AUSTRALIAN grain growers were in a unique position to “ride the
racehorse” of dynamic change driven by emerging middle-class consumers in near neighbours, WA farm consultants were told at the Australian Association of Agricultural Consultants WA Outlook conference in November.
But to stay on the “racehorse” and help meet growing demand for protein and wheat, farmers and consultants were told they needed to be aware of world markets and a possibility of planting more soybeans and canola.
Emily French, grain and oilseed derivatives specialist for United
States of America-based global broker and consultant ConsiliAgra, said there would be challenges but Australian farmers had particular skills to help them.
Ms French, a fourth-generation wheat farmer from Northern Idaho and former grains trader and international operations manager for the US Grains Council, was keynote speaker at last Friday’s Australian Association of Agricultural Consultants WA Outlook conference.
She is well acquainted with Australian agriculture, having lived
in Sydney and held senior positions in agriculture derivative selling for National Australia Bank and Macquarie Bank before returning to the USA.
For many countries “red was the new black” with a quarter of the world’s economies having negative interest rates which had focused attention on the “unprecedented concentration of wealth in a handful of people at the top of the wealth pyramid”, Ms French said.
“Wealth at the top of the global wealth pyramid has doubled in the past six years – 33 million people (worth $1m or more) made 46 per cent of the world’s profit,” she said.
But, according to Ms French, it was emerging middle-class consumers – 900 million people in total with one third of them in China – driving dynamic social and economic change around the world.
“The emerging middle class are really the perpetrators of the shocking political backlash we have seen in last few months – Britain with Brexit, in the US with Trump, and there’s a chance we will see more of it next year with French, German and Dutch elections,” she said.
“It’s the anger of the status quo, the anti-establishment, and it’s not just isolated to the US and Western Europe.
“They (emerging middle-class consumers) determine demand,
trade flows, what the world is consuming, producing and so on.
“Consumers drive demand and politics.
“They are driving a re-balance of power and that’s what the world is going through right now,” Ms French said.
The China phenomenon of an emerging middle-class with a rapidly changing diet was spreading across South East Asia, she said.
Some of the world’s best forecasts for gross domestic product (GDP) increase were in South East Asia with the Philippines forecast for 6.7pc growth, Vietnam 6.2pc, Indonesia 5.3pc and Thailand 3.3.
“The only other region that can match those forecasts is sub-Saharan Africa but markets there are largely undeveloped and inaccessible for the most part.
“You are in a fantastic spot to be in, just in terms of geography.
“If you combined South East Asian countries (they would make
up) the seventh largest economy in the world.
“It took that region 10 years to double their GDP.
“To put it into perspective, it took Japan and the US 16 years – you don’t put that sort of growth genie back in the bottle, you ride the racehorse.”
Ms French said she was therefore “baffled” by Donald Trump’s indications as president he intended to take the United States out of the Trans Pacific Partnership (TPP) trading agreement.
“With that market potential why would you give up a seat at the
table?
“If Trump does take the US out of the TPP who wins – pretty much everyone else,” she said.
Apart from forecast growth in South East Asia, Ms French believed the world was starting to see “the decade of India”.
The middle class in India, earning between $10,000 and $100,000 a year, had not yet emerged and was currently only a tenth the size of the Chinese middle class and only 3pc of the world’s middle class.
With India’s population at 1.26 billion, middle class growth over the next decade had potential to significantly influence world markets, particularly food, she said.
In the past 16 years its imports have tripled.
Eggs – the cheapest source of protein in Indian diets, vegetable oil – at 14.5 million tonnes India accounts for 52pc of world vegetable oil imports, and poultry – Indians eat 54 million broiler chooks a week, only trail crude oil at the top of its imports list.
“The great irony of India is that it will allow the importation of soy bean oil (as vegetable oil) but not soy bean milk,” she said, but admitted that could change anytime.
Ms French said Asian countries were expected to maintain significant wealth.
“China and India will lead the new world, they will have more than 20pc of the world’s population which by 2050 – governments use this figure – will be 9b people,” she said.
“More than 60pc of that 9b people will live in South Asia, East Asia and Africa – two out of the three are your very near neighbours.
“You are close to China, close to India, to Pakistan, to South East Asia and the only country in that region that has western-style
levels of agricultural production.
“That’s really exciting for Australia given the numbers and the potential for growth.”
What was termed the “Southern Silk Route” of trade between China, through South East Asia, India, the Middle East and Africa, further “emphasises” Australia’s position to “feed a region where dietary shift is happening”, Ms French said.
“Ten years ago emerging economies accounted for 10pc of the world’s economy, now 40pc of the world’s economic activity is
in emerging economies,” she said.
“They demand what you have – you have land, you have water, you have food safety – a huge issue, especially for China and for Asia.”
While the challenge will be to increase yields to produce enough food “at a basic cereals level”, agriculture will also come under
pressure for its use of water, Ms French predicted.
“Food is going to be under attack because it is a huge consumer of water, 70pc of the world’s water use is in agriculture,” she said.
“By 2018 4.8b people will be exposed to severe water scarcity – half the world’s population.”
But Australian farmers were better placed than others to deal with the water issue, Ms French said.
“Australia is the world’s most efficient (food) producer when it comes to water, hands down.
“You guys have learned how to deal with that, congratulations.”
But Australian farmers needed to stay up with global commodities trends, she warned.
“Why do you care if you’re a wheat farmer that soybeans and soy milk are driving the Chicago Board of Trade futures markets.
“If you are not paying attention to this, you are missing the boat.”
To demonstrate her point Ms French used statistics of comparative world consumption of certain crops over the past 20 years.
While world wheat consumption had increased 44pc growth had been driven by feed wheat, corn was up 127pc but impact of
biofuel production had decreased in the past four years, sorghum was up 6.4pc and barley consumption declined 15.6pc.
The two world growth crops, she said, were soybean with consumption up 226.6 million tonnes or 222pc and canola up 49mt or 246pc.
“The world cannot live without soybeans, that’s a fact,” Ms French said.
She also pointed out while canola had “emerged” as an alternative crop in Australia and its production had lifted from 83,000 tonnes to 3.7mt in 20 years, Canadian production
had lifted from 3.7mt to 18.5mt in that time.