Australia is coming off a year in which it registered a record production of wheat, and current figures already show that the A.W.B. has sold out its 1997-98 wheat crop. In recent years Australia has exported 75% of its total rice and wheat production. All of this has occurred despite ongoing problems facing the business side of farming in Australia, which has struggled to develop a wheat board model that is agreeable to all parties.
Agricultural Policy. As part of its ongoing strategy to improve the structure of various agricultural agencies, Australia has organized a series of studies to determine the role these agencies will have on imports, exports and authoritative power in the future.
The Hillmer review, an independent committee formed to inquire into competition policy, was accepted by Australian state and national governments in 1995. The function of the committee is to examine each agricultural marketing authority and establish whether its statutory authority is in the best interest of the public.
The Australian Barley Board (A.B.B.) was recently examined in regards to its role in regulating the domestic and export markets. The studies showed that the A.B.B. does not provide a significant benefit for the community, and recommendations have been made to deregulate both markets.
The A.W.B., which will be reviewed in 2000, is part of an Australian wheat industry that has been involved in a revolving door of changes and restructuring over the past several years. Recent decisions by the Grains Council of Australia (G.C.A.) have set the groundwork for a more commercial grains organization.
As part of its agenda, the G.C.A. reached a unanimous decision on a grower corporate model for the A.W.B. that would include five key grower objectives. These objectives include the retention of the single desk selling authority; grower control; a strong capital base that would ensure a strong commercial entity; a commercial structure that maximizes pool returns and reflects market signals; and industry self-determination.
Another issue of importance is determining the number of voting shares the new board of directors will have. The model most likely to be used would consist of two classes of shares; class A would be based on being a wheat grower and maintaining a controlling share in the company, and class B, a non voting class that is based on total tonnage of wheat produced in recent years.
There is concern that the class B shares, which reflect grower contributions to the Wheat Industry Fund, could be eventually purchased by non growers, effectively diluting grower control in the A.W.B. The restructured A.W.B. is scheduled to be in motion this year.
In the near future, with changes in the structure of the board, the A.W.B. will move from being a statutory authority to being a company owned by the growers. Full privatization of the A.W.B. is scheduled to take place in June 1999.
Flour milling and wheat. Currently, 14 flour milling companies operate a total of 37 plants in Australia, with the four largest companies accounting for 90% of production capacity. Twelve mills, each with capacity of less than 5 tonnes per hour, account for 8.9% of Australian flour milling capacity, while 10 mills that operate with a capacity of 10 tph or better, account for 56.3%. Total flour milling capacity is 280 tph, which is an increase of 20% over the past 5 years.
Contrary to belief that flour production has remained unchanged for the past 10 years, total domestic flour sales have actually increased 40%, going to 1.65 million tonnes from 1.18 million tonnes. During 1996-97, flour production (including durum semolina) reached 1.79 million tonnes as compared with 1.38 million tonnes in 1991-92. Bread bakers account for 44.7% of flour use in Australia, industrial use 28.5%, food manufacturers 9.1%, packeted flour 4.9%, pasta 4.4%, pastrycooks 3.8% and biscuit use 1.9%.
One of the unique characteristics of the Australian wheat sector is its relationship with the wool sector. Because the two industries compete for many of the same farm resources, farmers are able to vary production numbers appropriately. When wheat prices are low, farmers are likely to transfer more money into wool production, and vice-versa.
Transferring of resources into more desirable commodities is not uncommon in Australia. During the 1996-97 growing season for instance, a favorable price outlook for wheat and other grains, combined with a less favorable outlook for the cattle industry, resulted in the transfer of land from cattle to the more favorable commodity, grain.
Total wheat production and total exports are at their highest levels since the mid-1980s. Australia currently ranks as the fourth largest exporter of wheat in the world, averaging 13.2 million tonnes in exports over the past five years.
Wheat production reached a record high in 1996, totaling 23.5 million tonnes, an increase of 7 million from the previous year and a 15 million increase from 1994. However, there has been discussion that suggests wheat production will decrease in the future.
According to the Australian Bureau of Agricultural and Resource Economics (ABARE), the decrease will occur despite the increase of forecast yield and higher yielding varieties. Producers will continue to move away from the production of wheat and coarse grains, and will instead focus more on the production of oilseeds, pulses and malting barley, ABARE said.
Feed milling. Australia enforces strict guidelines on imports of grains that are to be used as feed. In an effort to prevent substandard grains from entering the country, officials require all grains that are to be used for feed be steam treated or cracked at the port before they can be moved inland. The program has been established to prevent imported pests and weeds from infecting domestic grains.
While feed users have opposed these stringent rules, grain growers have been in support of the treatment because it protects their product.
Red winter wheat was grown commercially for the first time during the 1996-97 season, marking the first time that Australia has promoted the production of a feed wheat. The move allows for an additional stream of revenue for the high rainfall regions of Australia that were previously reliant upon livestock. This move further shows the importance of feed wheat and the potential for export into neighboring countries.
Due in large part to lower grain prices and more demand from Japan, the number of cattle on feed has increased. The number of cattle on feed in March 1997 totaled 437,518, an increase of 34% over the previous total in September 1996.