Who gets the grain - fuel or fowl?

PHoto of John McQueen

Kellie Penfold reports on the looming competition between a growing stockfeed market and the prospects of a significant biofuel industry

[Photo by Kellie Penfold (left): Dairy industry chief and chairman of the Livestock Feed Grain Users Group John McQueen]



Ethanol or intensive livestock - who will get the surplus five million tonnes of grain currently exported from Australia"s eastern states?

The recent Agriculture Australia 2005 conference heard that one of the biggest issues facing the grains industry was ensuring enough supply to meet growing domestic demand. If the ethanol industry is to go ahead with government subsidies, and all petrol is to have a minimum 10 per cent ethanol content, the livestock feed industry has warned the results could be disastrous.

All predictions point to a dramatic rise in demand for export grain-fed livestock, with feedlot numbers set to grow by up to 50 per cent in the next five years and with domestic supermarkets now seeking grain-fed lamb.

The Livestock Feed Grain Users Group was formed 18 months ago by the Australian Lot Feeders Association, Australian Pork, Australian Dairy Farmers, Australian Chicken Meat Federation and the Australian Egg Industry Association to raise issues regarding feed grain security, following drought-induced shortages and high prices.

Group chairman John McQueen, who is also chief executive officer of Australian Dairy Farmers Ltd, says collectively the industries are one of the largest customers of Australian grain, buying 10.8 million tonnes a year.

"Yet it has almost been treated as a seconds market. We need it to change to a professional market," he says. "From 2003 to 2007, domestic demand will rise by 14 per cent. To remain viable in world markets we need access to secure supplies of feed grain. In the future we will see further reform of international trade and there are some fundamentals which will change in the world market with the removal of export subsidies.

"Trade reform is going to be an enormous opportunity for our feed grain industry in Australia, as it will coincide with quite a significant increase in demand."

Meat and Livestock Australia"s manager of market information and analysis, Peter Weeks, says the livestock industry has traditionally worked on the assumption that one in every four years would be a drought market. That has changed to one in every three.

The Livestock Feed Grain Users Group acknowledges that while the recent high domestic prices are good for growers, they could be damaging in the long term if there is an impact on the grain"s customers.

"We need to have more stable access and price if we are to remain competitive," Mr McQueen says. "We have to remain internationally competitive and a doubling of our costs in the drought meant we did take significant losses.

"Our domestic industries are vulnerable to drought. There is a scissors effect, because you get caught at both ends - increased demand from industries which don"t normally use a lot of feed grain and a decreased feed grain supply."

Mr McQueen says the dairy industry alone needs an extra 2.5 million tonnes for feed during a drought.

As for the emerging competitor, ethanol production, the Livestock Feed Grain Users Group has come out in opposition to production subsidies. In submissions to the Biofuels Task Force Report to the Australian Government, the group estimated a 38 cents a litre exciseholiday for ethanol was equivalent to a $150 a tonne subsidy for the purchase of grain.

"It could potentially lead us to the equivalent of a full-scale drought on the east coast every year," Mr McQueen says. "If the government says the minimum volume of ethanol in petrol is 10 per cent, that will take up the equivalent of all the barley and sorghum currently produced in Australia."

Mr McQueen says the group feels it is making headway in the grains industry by establishing strategic relationships, collecting data for forecasting trends and by achieving a level of recognition of its importance.

"We need a very professional relationship with the grains industry and a different approach to feed grains in Australia."