AUSTRALIA is in a good position to capitalise on the burgeoning South East Asian grain market, providing it can get a consistent quality product to market, according to Rabobank grains analysts.
St Louis, United States-based Sterling Liddell, together with Graydon Chong, Australian senior commodity analyst, have been touring regional Australia over the past fortnight and the pair say it is time for Australia to take advantage of both its proximity to South East Asia and its counter-seasonal production to most of its major rivals.
“The real growth engine we see is South East Asia, there’s close enough to a billion people living there and there’s strong growth in grain consumption, similar to what we have already seen in China,” Mr Liddell said.
Moving on from protein
While Australia faces stiff competition in terms of pricing from low-cost producers through the Black Sea region, Mr Liddell, senior vice president of food and agribusiness research, said a focus on meeting customer quality needs would hold Australia in good stead.
But this does not simply mean pushing the envelope in terms of protein levels, typically synonymous with ‘quality’ in Australia.
“Australia could be pushed out in terms of the high protein market, there isn’t always going to be a desire for that type of product,” he said.
“Indeed, you look at China this season, they’ve been actively sourcing wheat with good gluten levels, not chasing protein.
“What Australia needs to do is concentrate on producing a consistent quality product.”
Mr Chong said Australia was never going to produce enough grain to satisfy South East Asia’s demands in its entirety.
“I see Australia working as a complementary grain supplier into these markets, particularly if the industry works with customers to deliver what is wanted.
“The Black Sea probably has the most scope to increase production of wheat, but the issue there has always been the variable quality of the product, so Australia’s opportunity will be tied into having a consistent product.”
Mr Liddell said grain marketers needed to be nimble to be able to meet market demand.
“With Chinese demand this year it was those marketers that could get into their millers early and offer high-gluten products that were rewarded.”
Getting Aus grain noticed
Mr Liddell said it was countries with “good organisation and enough velocity to get noticed” that would get the most out of market opportunities.
“In America we have opportunity, but Australia has even more because of its location,” he said.
He said it was crucial for Australia to understand who its competitors were.
“For Australia that is Canada, Russia and the Black Sea region is a major player, but their quality is not consistent so there will always be a role for your low-cost wheat,” he said.
“The winner will be who can organise and better target specific markets.”
He said the US was also in for some tumultuous times in the next 15-20 years, not just with its competitiveness but in storage and logistics.
Mr Chong said Australia was doing a reasonable job in its industry-wide promotion of its product, but added there was room for improvement.
“The promotion of what customers can do with Australian grain could definitely improve.”
In the future, Mr Chong said long-term partnerships throughout the supply chain would also create value.
“Closer links between the end user and the producer will mean the producer will be able to get the message out better about what they want, and it will allow growers the chance to settle with one particular variety as they know it is what their customers want.”