Outlook for feed grains* Domestic surplu & on horizon


The current situation

In 1999, Australia produced an estimated 12.5 million tonnes of the 13 main livestock feed ingredients. Approximately 60 per cent of the available feed was estimated to have been used by different sectors of the Australian livestock industry, while the rest was available for export.

Nearly half of the total feed usage was supplied by interregional trade, as feed deficits in some regions are met by shipments from surplus regions, while imports supplied nearly 3 per cent.

The feed-intensive poultry, pig and feedlot industries were the largest users of feed. The poultry industry accounted for 29 per cent of the total use of main feed ingredients followed by the feedlot industry (23 per cent), the pig industry (22 per cent) and the dairy industry (21 per cent).

Projected increases range from 10 to 18 per cent, depending on the projection models.

Outlook - domestic surplus

Over the next five years the growth in feed availability of grains, pulses, oilseed and oilseed meals is projected to outstrip the growth in their usage. As surpluses of feed are expected to grow, the feed industry, particularly the grains industry, is expected to export these surpluses in the international market. However, the industry would have to diversify its export markets.

Asia, a large market for Australian food grains, is likely to increase its feed grain import demand as livestock industries in Asian countries continue to expand. Nonetheless, Australian exports to these markets may be limited for several reasons.

Firstly, Australian export availabilities of feed do not include significant quantities of maize, the feed ingredient heavily used in some Asian countries. Secondly, there is strong competition from other major feed exporters such as the United States and China. Also, changes in trade policies of some Asian markets, particularly Japan, South Korea, the Philippines and other Southeast Asian countries favour meat imports rather than feed imports.

In the domestic market, the increase in feed surplus is expected to ease to some extent the concerns of feed scarcity faced by some livestock industries. Since most of the projected feed surplus is expected to be of feed wheat and barley, soybean meal imports are expected to continue to meet oilseed meal demand.

Drought would increase feed costs

However, drought similar to the 1994-95 drought is expected to reduce feed surpluses, divert feed from export markets to domestic markets, and increase feed costs as livestock industries substitute more expensive feed ingredients as supplies of cheaper ingredients are not available.

The likely increase in the total volume of interregional trade and the likelihood of increased feed movements from west to east during a drought highlight the importance of having a strategic plan by the livestock and feed industries to facilitate such feed movements within Australia.

In simulating the drought scenario it was assumed that there are no barriers to trade between regions. Currently, however, feed movements from east to west are hindered by high transport costs, inadequate infrastructure and lack of coordination between statutory marketing organisations. In the model, it was also assumed that feed grain exporters would have no problem in diverting feed from export to domestic markets.

However, the decision to reduce exports to traditional markets may be a difficult issue for some statutory marketing organisations given their obligation to honour long-term export contracts with foreign buyers. Consequently, the estimated increase in interregional trade and reduction in exports may be overstated.

* Excerpted from Projection of Regional Feed Demand and Supply in Australia, ABARE Report for the Grains Research and Development Corporation by Ahmed Hafl andAntonia Rodriguez, May 2000.

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