Growers urged to go for yield

02 Sep, 2018 04:00 AM
Andrei Agapi, S&P Global Platts, said Indonesia was ncreasingly comfortable sourcing wheat from the Black Sea.
Andrei Agapi, S&P Global Platts, said Indonesia was ncreasingly comfortable sourcing wheat from the Black Sea.

FOR years Australian wheat has been highly regarded by Asian flour manufacturers, not least for its good protein levels.

However, a flour industry expert has told the Australian Grains Industry Conference that Australian producers needed to focus on yield rather than quality traits.

“Millers aren’t paying for quality anymore, volume is the name of the game,” said William Syers, distribution director with multinational grains business Bunge.

He said the Asian flour milling sector was becoming increasing adept at extracting the product it wanted from lower quality grain.

This in turn means they can buy a larger percentage of wheat from lower cost producers, such as the Black Sea nations and Argentina.

“The margins are tight for millers and these guys have to look at any way to earn some margin and their biggest cost by far is the procurement cost, which is 75 per cent,” Mr Syers said.

“Using the cheapest grain they can for their products can help generate that margin.”

His comments were backed up by Andrei Agapi, S&P Global Platts agriculture manager.

“Indonesia is the most painful market for Australia as it has been the most effective in switching from Australian to Black Sea wheat when it makes sense pricewise,” Mr Agapi said.

Black Sea grain remains discounted into Indonesia even accounting for Australia’s freight advantage.

However, Mr Syers said demand for Australian grain would continue simply because of the continued rise in demand.

Mr Syers said Asia would have to source an additional 20 million tonnes of milling wheat over the next 20 years to meet demand.

“That is excluding feed wheat or wheat for bioenergy, so it is a big ask,” he said.

At current prices he said Asia would look to satisfy that demand from the Black Sea and Argentina, but he added the two origins would not be able to meet all of the shortfall, which meant opportunities for Australia.

A burgeoning middle-class will be responsible for much of the demand growth, but equally he said new markets will emerge.

“Myanmar is a great example, it is little known at present as a wheat buyer but its economy is growing at 8-9pc per annum and it won’t be too long before it exceeds Malaysia, which is a well recognised market, in terms of demand.”

Mr Syers also said the subcontinent would continue to grow as a wheat importing hub.

“Bangladesh, India and Sri Lanka are all importing more wheat and that is often coming from places such as the Black Sea,” he said.

Mr Syers said millers throughout Asia were trying to create greater margins through making a higher proportion of tailored brands and specialty premix products rather than generic flour.



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