Bright future for Australian grains but many challenges to overcome (National, 20 April 2009)

Date: 20 Apr 2009

Broadacre grain production in Australia has export opportunities on its doorstep underpinning its long-term future, but the sector will need to meet the challenge of its dependence on imported inputs that will eventually become increasingly expensive.

Advisers attending the Grains Research and Development Corporation (GRDC) Update in Adelaide last month were treated to a detailed talk by the Western Australian Department of Agriculture and Food’s Associate Professor Ross Kingwell, who painted a rosy but otherwise complex and challenging future for the Australian grains industry.

Prof Kingwell said that although Australia faced increased competition from emerging grain exporters, it was well placed to service emerging markets in Asia. Twelve nations in our region – China, India, Indonesia, Pakistan, Bangladesh, Japan, the Philippines, Vietnam, Thailand, South Korea, Malaysia and Sri Lanka – already represent more than half the world’s population and by 2020 are expected to have a combined population of almost four billion.

It is projected that by 2020, these nations’ consumption of protein (beef, pork, chicken and dairy) will have risen dramatically. Current global feed grain production growth will only meet about a third of this demand. Prof Kingwell said Australia will benefit from this increased demand probably by specialising in human consumption grains while other countries focus on serving the increased need for feed grain and fodder.

All this could mean sustained high prices for feed and human consumption grains due to the combined forces of income growth, climate change, high energy prices, globalisation and urbanisation.

Commentators are very confident that over the long term – and despite a recent drop in oil prices – the cost of energy will increase and herein lies one the biggest challenges facing Australian grain producers.

Prof Kingwell said that partly in response to rising fuel prices, farmers had changed their tillage and sowing practices and were using more fuel-efficient farm vehicles and equipment. Productivity gains have further offset rising fuel prices.

Despite this improved efficiency, Australian growers are more reliant on fuel – and more exposed to cost pressures from price rises – than ever before. This is partly because farming in Australia has shifted further towards cropping and away from livestock. Prof Kingwell said sheep numbers in Australia were at their lowest level since 1924.

He said the long-term trend was for higher oil prices, placing upward pressure on other energy commodities such as natural gas, the key ingredient in ammonia and urea production. Nitrogen fertiliser was therefore also likely to become more expensive in the long run.

“The future lies in energy-efficient production,” he said.

Climate change is the other big challenge facing Australian grain production. Prof Kingwell said that while some experimental studies show that plant photosynthesis may be more efficient in an atmosphere with increased levels of carbon dioxide, the other effects of climate change – decreased rainfall and higher temperatures in southern Australia – will more than offset any yield gains from increased CO��. Policy aimed at dealing with climate change may also result in an increase in farm costs.

“To meet these challenges and profit from emerging market opportunities we will require science and innovation, sound advice, skilful farm management and policy to support farm business resilience,” Prof Kingwell said. “It will be a great technical, scientific and farm management endeavour.

“History tells us that Australian farmers, scientists and advisers are likely to be up to the challenge. They are already experienced in dealing with climatic and price uncertainty and volatility. Farm businesses will need access to productivity-enhancing, energy-efficient innovations if they are to prosper, or at least ease any pain of adjustment over the next few decades.”

Region National, North, South, West