Consistency key for export grain

24 Mar, 2015 01:00 AM
The winner will be who can organise and better target specific markets

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.”

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27/03/2015 5:55:33 PM

Ignorance is bliss Jock. What evidence have you to prove that under the current massive world demand for wheat, that you are not being ripped off and that if we still had The Single Desk that our returns would not be higher and our management of customers quality needs would not be better? You have none, so you are purely guessing.
Philip Downie
27/03/2015 11:25:25 AM

Sterling so there is a difference between level of protein and gluten? They are very closely related. A little bit of knowledge is not good enough. The only time the relationship fails is with soft. low protein biscuit wheat. There is no hope of getting consistent quality. Why because with AWB we directed customers to the same port, same grade even if there were slots available at other ports. Now with the merchants it is wherever and quite frankly very few, if any, would even know the quality of the various port/ grades. It is far more than protein content and grade.
27/03/2015 11:24:45 AM

picking caltrop all summer tends to lessen the iq I've noticed hyden. the merchant in our midst is 100% right. times have never been better for grain farmers that manage seasonal and marketing risks with their smarts. the socialist model of relying on the neighbour to carry your lazy bum is long gone thank the dear lord
Jock Munro
27/03/2015 10:51:27 AM

Jockstrap, Please explain how we could be better off by having the same merchants trading our grain that trade grain from across the globe?! And explain why our quality and relative value are in decline.
27/03/2015 9:01:06 AM

picking caltrop all summer tends to lessen the iq I've noticed hyden. the merchant in our midst is 100% right. times have never been better for grain farmers that manage seasonal and marketing risks with their smarts. the socialist model of relying on the neighbour to carry your lazy bum is long gone thank the dear lord
26/03/2015 10:54:02 AM

Merchant, of course you would speak in favor of the current situation/debacle. You are a grain merchant who needs growers to be divided to carve the biggest margins possible out of growers incomes. There is no way you can prove your claim that there is no way could achieve the exports of today. Fact is you are making a claim you can not prove and making false suppositions.
Jock Munro
26/03/2015 10:47:35 AM

Thanks Merchant-because we now have a merchant controlled rabble for a marketing system (thanks to Rudd Labor and Nelson's Liberals) and because our quality reputation has been trashed, we are no longer a premium supplier and have to compete against lower quality wheat from the Black Sea. Of course the same merchants that hock wheat our for the lowest price are selling Black Sea wheat too! What a farce!
26/03/2015 8:35:00 AM

Your comments are full of blind rhetoric. Reality is that the grain farmers have never been more serviced than they are now. The transparency in the grain supply chain is at an all time high. Costs of engaging the supply chain are going down not up. Jock, have a look at the export figures since the single desk was abolished, the results are far greater than AWB could achieve. Look at the Port facilities being developed, that investment is a direct impact of competition. The real issue is that Aussie farmers struggle to produce grain cheaper than the Black Sea region. Ask a flour miller.
26/03/2015 6:54:03 AM

Stick to your guns Jock because you are hitting a raw nerve. Imitation is the greatest form of flattery.
Jock Munro
26/03/2015 6:18:09 AM

Welcome cousins-Frank and Jack-more sellers means lower prices-ask your local input and machinery supplier if he would like to see a competitor open another branch in your town. When you have an understanding of competition principles we can then deal with the quality issue. Cousin Bill gets it.
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