Astounding grains figures from China

27 Jul, 2005 08:45 PM

WHEN the focus moved onto grain markets at the GrainsWest Expo there was little chance to avoid talking about China, a fast-developing country producing a lot of grain and potentially a big importer in the future.

Louis Dreyfus Australia trading manager Alick Osborne said that in addition to China's 128 million tonnes of corn and 91mt of wheat produced each year it also produced 125mt of rice.

It was usually produced on market garden-size plots.

"They fit that in with cotton and a lot of other agricultural products they are producing," Mr Osborne said.

He said that after much anticipation China became a significant importer in 2004 to import about 7mt of wheat from the world market, which came after a reduced wheat and rice crop the previous year.

"The estimates are that China produces 91mt of wheat and consumes a bit over 100mt of wheat so there is a 9mt deficit there each year," Mr Osborne said.

It was still unknown how much wheat China had in reserve.

"If they are drawing down on their stocks by 9-10mt a year and they started with 50mt you can work out when they are getting near the bottom of the barrel but if they started with 100mt it's going to take a little bit longer," Mr Osborne said.

"Those figures out of China are sometimes a little hard to track down."

Meanwhile, in South America the combined production of soybeans in Argentina and Brazil in the mid 1990s was 36mt but this year was on track to produce 100mt.

"They are competitive producers due to devaluation of their currencies but also gaining from economies of scale," Mr Osborne said.

Argentina produced about 15mt of wheat and exported 10mt, supplying its own domestic market and markets in neighbouring countries first before looking to place surplus, he said.

"They don't mess around when they do this because they have 39mt of soybeans breathing down their neck with double cropping."

Mr Osborne said Argentina produced wheat in a similar season to Australia, planting in May and June and harvesting in October and November with beans harvested in March, April and May.

"So they need to move those beans.

"When they need to they will export into markets Australia may consider core markets such as the east coast of Africa up into parts of the Middle East and also right on your doorstep in Indonesia and Sri Lanka."

Mr Osborne said that since Argentina had deregulated its wheat market it had increased production and reduced handling costs.

Louis Dreyfus operates an integrated soybean crushing plant and export grain facility in Argentina which crushes 12,000t of soybeans each day.

Rabobank grain market analyst Ingrid Richardson said overall grain consumption in China was falling dramatically which was attributed to increased affluence in cities.

She said 20pc of China's population lived in 36 of its biggest cities which made up 45pc of retail sales.

Ms Richardson said that in 2003 rural households consumed 250kg of grain a year compared to 80kg in urban areas.

There had also been a change in language used by China in regards to self sufficiency in grain and it was now promoting self reliance.

"Less land is going into grain production," she said.

Ms Richardson said China was not a big competitor with Australia in wheat exports but was in horticulture and meat exports, particularly into Asia.

She said world trade between developing countries had increased by 12pc to 42pc in the past 10 years.

While former Soviet Union countries were Australia's competitors she did not think their impact would be as great as some people thought.

Ms Richardson said much of the grain produced in these countries was used for animal feed and the quality of grain was perceived to be poor.

"They have been on the watch list for 8-10 years and not much has changed," she said.

Mr Osborne said the cost of production of barley in the Ukraine, for example, was $60t compared to $100t in Australia.

He said planting opportunities in the Ukraine and Russia, which had good black soils, were restricted to May and June and if they had bad weather the crops could fall over quickly.

The crops lay dormant during the winter with only a narrow window of opportunity to harvest the crop.

Mr Osborne said the Black Sea countries also had the European market on their doorstep.



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