A funny thing happened in the northern Australia wheat market last season.
The domestic cash market was paying more for H2 wheat (the old AH) in its higher protein levels — 12.6-12.9/13 per cent — than lower protein Prime Hard — 13-13.5 per cent. It's reported that some growers delivered PH as H2 to achieve the price premium, variously $6-$13 a tonne.
The situation confused growers and challenged the northern grains industry's long-held acceptance of Prime Hard wheat as the basis of profitable production. It questioned the economics of applying fertiliser nitrogen (N) to boost grain protein and with it the direction of much wheat and farming systems research.
Thanks to AWB Ltd/AgForce grower workshops in Roma and Condamine, we now know that:
- much of the domestic market — the 'big plant' bakeries — now prefers wheats in the H2/AH protein range (and could even take grain further down the protein scale in the future)
- the trend just mentioned began after the release of the Hartog wheat variety in 1985. Growers loved Hartog for its yield and agronomic advantages, but the extra-strong flour it produced created production problems for those high-speed, 'big plant' bakeries
- the small (circa 600,000 tonne) Queensland crop in 2000 resulted in a bigger than normal percentage of PH wheat in south Queensland and an equivalent reduction in H2/AH production
- a very active cash market has resulted, with competition from domestic millers pushing prices to the unusual levels discussed above
- meanwhile, world market demand for PH wheat eased relative to the lower protein levels, creating an unusual reduction in the spread of prices
What we don't know is how long this combination of circumstances will last.
AWB Ltd's regional manager for Southeast Asia and South Asia, Greg Harvey, told growers at Roma and Condamine his firm belief was that the narrow-spread, low-price situation was unlikely to be long term. Mr Harvey also reminded growers that:
- the local market takes no more than 30 per cent of Queensland wheat production in an average season
- Australian PH is still a premium wheat in the international market, with some 40 per cent of our exports going to Japan and around 20 per cent to both Malaysia and Indonesia
- fluctuating supply has always created problems in the marketing of PH in Asia, but it remains a keystone of the Australian wheat industy's international profile.
Time will tell whether all these factors will be permanent features of the wheat industry in northern Australia. But they do challenge just about everybody in it.
QDPI economist Rod Strahan and QDNR agronomist Brett Robinson told the Roma and Condamine workshops their studies show N applications pay until a wheat crop reaches its yield potential — generally reached when protein is around 12-12.5 per cent. Then, as protein increases, the amount a grower gets back for the N investment falls. It used to pay growers to keep protein above 13 per cent.
"If you can't get back $2 for every $1, you are generally better off looking for other investment opportunities," Mr Robinson said. "The implication of all this is that, because we are no longer afraid of falling off the cliff face in the protein pricing structure, we should concentrate on maximising yield in relation to available water.
"Making sure of phosphorus and zinc levels, and that weeds and disease are controlled, the system now is that you chase yield."
Warning on soil fertility
Mr Robinson said reductions in N applications could accelerate the rundown in soil fertility, and growers would need to look at rotations and even ley pastures for the necessary soil organic matter.
And then again a reduction in the price of urea could change the whole equation.