international grain competitors: what can we do at the ... · russia. ukraine. united states %...
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International grain competitors: What can we do at the farm and industry level?
Professor Ross Kingwell
AEGIC & University of Western Australia
Competitor analyses
Australian supply chain analyses
All these publications are available on the AEGIC website
AEGIC blog articles….26 so far…some on international markets and competition
What are all these reports and analyses telling us?
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45Share %
Australia Brazil Canada European Union
Russia Ukraine United States
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Australia Brazil Canada European Union
Russia Ukraine United States
Countries’ shares of the volume of grain exports by the major exporters: 1999/2000 to 2018/19
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45Share %
Australia Brazil Canada European Union
Russia Ukraine United States
Countries’ shares of the volume of grain exports by the major exporters: 1999/2000 to 2018/19
Australia…..on the lowest rung
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Argentina Australia Canada EuropeanUnion
Russia Ukraine United States
% share
Country shares of volumes exported by main wheat exporters
1999/2000 to 2003/4 2004/5 to 2008/9 2009/10 to 2013/14 2014/15 to 2018/19
The rise of Russia
Russian wheat crop estimates for 2019-20 are ~76 mmt (i.e. Russia’s second largest wheat harvest ever).
Russia’s current area planted to winter wheat, to be harvested this July and August, is up 2 per cent to a record 15.8 million hectares.
Winter wheat yields can be up to double those of spring wheats.
The return of Argentina
y = 1.102e0.01x
R² = 0.346
y = 1.2341e0.0158x
R² = 0.8128
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Wheat yield (t/ha) Australia
Argentina
Expon. (Australia)
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Foreign investment
By December 2018 97 new locomotives, along with 3,500 rail cars manufactured by a Chinese rail company arrived to serve Argentina’s rail transport of grain. These locomotives are part of a package of 107 locomotives that are creating a faster and safer movement of grain.
The renovation of 580 kilometres of rail track north of Rosario (the Belgrano line), Argentina’s main grain export hub, has involved a $US2.8 billion investment from Chinese sources.
Chinese investors have provided a capital loan to be repaid over 20 years with an upfront grace period of 5 years during which no repayments are required.
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Sheep Population
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Wheat Production (kt)
NSW SA WA
So….. What can we do at the farm and industry level?
Possible courses of action(i) Understand the nature of your competition.
The emerging wheat export competitors will cause increased direct and
indirect competition in Australia’s key wheat export markets. Black Sea
and Argentinian grains are not the only threat.
(ii) Make sure your grains organisations are well-coordinated and
effectiveAustralian grain exporters will face not only growing price competition but will also experience
intensified organisational competition from industry organisations in some exporting countries.
In Australia there are disparate bodies representing aspects of the grains industry, often insecurely
funded and with their activities not necessarily well co-ordinated. Australia needs to ensure all its
grains organisations are well co-ordinated so that from wheat breeding, varietal classification,
supply chain infrastructure provision, wheat research and trade development; all efficiently align to
deliver strategic benefits to all transactional parties, including Australian grain producers and end
users of Australian grain.
(iii) Produce grain as cheaply as possible (i.e. high-yielding varieties
with a prospect for price premia) Australia is unlikely ever to be a reliable source of highly affordable feed grains. Most farmers’
strategic needs will remain in growing fit-for-purpose, affordable grains for human consumption.
Also, to protect crop margins and control costs of production, most farmers, to the extent it is
possible, will need to ‘play the season’; curtailing costs in poor years and chasing upside in
occasional bumper years.
(iv) Maintain the competitive strength of Australia’s investment in crop
breeding Traditional crop breeding has long lead times and path-dependency effects, yet uniquely, Australia’s
main crop breeding companies can now quickly develop varieties attractive to end-users and
Australian grain growers. When combined with other activities, such as classification changes, new
segregations, more efficient supply chains and industry-good marketing functions, Australia can
match some of the competition it faces in international markets.
(v) Diversify crop and enterprise portfolios Farmers’ experiences over the last two decades have revealed how commercially risky is the
business of farming. Variable seasons, varying prices within and across years and ever-increasing
costs of inputs make the business of farming always challenging. One way to address the challenge
is to spread the biological and commercial risk by growing a few different crops (e.g., grain legumes,
cereals and oilseeds), perhaps with a complementary animal or side-line enterprise.
(vi) Know and manage your supply chain; paddock to
grain receival
In South Australia, grain supply chain costs amount to around 30 per cent of
the FOB price of wheat (White et al, 2018). Planning and managing harvest
logistics and grain marketing can be important sources of incremental
commercial gain for farmers. The 2018 season, for example, unveiled many
highly profitable grain marketing opportunities for many farmers. White et al
(2018) outline how reducing Australia’s supply chain costs is feasible through
synergistic infrastructure investments and emerging innovations involving
automation, information technologies and organisational change.
Summary
Low-cost nations increasingly proficient in grain exporting are restricting the reach and market share of Australian grain.
Australian farmers and their industry have several options worth pursuing to address the emerging challenge.
