricultural and Resource Economics and Sciences predicts a fall this year.
“Australian canola production is forecast to fall by 15% in 2013-14 to 3.4 million tonnes, driven by large declines in production in New South Wales and Victoria,” it says. “Production is expected to increase in the other major producing states of Western Australia and South Australia. If this forecast is realized, canola production in Australia would be the third highest on record.”
“Canola exports are forecast to fall by 25% in 2013-14 to 2.6 million tonnes, largely reflecting the forecast decline in domestic production,” ABARES said. “In 2013-14, the European Union and China are forecast to be the primary importers of Australian canola. The value of canola exports is forecast to decline by 31% to $1.4 billion in 2013-14, reflecting expected lower shipments and weaker prices.”
According to the Biofuels Association of Australia (BAA), there is support at national and state levels for a greater role for biofuels in transport.
“However, the Australian Government regulations limit the proportion of ethanol in petrol to 10%,” it says on its website. “This constraint reflects the reluctance of the motor vehicle manufacturers to honor vehicle warranties when higher blends are used.”
E10 is available at more than 600 service stations nationally, and sales of E10 are growing rapidly, BAA said.
“In 2012 Australia produced approximately 440 million liters of ethanol and 350 million liters of biodiesel,” according to an attaché report on the subject. “While biofuels currently account for less than one percent of Australia’s liquid fuel production and consumption, there is significant research and development being undertaken to investigate potential new sources of biofuels.
“Currently only one state (New South Wales) has a mandated level of ethanol use of 6. A 5% mandate had previously been proposed for the state of Queensland but is not likely to be implemented in the near future.”
There are only three ethanol producers in Australia, the largest of which is the Manildra distillery in New South Wales, the report said. It puts total productive capacity at around 440 million liters a year with 360 million of that taken up by New South Wales’ 6% ethanol mandate. “It is expected that production capacity for these plants could increase to 613 million liters per year by 2016,” it said.
Population: 22,262,501 (July 2013 est.)
Religions: Protestant 27.4% (Anglican 18.7%, Uniting Church 5.7%, Presbyterian and Reformed 3%), Catholic 25.8%, Eastern Orthodox 2.7%, other Christian 7.9%, Buddhist 2.1%, Muslim 1.7%, other 2.4%, unspecified 11.3%, none 18.7% (2006 Census).
Location: Oceania, continent between the Indian Ocean and the South Pacific Ocean.
Government: Federal parliamentary democracy and a Commonwealth realm. Chief of state: Queen of Australia Elizabeth II (since Feb. 6, 1952); head of government: Prime Minister Tony Abbott (since Sept. 18, 2013).
Economy: The Australian economy has experienced continuous growth and features low unemployment, contained inflation, very low public debt, and a strong and stable financial system. By 2012, Australia had experienced more than 20 years of continued economic growth, averaging 3.5% a year. Demand for resources and energy from Asia and especially China has grown rapidly, creating a channel for resources investments and growth in commodity exports. The high Australian dollar has hurt the manufacturing sector, while the services sector is the largest part of the Australian economy, accounting for about 70% of GDP and 75% of jobs. Australia was comparatively unaffected by the global financial crisis as the banking system has remained strong and inflation is under control. Australia has benefited from a dramatic surge in its terms of trade in recent years, stemming from rising global commodity prices. Australia is a significant exporter of natural resources, energy, and food. Australia’s abundant and diverse natural resources attract high levels of foreign investment and include extensive reserves of coal, iron, copper, gold, natural gas, uranium, and renewable energy sources. A series of major investments, such as the US$40 billion Gorgon Liquid Natural Gas project, will significantly expand the resources sector. Australia is an open market with minimal restrictions on imports of goods and services. Australia plays an active role in the World Trade Organization, Asia-Pacific Economic Cooperation, the G20, and other trade forums. Australia has bilateral free trade agreements (FTAs) with Chile, Malaysia, New Zealand, Singapore, Thailand, and the U.S., has a regional FTA with ASEAN and New Zealand, is negotiating agreements with China, India, Indonesia, Japan, and the Republic of Korea, as well as with its Pacific neighbors and the Gulf Cooperation Council countries, and is also working on the Trans-Pacific Partnership Agreement with Brunei Darussalam, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, the U.S., and Vietnam.
GDP per capita: $43,300 (2012 est.); inflation: 1.8% (2012 est.); unemployment: 5.2% (2012 est.).
Currency: Australian dollar (AUD): 1.13 Australian dollars equals 1 U.S. dollar (Dec. 26, 2013).
Exports: $257.9 billion (2012 est.): coal, iron ore, gold, meat, wool, alumina, wheat, machinery and transport equipment.
Imports: $263 billion (2012 est.): machinery and transport equipment, computers and office machines, telecommunication equipment and parts; crude oil and petroleum products.
Major crops/agricultural products: Wheat, barley, sugarcane, fruits; cattle, sheep, poultry.
Agriculture: 3.9% of GDP and 3.6% of the labor force.
Internet: Code: .au; 17.081 million (2012) hosts and 15.81 million (2009) users.
Source: CIA World Factbook
Chris Lyddon is World Grain’s European editor. He may be contacted at: email@example.com.