Australia should return to ordinary times, warns U.S. grains expert
Staff Writer |
Australian grain growers should brace for a “return to ordinary times†for the foreseeable future, as competition from the Black Sea region and Europe intensifies and the market remains heavily oversupplied.
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Hailing from St. Louis in the U.S. corn belt, Stephen Nicholson, vice president of Rabobank’s Food & Agribusiness Research and Advisory division has spent last week meeting with growers in Western Australia’s wheatbelt and is currently touring the grain-rich Riverina and central-west regions of New South Wales.
Nicholson said while his message was “not what farmers wanted to hearâ€, it highlighted the “adjustment to a new realityâ€, with the market set to remain pressured in the short to more medium-term by burgeoning stocks of wheat, corn and soybeans.
“The last 10 years or so have essentially been an aberrant of the norm and gave many producers around the world a skewed view of margins,†he said, “and we are now back to the era of high volumes and tighter producer margins.â€
In Australia however, the pressure on producer margins is not as great with the market back around 2012 levels, underpinned somewhat by the lower Australian dollar and reluctant sellers given the lower prices. Australia’s increased focus on the South-East Asian market is also offering many opportunities, he said.
With global wheat stocks currently at record highs, Mr Nicholson said corn stocks were also weighing heavily on the balance sheet, with feed grain stocks expected to build up for the second consecutive season.
This is seeing farmers in the U.S., but also broadly speaking in other parts of the world, increasingly focus on “understanding their costs of productionâ€, he said, with technological advances also key to optimising yields in a lower-profit environment.
Nicholson said, with much of the downward pressure on the global grains complex stemming from high stocks and Kansas wheat futures now at a 10-year low, this had been amplified by higher exportable surpluses out of the Black Sea region and Europe, particularly France.
“The global marketplace is undergoing significant change as grain trade is no longer dominated by the U.S., Canada and Australia,†he said.
“Instead we are seeing the Black Sea region and Europe increase their dominance in world markets, to become significant suppliers of wheat into our traditional export markets such as the Middle East – which has been a particularly big market for Australia.
“The geographical advantage that the Black Sea region and Europe holds into the Middle East has been further aided by their relative exchange rates, with the Russian ruble and Ukrainian hryvnia depreciating significantly over recent months, while the euro has also taken a slide.â€
In light of this, Nicholson said, Australia’s increased focus as a supplier of grain into South-East Asia offered many opportunities. ■