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Demand for Australian grains and oilseeds will intensify in the years ahead, driven by a combination of traditional factors and developments around geopolitics, technology and sustainability.
Participants at all points in the grain and oilseed supply chain will need to carefully plan their ongoing strategies if they are to truly make the most of the opportunities the sector presents.
Undeniably, the Australian grains and oilseeds industry is not just a leading producer and exporter but a vital part of the entire global food supply chain. Whether it’s wheat, barley, canola, oats or others, Australian cropping products play a vital role in feeding populations across the globe, particularly in Asia.
As the industry looks toward 2030 and beyond, it’s clear competition between export and in-country demand – in the form of feed and food, seed and industrial (FSI) usage – for a share of Australia’s grains and oilseeds production will only increase.
Should any of these areas experience volatility in pricing, the whole supply chain may shift in response.
Export
Over the past 50 years Australia’s share of global wheat exports has averaged around 10 per cent. This share has been relatively volatile, ranging from five to almost 20 per cent in recent years, largely impacted by Australia’s shifting production volumes.
Across the other major crops, Australia’s share of world exports is even more impressive. Australia accounts for an average of 20 per cent of global barley and canola exports, though for both at times this can be as high as almost 40 per cent.
The balance between major grains directed to exports, as opposed to animal feed and to FSI usage, will be a major issue for the Australian industry to focus on going forward. A key factor will include how domestic and international factors impact usage.
Looking back at the grain and oilseed usage in Australia over the past 60 years, the overall percentage of Australia’s grains and oilseeds used for export has generally remained high, fluctuating between 60 and 80 per cent.
The share spiked around the late 1970s, the early 1990s and the late 2010s – all times when global demand was strong. These were also periods which saw global prices at relative highs, emphasising the attraction of exporting.
The impact to supply chains from the pandemic, as well as concerns around grain and oilseed availability due to the conflict in eastern Europe, have both arguably raised the long-term floor for pricing.
As major importers build up reserves, or seek to lock in supplies in case of further disruptions, higher export prices could potentially lead to a longer-term rise in feed and FSI costs. That said, this will still remain volatile and tied to global production levels.
Feed
The share of production allocated feed usage in Australia surged notably during the drought periods of 1982-83, 1994-95, 2002-03, 2006-07 and 2018-19. During these times, demand from the livestock industry surged and domestic prices rose accordingly.
While overall feed volumes have been volatile, they have also correlated with the growth – and at times declines – in the number of domestic cattle on feed. This is clearest between 2007/08 and 2018/19, when the number of cattle on feed grew from around 2.5 million to 4.5 million in 2018/19. Feed usage climbed in tandem.
The volume and percentage of feed use is likely to be impacted by several variables in the future. While it remains likely cattle will be the major source of consumption, growth in the domestic poultry sector could spur a shift, given the ongoing rise in consumer demand for chicken. The aquaculture sector, including farmed species such as salmon and barramundi, also increased its feed usage.
Food, seed and industrial
Australia has a small population and large livestock numbers, meaning FSI is the smallest of the major categories of grain usage – albeit a vital one. It’s also by far the least volatile of the major categories.
The volume of grains for FSI has also plateaued over the past five years. This could be the result of several factors – increased manufacturing efficiency leading to reduced need for grain for products such as bread and pasta, and agronomic and biotech grains that have allowed less seed to service greater planted areas and crop volumes.
Looking ahead, it is likely that FSI usage will grow amid an upturn in population growth, which should see food demand rise, and a potential rise in cropping as more farmers shift from running sheep.
One potentially less predictable area will be around biofuels, and the allocation of grains and oilseeds for their usage.
The use of biofuels from grains in coming years will be impacted by factors including technological advances, ongoing research and development of the feedstock conversion process, and feedstock availability and prices. If biofuel production were to grow sharply, then it could lift FSI usage strongly, increasing competition with feed.
Michael Whitehead is Executive Director for Food, Beverage and Agribusiness Industry Insights at ANZ
This is an edited version of the ANZ report “Australian grains – What will demand changes mean for the supply chain?”.
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