WILL there be “enough room” for Australian wheat exports to south-east Asia within the next decade?
Subscribe now for unlimited access.
$0/
(min cost $0)
or signup to continue reading
That has been the focus of a London-based global grains expert’s visit to the region in recent days.
Rabobank global sector strategist for grains and oilseeds, Stefan Vogel, spent two weeks in the country talking with farmers and groups about the challenges and opportunities.
Read more:
He said growing Black Sea competition meant Australian wheat farmers needed to focus more on meeting quality targets, capitalising on economies of scale and examining domestic freight avenues and costs.
Mr Vogel spoke to growers and industry figures in several Australian states and finished up with visits to Breeza, Wee Waa and Moree.
He said the Black Sea region had emerged as a competitor to Australian wheat as crop yields increased and international shipping rates decreased.
In Russia, for example, the 2016 harvest had been up almost 20 per cent on the average crop – a record – and the next crop was another 15 per cent bigger.
“We’re talking about massive amounts that suddenly are sitting in that country, needing to go on the export market,” he said.
“They’ve shipped as much as they can into their traditional export destinations, like Africa, but that’s not enough demand, so they go further out – and that further out is south-east Asia.
“We have seen south-east Asian demand growing rapidly, but it’s a region where a lot of the traditional wheat exports out of Australia are heading.”
Mr Vogel said many of the region’s countries, such as Ukraine, Romania, Bulgaria, Hungary and Serbia, also had “a nice transportation way to ship commodities cheaply from those countries to an export port in Costanza in Romania”: the Danube River.
How to meet the challenge
However, Mr Vogel said there were a few key ways in which Australian growers could respond to the global competition.
International shipping rates were controlled by the global market – and the lower they were, the worse it was for Australia, because it became feasible for European countries to ship to the Asia Pacific.
But low-cost domestic shipping from the farm to the port was “where Australia can get active”.
“Also the country needs to look at what can the farmers do … looking at their costs on the farm.”
Labour and land costs were largely beyond their control, Mr Vogel said, but not “controlling input costs – that may mean not having the highest yield”.
“Yield is one thing, but it is important that producers try and meet the qualities that are expected on the world market, and it depends on which region you’re in,” he said.
“At the end of the day, one needs to be very well aware that Ukraine is the cheapest feed wheat supplier in the world ... that is a market that is extremely competitive, so I think Australians need to ensure that the quality they get off their fields is meeting the demand.
“In my mind, it’s more important to meet the right quality specifications than having the highest yield possible and sacrificing some of the quality – but sometimes weather doesn’t allow you to get the best quality and then you need to deal with it.”
Another Australian advantage was the size of our properties, “meaning you can use bigger gear, bigger machinery, use it more efficiently”.
Farmers worldwide were implementing new technology, but some of it could be more cost-effective in Australian than anywhere else.
“Farmers are looking more and more into ways of how to use technology, and right now there is still a bit of a challenge in using technology in a way that also brings financial returns,” he said.
“Everywhere in the world people are looking at it – but it might be easier to implement on a large-scale farm than on a small-scale farm, some of those costs that you have, so I think that’s an advantage.
“And then I think the next advantage is still, the region here is pretty close to the key outlet market in south-east Asia, so the distance isn’t so far, meaning the higher the freight rates are, the better the advantage is for Australia.”
Mr Vogel said his message to growers was: “focus on quality, focus on cost control and have distinct planning on how to manage the farm going forward”.