The 2021-22 outlook for Australian grain is extremely positive, the 2021 Australian Grains Industry Conference (AGIC) has been told.

Commodity adviser and Lachstock Consulting chief executive Nick Carracher told the conference that production expectations for Russia this year were “slowly reducing”, which meant that demand for Australian grain would be strong, particularly from Asian buyers.

“From a pure pricing perspective, we are set up for another strong export year,” Mr Carracher told the conference – which was held online in September because of COVID-19 restrictions.

“Australia’s freight advantage is actually increasing. We have a good leg-up in terms of accessing South-East Asian markets. We’re looking at an export program for Indonesia, in particular, of about four million tonnes in the next year. We are well positioned to supply them,” he said.

He said there had been a big change in terms of barley export markets. Australia had “weathered the storm” of Chinese barley tariffs and was well placed in other markets – particularly Saudi Arabia, which had become the major barley market. “The relative price of corn and barley lends itself to barley being dominant in their feed sector, and Australian barley should hold the lion’s share of that demand.”

Meanwhile, high prices for canola continued to create “fantastic” gross margins for growers, he said. “From a long-term perspective, canola oil looks very robust. We need to distribute about six million tonnes of supply across our major export markets … (and) prices leading into the harvest window look robust. Even though we have high values, they look well-supported.”

China remains the hub of commodities trade, but they have become tactical in terms of buying feedstuff grains.

Further bolstering the outlook for Australian grains in world markets is the widespread drought in US grain growing areas, CHS global research analyst Joe Lardy told AGIC. “North America came into the current season with pretty dry conditions, and these have persisted – especially in the upper Mid-West,” Mr Lardy said.

“The US Department of Agriculture’s August summary predicted substantial declines in spring wheat and soybean production. We are seeing very, very significant weather effects.”

Mr Lardy said changes in the way pigs are produced in China – from largely village-based production to mass production in “hog hotels” – would also have far-reaching impacts on world grain markets.

“China remains the hub of commodities trade, but they have become tactical in terms of buying feedstuff grains. The Chinese Government aims to control what they need for feedstuffs.

“Overall, its demand is expected to plateau for a few years, and that will give world suppliers a chance to re-evaluate where they are at.”

China, which was described by one analyst at the conference as “the most important world commodities trade hub”, remains a focus for Australian Government efforts at developing constructive relationships with trading partners.

Barley tariff dispute

Minister for Trade, Tourism and Investment Dan Tehan told the conference that a dispute with China in the World Trade Organisation (WTO) over barley tariffs would “probably take more than two years” to be resolved, but the Government would continue to work on Chinese market access.

“The world we live in now is an incredibly challenging one. The geo-strategic environment has changed. It is a much more uncertain place and that means we have to be proactive in how we go after new markets, and make sure we consolidate our traditional markets,” Mr Tehan said.

“We will continue to build relationships in the important markets of Japan, South Korea, Vietnam and the US to make sure they remain in good shape, and we will make sure that we continue to do what we can with the Chinese market, where 800 million people have been lifted out of poverty as a result of China opening up its economy and joining the WTO.

“It’s also important to access new markets, like we have been able to achieve with (exporting) barley to Mexico and Saudi Arabia. Expanding the markets we can trade with gives us new opportunities and ensures that, when we might be harmed in trade, we have the ability to go elsewhere to sell our produce.”

Mr Tehan said the Government was confident of finalising free trade agreements with the European Union and India within the next 18 months.

Economic outlook

Meanwhile, ANZ Bank senior economist Adelaide Timbrell offered growers and other conference participants a broad Australian economic outlook for the short and medium term. Ms Timbrell told the conference that interest rates were expected to remain low until at least 2024, when they were likely to increase “really slowly”.

“In five to 10 years, we expect the cash rate to still be less than two per cent,” Ms Timbrell said. “The days of really high interest rates are over. That’s not because of COVID-19; that’s because of a lot of things, including globalisation and digitisation of goods and services, keeping prices down.”

In terms of the exchange rate, ANZ Bank expected the Australian dollar to hover around 78 US cents next year, she said. “For exporters, that’s good news because the lower exchange rate will help with global competitiveness, and we think that will continue into the long term.”