Grain Demand Spike Likely

grain demand

spike likely

An impending fall in European grain

production is good news for wheat and canola growers, while barley might be a bit more complicated, according to Rabobank analysts

Above: Rabobank global grains strategist Stefan Vogel on an earlier visit to Australia with Rabobank senior grains analyst Cheryl Kalisch Gordon Wheat export volumes from European Union member nations are expected to fall by at least 10 million metric tonnes this year, with Australian crops likely to make up the shortfall. Rabobank’s London-based global grains and oilseeds strategist Stefan Vogel says grain traders are banking on Australian production to enter European export markets, even despite an expected boost in Russian wheat production. “No one else has a whole lot of buffer to make that up,” he says. “So if we want to keep stable or even growing global export volumes, Australia is actually required to give us a decent amount of wheat on to the world export market.” Similarly, this year is expected to be the poorest European canola harvest since 2006, which Vogel says could see Europe double its volume of canola imports from Australia. “COVID-19 has clearly hit the prices of canola in Europe,

get set for harvest challenges

Australia’s total wheat

harvest is expected to rise by 71 per cent in 2020–21, but one analyst is concerned our infrastructure isn’t ready to cope

Australia’s grain industry has some work to do in order to handle what ANZ Bank expects to be one of its biggest ever crops, the latest ANZ grains report says. ANZ agriculture research director Michael Whitehead says the bank’s outlook for the national wheat crop this year remains at 26 million tonnes, despite a number of grain regions experiencing a dryer-than-expected June. “After last year’s drought-hit low of 15.2 million tonnes, this would be an increase of 71 per cent,” he says. “In addition, on some current estimates, wheat exports are currently forecast to jump by around 90 per cent to 17.5 million tonnes.” Were that to happen, the forecast increase production and exports would be among the largest year-on-year rises in over 50 years. “For grain traders and receival site operators, the build up to this year’s harvest will similarly need to focus on ensuring that although they are in the meantime still holding above the last few years given improved demand and the extremely poor European crop,” he adds. While demand for biofuels, malt, beer and clothing had fallen due to the COVID-19 pandemic, Rabobank predicts demand for all these products will be at 85–95 per cent of normal levels by this time next year. However, the impacts may be felt more heavily in the feed grain sector in the coming months, as the economic downturn triggered by the coronavirus resulted in reduced meat consumption in developing countries. “We are actually thinking this could get worse in some countries where reduced incomes may see consumers not being able to afford as much meat as they normally consume,” Vogel says. “We have to consider if there will be a reduction in meat demand and therefore a reduction in livestock feed demand,” he said. That said, Rabobank Australian senior grains and oilseeds analyst Cheryl Kalisch Gordon says there is an animal protein deficit globally – meaning that supplying feeding stock will not necessarily be a bad outcome for barley growers. “Moving our barley is going to be tricky. The capacity for the barley price to find strength is really going to depend on how farmers hold barley for that feed grain complex in Australia,” she says. More broadly, the year will be positive for Australian grain growers, she says, with total wheat production forecast to be 25 million tonnes for 2020–21 and prices above the 10-year average – albeit lower than the five-year average. In addition, she said, growers, particularly those in the eastern states, had a greater – and increasing – capacity for grain storage than in the past, and therefore more capability to avoid harvest sales.

Left: ANZ agriculture research director Michael Whitehead

logistical capabilities and storage capacity are prepared for the scale of crop which could eventuate,” the report says. “In the record wheat crop of 2016/17, some industry stakeholders were caught unprepared by the scale of the crop, leading to some logistical challenges along the supply chain. “In comparison, the forecast year-on-year crop increase in 2020/21 will be greater than that year, in both volume and percentage increase.” The report says it is vital that transport, storage and export processes run as efficiently as possible in order to handle this, ensuring potential issues such as port and shipping access or COVID-19 challenges be planned for in advance. “While the COVID-19 situation in Australia later this year is difficult to predict, it would be wise to factor in any implications from possible continuing restrictions on cross-border movements between states,” Whitehead says. The report also says that in the face of substantially higher production, growers will need to evaluate how much can be stored on farms, rather than being sent to grain receival sites, and whether their storage facilities are adequate. Whitehead says grain growers will need to ensure that their own infrastructure, including silos, coverings and grain bags, are in good supply. “Growers, contractors and traders will also be looking ensure adequate availability of harvesting and transport machinery, including headers, trucks, and train capacity,” he says. Despite global challenges, the ANZ report says there is a positive outlook for Australian grain to supply the fundamental bread and noodle needs of markets across Asia, amid a boost to grain from the free trade agreement with Indonesia. The impact of China’s tariff hikes on Australian barley imports has not yet been felt, ANZ adds, noting that while Canadian farmers have picked up some of Australia’s market share, exporters are treading with caution, noting that Chinese restrictions on Canadian canola exports have provided opportunities for Australian producers.

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