Add to favorites


Risk and Reward

Australian wheat should be marketed to the world on its quality and its strengths, says GrainGrowers’ General Manager of Grower Engagement Michael Southan. The problem, he argues, is that there has been no promotion of the Australian grain industry to world markets since the end of the single-desk wheat marketing monopoly.

“There is no generic promotion of Australian wheat. There is no generic marketing to build on relationships with export customers since deregulation,” Southan says.

He believes growers could extract more value from their crops if their wheat was being properly marketed. Australian wheat is considered the best there is for Asian noodles – 60 percent of the export crop ends up as noodles – yet that advantage is not being pushed to the maximum effect with Asian buyers.

It’s not as if the industry is struggling; it isn’t. It is Australia’s largest rural export, by a wide margin, earning more than $7 billion a year in export dollars. And that figure is growing as farm output and grain prices increase. The issue, Southan believes, is that the industry has greater potential; that it can do better in world markets.

He says in the wake of deregulation, traders are focusing on profits only. “Traders are more interested in how to make more money than in marketing,” he laments.

Since the wheat board monopoly ended, the number of traders buying and selling Australian grain has exploded. Southan says there are now 20 major traders and as many as 200 small ones in the market, all pursuing their own ends.

Michael Schaefer of Grain Producers Australia says this competition for grain is a good thing. “The protectionists are not on the right track,” he said. “We all function much better under competition. The industry is a better place with competition than it was under the single desk. The system is still not completely sorted but it is getting there. It just may not be as quickly as we would like.”

Lost in Translation

For Southan, it’s not the competition, but what has been lost in the transition to deregulation, which he thinks happened too abruptly. “A lot of pain is being felt by the industry. The dairy industry had 20 years of government support for its move from being regulated to deregulated. For the grain industry is was effectively overnight.”

Gone, he says, is the focus the industry once enjoyed and value is being lost as a result of it.

Grain growers have reacted to deregulation by selecting varieties that will produce the biggest yields rather than the best quality.

“We can’t compete on yields due to our climate,” Southan says. “What we should do instead is focus on a particular functionality that is the best in the market, such as Asian noodles.”

He says concentrating on quality will result in better prices for grain because the market will start to demand Australian grain rather than buy on price alone.

For all the increase in traders, in other parts of the industry competition is diminishing, particularly among the suppliers of farm inputs such as chemicals. “Input costs are squeezing farmers. These suppliers know what it costs farmers to grow the crop and what they will get for it and set their prices accordingly.”

Into the future climate variability will be one of the major challenges for grain growers, Southan says. “We need consistency when customers want a particular kind of wheat and climate variability makes that difficult. When prime hard wheat is hit by drought it becomes unavailable. If it is too wet, it’s downgraded and becomes unavailable. This is a real issue for Australia.”

Changing Grains

Queensland wheat is now seen as little more than a rotation crop with growers moving into other grains such as sorghum that can deal better with the climate. It has a ready market in China as stock feed and as the main ingredient in a popular alcoholic drink. “Sorghum responds well to summer rain and I think we will see other options for growers.”

In southern NSW, Victoria, and southern Western Australia, the popular rotation crop canola now earns more for growers than wheat, driven by the good prices for oilseed in recent years.

Canola cultivation

Canola cultivation in Binalong, NSW. Photo by Jan Smith

According to the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES), canola exports in 2012-13 were valued at $2 billion with 30 percent of it going to Belgium. The Netherlands and Pakistan were the next largest markets. Canola exports are tipped to drop in 2013-14, in both volume and value, in the face of a global glut and falling prices.

Some growers are substituting barley for canola and ABARES is forecasting an increase in its production of 10 percent in 2013-2014 to 7.4 million tonnes. However, both prices and export volumes are expected to fall this year, with export earnings of just under $1.7 billion.

Schaefer says a further challenge faced by the grain industry is the cost of getting grain to export ports. “It is critically important to the industry,” he says. Road transport dominates the movement of grain in the country yet state governments are not encouraging the use of longer, more efficient trucks. “It is irresponsible of the states to charge more for longer grain trucks. Longer trucks mean more freight being moved with less pollution.”

He adds that the West Australian Government is much better in its treatment of road transport operators.

Despite all the issues of input costs, fluctuating prices, drought, and a lack of global marketing, Southan says broadacre grain growing remains a great industry for Australia.

“When everything aligns – prices, season – farmers can make a lot of money. It’s like everything, the higher the risk, the higher the reward.”

Risk and Reward


  • United States
  • David Carter