GroundCover™ Issue: 42
Dramatic changes in world grain trade
THE PATTERN of international wheat trade will change dramatically this year. Lower US, Canadian, Australian and Argentine production will contribute to the transformation of international trade. The EU and former Soviet Union will be the big winners but the international situation is changing fast.
The harvest: record prices and incentives for high protein
AUSTRALIAN WHEAT growers will harvest valuable grain this year, but there will be less of it. Estimated pool returns for the 2002--03 benchmark grade of Australian Premium White are now at a record $297/t. In a bid to secure supplies, AWB Limited will offer a premium for high-protein hard wheat. It has established a new grade, Australian Extra Hard, and will offer an incentive of $6/t. The estimated pool return for AEH is $330/t, based on 13 per cent protein.
Canola forecast down again
IN SEPTEMBER, ABARE downgraded its Australian canola crop forecast to 990,000 tonnes, 38 per cent below last year's total. The industry considers this forecast is optimistic and the Australian Oilseed Federation suggests 800,000 tonnes is more realistic. While the canola crop will produce enough to satisfy domestic demand of about 400,000 tonnes, not all export needs will be filled. Although Australia is not the only world producer, a widespread drought is also cutting Canada's canola production and global supplies are diminishing. As a result, world canola prices have increased significantly.
Local markets will have to outbid exporters
IN ORDER to retain grain stocks for domestic markets, local buyers and traders will have no choice but to outbid exporters. ProFarmer suggests there are likely to be huge variations in prices posted at local silos this harvest and we are also 'likely to see changes during the day as traders and buyers hop in and out of markets. Harvest delivery and pricing management this season is predicted to be more difficult than most farmers have ever experienced.
Import grain or drop livestock numbers
AS THE drought bites and feed grain prices rocket, farmers are cutting livestock numbers and/or looking to import feed grains to address the crisis. Grain can be imported profitably to the east coast, but phytosanitary and political issues might prove tricky.
Game shifts with new mill owners
GRAINCORP AND Cargill have successfully purchased the highly prized, flour milling assets of Goodman Fielder, for $200 million. The new joint venture is yet another significant shift in the rationalisation of the grains sector. The deal includes 13 mills across the country, a mixing plant in Sydney and, importantly, a long-term contract to supply flour-based products to Goodman Fielder. AWB Limited expressed disappointment at missing out on the purchase of the miller but the ACCC indicated that the acquisition of Goodman Fielder assets would have given the AWB a more than dominant market position.
Compiled by Dr Mike Taverner from media and industry reports - up-to-date at the time Ground Cover was prepared for publication. Readers are advised to seek independent advice if they intend to act on these market signals.