By David Adams
Growing opportunities and specialisations within the feed grain market, long regarded as the poor cousin to the milling grain industry, are leading many to reassess what is now being seen as a potential premium market.
Dr Mike Taverner, program consultant with the GRDC Premium Grains for Livestock program, says that while the feed grains market has been viewed as the poor relation in the grains industry, this is changing through the use of technology such as Near Infrared Spectrometry (NIRS) which allows buyers and sellers to precisely measure end-use feed grain quality.
"What is happening is that grains are traded on characteristics like protein or bulk density that are of little value to feed quality," he says. "They"re basically characteristics that have always related to the food industry or the malt industry but they"re not characteristics that are particularly important to the feed industry.
"But our research has now identified industry-specific measures of grain quality that relate to grain value for each livestock industry."
Taking the harvesting of grain with high screenings as an example, he says that while such grain does not look good for flour milling and is often sold cheaply as feed, analysis shows that growers are able to gain a higher dollar value for such grain if it is sold specifically as feed grain.
Dr Taverner says the situation is the same when it comes to weather-damaged grain - a fact which he says "more than anything else" should help to create the basis for a "more rational feed grain trading program" and provide clearer directions for cereal breeding programs.
Kirsten Pietzner, GRDC program manager for Value Chain, says that as well as looking at the development of grain varieties for specific livestock groups, the industry is also examining where feed grain growers are located in regard to end-users - in a bid to address freight efficiency, a concern raised by the Australian Lot Feeders Association.
"It"s something that the GRDC is beginning to build a picture of," says Ms Pietzner. "The ABARE work on supply and demand is showing us where the industries are located. It"s also showing us how grain moves from one part of the country to another.
"What we then have to do is tie that information to the breeding programs - what the breeding programs are breeding for and where growers are able to grow particular types of grain."
Figures from the recent ABARE report Feed Grains: Supply and Demand in Australia, prepared for the GRDC, show that expected total feed grain availability for 2003-04 is 21.5 million tonnes with total domestic use expected to be about 8.9 million tonnes.
The report shows that while availability is only expected to rise to 21.8 million tonnes by 2007-08 (due to a small fall in the projected area under grain being offset by a projected increase in crop yields), use is expected to increase to 10.5 million tonnes over the same period, reflecting a projected growth in livestock numbers.
It predicts that the cattle feedlot industry will be the main driver of the increase, with consumption increasing by 29 percent over the period.
Meanwhile, consumption of feed grains is predicted to rise by 12 percent in the pig industry, by 15 percent in the broiler industry and by seven percent in the dairy industry.
While much of the growth of the demand for feed grains in the near future is expected to be in the domestic market, there are also potential opportunities for growth overseas.
Dr Taverner says that while the Middle East has been an important market for bulk feed grain in the past, a premium product could be well-received in Asian markets such as Korea, Japan and possibly China, where there is rising demand for animal products.
A recent GRDC-funded report produced by the University of Sydney and the China Agricultural University confirms that China is becoming a large market for feed grains, but it warns that unless Australian graingrowers change their market strategies to make their products more competitive, the USA and South America are likely to be the main beneficiaries of this potentially lucrative market.
Meanwhile in Australia, there is the recognition that the increasing sophistication of the feed grain products is changing market perceptions among growers and those on the processing end.
Scott Jaques, assistant purchasing manager at QAF Feeds, says the company has become more discerning about the quality of grain it buys. "The image of stockfeeders is changing; we"re no longer simply viewed as a dumping ground," he says.
Mr Jaques says QAF continues to examine and compare the nutritional value of specific grain varieties. The company is also encouraging the development of specific feed grain types, such as triticale, through a collaborative research program with the University of New England.
Grant Black, a grower cropping 1416 hectares near Corowa, NSW, who produces both feed and milling quality grains, agrees that there is now a greater emphasis on quality. "Feed grain just used to be feed quality and they didn"t bother testing it or screening it or anything," he says.
However, he says that feed grain buyers are becoming much more specific in what they buy - something he believes will eventually result in higher prices. "In keeping up with technology there"s a cost and ultimately that has to be passed on somewhere."
Amanda Reagan, a policy analyst at Australian Pork Limited (APL), confirms the changes taking place in the feed grains market. She points out that until now the pork industry has relied on downgraded wheat at discounted prices because there has been no dedicated feed grain industry to provide the necessary inputs.
She says with the pig industry"s usage of grain increasing from 1.57 million tonnes in 1992-93 to more than 2.13 million tonnes in 2002-03, a more specialised feed grain industry is needed to ensure reliability of supply.
"Having a specialised industry means we can make sure that there is always going to be the quantity of feed that we need to meet the industry"s increasing demands," she says.
There is a note of caution, however, from the president of the Grains Council of Australia, Keith Perrett, who says that if graingrowers are to specifically cater for the feed grains market, economic and agronomic advantages must be at least equal to those for the production of grain for human consumption.
He says the establishment of a meaningful trading standard will help growers decide if they will grow a dedicated feed grain or concentrate on growing grains for human consumption. If feed grain varieties are to be grown, then growers need to be able to increase returns by selecting varieties that are best suited to the premium domestic feed markets.
The flow-on from this should be an improved competitive position in the expanding, high-value export feed markets.
For more information:
Dr Mike Taverner, 02 6248 0364, firstname.lastname@example.org
The ABARE report can be found at www.grdc.com.au/bookshop/docs/feedgrains_supplyanddemand2003.pdf
GRDC programs 5 and 6