Western Australia a beneficiary of FTA

06 Sep, 2018 04:00 AM
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 Grain Producers Australia chairman Andrew Weidemann said the new agreement was good news for WA growers.
Grain Producers Australia chairman Andrew Weidemann said the new agreement was good news for WA growers.

WESTERN Australian grain growers will be some of the biggest beneficiaries of the just-inked Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) free trade agreement (FTA).

The Australian grains sector hopes the deal will open up new opportunities, particularly in the area of feed wheat.

In spite of being Indonesia’s largest supplier of milling wheat and exporting up to 25 per cent of our total annual wheat exports to our northern neighbour, Australia currently does not supply any of Indonesia’s 2-3 million tonnes a year of feed wheat imports.

Grain Producers Australia chairman Andrew Weidemann said 500,000t of Australian feed grain, made up of wheat, barley and sorghum, could now be imported into Indonesia duty-free following the deal.

This would equate to around $150 million in value for the Australian industry, based on a price of $300/t should exporters be able to supply the whole quota.

It will be especially good news for WA growers who lack the domestic feed wheat market available to the counterparts on the east coast.

Mr Weidemann said opening up the Indonesian feed market would mean WA growers could happily plant high-yielding feed wheat varieties rather than rely solely on milling lines.

“High rainfall parts of Western Australia would be well-suited to growing feed wheat but there hasn’t been the market for it, but this deal might change it,” Mr Weidemann said.

He said Indonesia could source feed wheat from the Black Sea region, which was a cheaper producer than Australia.

However, Mr Weidemann said the FTA, combined with Australia’s natural freight advantage, meant Australian wheat would be able to compete with other origins.

He said the FTA could put a further 15-25pc onto the total annual value of Australia wheat exports to Indonesia.

But it is not just wheat growers expected to benefit.

“We also expect there to be some upside for barley and pulse growers,” Mr Weidemann said.

“Indonesia is not a large pulse consumer in the manner of the sub-continental nations but it is growing and with this deal Australian growers will have preferred access over key competitors.”

The Australian Export Grains Innovation Centre (AEGIC) was delighted with the news, saying Indonesia, which is already Australia’s biggest wheat customer, is growing rapidly.

AEGIC chief economist Ross Kingwell said the IA-CEPA was an important milestone in the relationship between the Australian grains industry and Indonesia.

“This new agreement will provide a blueprint for future growth and collaboration between Australia and Indonesia and will result in significant benefits for both countries,” Mr Kingwell said.

“Indonesia already buys almost one quarter of all Australian wheat exports and is expected to experience huge growth in the coming decades.”

Mr Kingwell said the scope for growth in Indonesia was huge, saying that by 2030 it will be the world’s fifth largest economy.

“Indonesians will become more wealthy and will be increasingly urban.

“Along with this, their diets will evolve to incorporate more wheat products and less rice.

“It is important for Australia to use this partnership to position Australia to continue to be an affordable and reliable supplier of wheat that meets the needs of our Indonesian friends.”

Grain industry lobby group GrainGrowers also congratulated the Federal government for the progression of the deal.

“Indonesia is a country of boundless opportunity for the Australian grains industry,” said chief executive officer David McKeon.

“A country with 263 million people, Indonesia is forecast to grow to 295 million by 2030,” Mr McKeon said.

“Indonesia is already Australia’s largest wheat market, valued at roughly $1.3 billion with trade volumes around 4.2mt per year, and wheat is already Australia’s single largest export to Indonesia.”

Mr McKeon said that currently Australia’s grain trade to Indonesia was almost exclusively wheat for milling purposes, however, IA-CEPA would directly allow more diversity and growth in Australia’s grain trade with Indonesia in the future.

He said GrainGrowers had been lobbying hard to ensure the grain industry was an important part of the deal.

“We are thrilled with the outcome and the benefits this new trade agreement will provide to Australian grain growers and the broader industry,” Mr McKeon said.

“IA-CEPA will provide a platform for further growth in milling wheat trade and will allow for improved diversity in grains trade between the two countries.”

Mr McKeon said he expected the duty-free quota to enable Australian feed grain to go into Indonesian industries such as poultry, livestock and aquaculture.

He gave a heads-up there was further, grain specific trade work to take place between the two nations.

“GrainGrowers is equally pleased that Indonesia and Australia will start to work on a grains-specific economic cooperation initiative, dubbed the Indonesia-Australia Strategic Grains Partnership,” he said.

“The partnership will provide the required technical, economic, and social programs to allow the grains and related industries in both countries to flourish.”

GrainGrowers’ trade and economics manager Luke Mathews acknowledged the efforts by the government in pursuing a high quality agreement with Indonesia, and looked forward to the official signing of the agreement and subsequent ratification by both countries, as soon as possible.

Mr Mathews said IA-CEPA would cement the existing relationship between Australian and Indonesian milling wheat industries while allowing new trade, investment and relationships to flourish between Australia’s grain industry and Indonesia’s food manufacturing, stockfeed and livestock sectors.

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