Worrying picture for wheat

GRDC Adelaide Update: Worrying picture for wheat


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ATTENDEES were given a sobering picture of Australia’s grain trade competition at the GRDC Research Update in Adelaide on Tuesday.

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ATTENDEES were given a sobering picture of Australia’s grain trade competition at the GRDC Research Update in Adelaide on Tuesday.

Ross Kingwell, a chief economist at the Australian Export Grains Innovation Centre, outlined observations from recent trips to competing grain trading countries and how they compared with Australia’s grain supply chain.

He showed a chart of the seven major grain exporters – Australia, Russia, Brazil, Ukraine, Canada, the United States and the European Union – and their market share from 1999 to 2019.

“Brazil’s share has gone from about 8 per cent in the early 2000s to today being almost a quarter of all the international grain trade,” Professor Kingwell said.

“In the past two decades, Ukraine and Russia (known as the Black Sea region with Kazakhstan) have emerged from virtual obscurity to being the suppliers of more than 20pc of the international grain trade.

“The EU has maintained its market share, while the US has had a huge erosion.

“But Australia, which was once the fourth largest supplier of grain traded globally, has since dropped to the bottom rung of the top seven international grain exporters.”

Prof Kingwell said Argentina’s increasing wheat yields were also becoming a competitive strength, along with its state-of-the-art machinery manufacturing sector. 

“Their depreciating peso means they can sell and export their machinery easily, further supporting their local grains sector,” he said.

“Argentinian grain production systems are also being underpinned by massive foreign investments.

“In December, a Chinese rail company paid for 107 brand new locomotives and 3500 rail cars and they have already upgraded 580 kilometres of their northern rail system – it’s a $2.8b investment. We have a competitor that is developing new infrastructure, which will include the world’s largest grain port terminal just north of Rosario.

“Compare that to the struggle we have in Australia where we can’t get either local or even government investment in rail or roads.”

Prof Kingwell also showed a comparison of the supply chain costs of Australia’s grain trade competitors.

“In Australia, our supply chain costs are often more than $80/t,” he said.

“It’s far less in Russia at about $55/t, Ukraine is even cheaper, while Argentina is about $62/t.

“Production costs are also far less in Russia at $121/t, while Australia is about $148/t.”

Prof Kingwell said the ramifications were that Australia’s grain destinations were being “squeezed”.

“Australian wheat that used to go to the Middle East goes there far less often,” he said. “Those markets are being lost mostly to Black Sea grain.”

Prof Kingwell said fortunately, Indonesia would soon replace Egypt as the world’s largest importer of wheat.

“Indonesia is by far Australia’s main destination for exported wheat,” he said.

“We are fortunate to have that volume of demand on our doorstep because our supply chain costs don’t give our wheat much reach.”

Prof Kingwell recommended the Australian grain industry should focus on not only delivering high-yielding varieties, but varieties that attracted price premiums.

“Australia will never be able to provide a low-cost source of feed grains on the international market,” he said.

“Our labour is too expensive, our soils are too infertile and our supply chain costs are too expensive.”

Prof Kingwell said Australia’s crop breeding organisations gave us a competitive edge.

“Australia is unique with its end point royalty system, making our crop breeding companies some of the best globally,” he said.

“Because of their proficiency, they are able to rapidly deliver high-yielding, fit-for-purpose varieties, so grain quality can be a marketing strategy to underpin Australia’s market share.”

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