Australia is a big country with a relatively small population. Its grains crop is relatively small in international terms, but the high proportion which goes abroad makes it one of the world’s most important exporters. Weather problems, however, have often limited production, while the move from a long-standing single export desk arrangement has triggered wholesale change in the way the industry works.
The International Grains Council (IGC) is guardedly optimistic about the Australian wheat crop this year. "Mostly adequate soil moisture helped farmers to finish sowing, with the overall area expected to be similar to last year’s 13.6 (million hectares)," it said in its June report.
"However, despite beneficial June rains, more precipitation will be required, especially in parts of Western Australia. Assuming slightly higher yields than last year, the crop is forecast at 22.5 million tonnes." That compares with 21.4 million the year before. Drought pushed the wheat crop down to 13 million tonnes in 2007 and 10.8 million in 2006.
The IGC’s estimate for Australia’s total grains crop in 2009-10 is 34.3 million tonnes, compared with 32.7 million last year. The two previous years were badly hit by drought, producing crops of 23.8 million tonnes in 2007 and 17.6 million in 2006.
Maize production has been steady for the last few years at 400,000 tonnes, while barley production is predicted to rise to 7.5 million tonnes this year from 6.8 million last year and 5.9 million in 2007. Again, the IGC is guarded in its optimism.
"Soil moisture conditions were improved by widespread rains, giving the newly planted barley crop a good start in most eastern areas," it said. "However, more precipitation is required in southern New South Wales, eastern Victoria and parts of Western Australia." It expects a fall of 1% in plantings to about 4.5 million hectares. The rise in tonnage produced would come from increased yield.
The Australian Bureau of Agricultural and Resource Economics (ABARE) has predicted a canola crop of 1.878 million tonnes in 2009-10, compared with 1.704 million in 2008-09.
According to the Stock Feed Millers Council of Australia (SFMCA), the country uses 12 million tonnes of feed annually, not including grazing or the spikes in demand caused by droughts.
SFMCA figures show the dairy sector as, marginally, the biggest user of feed, consuming over 2.8 million tonnes. About 60% of Australia’s feed output is exported. The poultry sector is another big consumer, as it produces 750,000 tonnes of poultry meat a year, mostly for domestic consumption, while beef lots and Australia’s 15.5 million sheep are also big users.
"During 2007-08, feed demand was affected by a decline in the beef feedlot and pig industries," the SFMCA said on its website. "Demand for dairy and poultry feed remains strong."
REVOLUTION IN GRAIN MARKETING
After many years of sticking to a single desk system for grain exporting, Australia introduced a whole new system on July 1, 2008. Under the new system, AWB Limited (the former Australian Wheat Board) and ABB, which was formerly the Australian Barley Board, became just two companies in the Australian grains sector. "AWB will continue to honor previous commitments to participants in national pools run under the old single desk wheat export arrangements, which ended on June 30, 2008," the company said on its website. "In the future, AWB will focus on providing competitive products and services to wheat growers under the new multiple accredited wheat export marketing arrangements."
The single desk system went down in controversy, made worse by AWB’s role in the UN’s oil-for-food program for Iraq, with some grower representatives on AWB’s board opposing change.
Under the Wheat Export Marketing Act 2008, a Wheat Export Accreditation Scheme was put in place. Wheat Exports Australia, which replaced the former Export Wheat Commission, is responsible for administering the scheme. Exporters who want to export bulk wheat from Australia must be accredited by Wheat Exports Australia under the scheme, which started on July 1, 2008. There are now 23 licensed exporters, including international companies like Cargill and Glencore, as well as ABB Grain and AWB.
ABB Grain has completed a merger deal with Canada’s Viterra, and further consolidation as businesses adapt to new conditions is seen as likely.
CHALLENGES FOR MILLERS
The Flour Millers’ Council of Australia includes eight of the leading milling companies. "There are a few others," its executive director, Graham Lukey, told World Grain. "There are probably about eleven companies involved, three of which are majors. The others are quite small."
Its members range from Cummins Milling and the Laucke Milling Company, both of which are family owned, to Weston Cereal Industries, ultimately owned by the international giant Associated British Foods.
Not on the list of members are Allied Mills, which, according to its website, is the biggest producer of flour for human consumption in Australia, and another large company, Manildra, which processes 1 million tonnes of wheat a year. It has three mills in New South Wales, one of which, based in the town of Manildra from which the company takes its name, is the ninth largest in the world.
At the moment, according to Lukey, the industry is wrestling with the government’s plans for flour fortification. "Our biggest single concern over the past couple of years has been government legislation to introduce fortification with folic acid," he said. "We’re opposing it, not from the point of view of folic acid’s target population."
The problem lies with the way the government has framed the law. "The legislation handed down is extremely difficult," he said. "The level of forti- fication is on a range of two to three parts per million."
He pointed out that fortification is normally assessed on a minimum additional level. "The difficulty is that under normal circumstances that’s not a practical range," Lukey said. "Testing is not capable of discerning that range. That puts a lot of pressure on the milling industry."
Australia’s flour consumption is stable. "It’s not a growth industry," he said. "It tends to grow with population."
He described the industry as largely domestic, with around 10% of output going for export. Earlier this year, the IGC estimated 2008-09 Australian flour exports at 250,000 tonnes in wheat equivalent terms.
Australia’s millers do not import wheat. "We mill wheat that’s grown domestically," he said. "We have a large wheat growing area, but we only consume 10 to 15 percent of it domestically. There’s an ample surplus of all quantities under normal circumstances."
WEATHER WORRIES GROWERS
The weather, in a country that has suffered from drought in recent years, has presented Australian growers with a challenging period.
"For the three-quarters of the country that’s had variable seasons over the last three years, rainfall is critical," grain trading commentator Malcolm Bartholomaeus told World Grain.
There could be more challenges from the weather. In its latest crop report, ABARE noted that on June 3 "the Australian Bureau of Meteorology announced the recent evolution of climate patterns across the equatorial Pacific is consistent with the early stages of an El Niño developing."
"El Niño events are usually (but not always) associated with below normal rainfall in the second half of the year across large parts of southern and inland eastern Australia," it said. "If realized, the combination of above average temperatures, combined with below average rainfall, may negatively affect 2009-10 winter crop yields."
Bartholomaeus said that in response to a relatively tough time, growers have reduced low-priced grains like barley and high risk crops like canola.
"They’ve gone heavily into wheat and what some would consider a highrisk crop, lentils," he said, noting that returns possible on lentils made the risk worth taking.
Chris Lyddon is World Grain’s European editor. He may be contacted at:email@example.com.