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Livestock feed demand puts squeeze on Australian grain
AUSTRALIA’S grain ‘balance sheet’ is set to materially tighten over the next decade, with increasing demand for grain to feed livestock – coupled with growing hu- man consumption – well outstripping projected supply, according to a re- cently released industry report.
This will see the propor- tion of the nation’s grain harvest exported annually decline from the current 60 percent to 53 percent by 2030, and may increase the likelihood of further grain imports into the country over time.
In its report ‘The Aus- tralian Feed Grain Squeeze’, agribusiness banking specialist Ra- bobank says by 2030, the domestic market for ce- real grains (wheat, barley, oats and sorghum) will soak up an additional 6 percent of Australia’s an- nual production, leaving available supply for ex- ports down by two million tonnes (or 10 percent un- der the current five-year average).
Report author, Rabobank senior grains analyst Cher- yl Kalisch Gordon says the bank is forecasting do- mestic demand for cereal grains to grow by 2.3 per- cent per annum over the next 10 years (to above 17.5 million tonnes a year by 2029/30), well exceed- ing projected annual sup- ply growth of only 0.4 per- cent per annum over the same period.
More mouths to feed
Livestock feed will take an increasing proportion of Australia’s domestic grain supply, the report says, driven by a rise in the number of stock being fed grain to satisfy local and international demand for animal protein.
Increased human con- sumption of food products containing grain will also fuel part of the rising de- mand.
“Despite changing diets, which have seen people’s consumption of wheat and other coarse grains fall on a per capital basis, Aus- tralians will still consume more grain due to popula- tion growth,” Dr Kalisch Gordon said.
“Overall, this will see an increase in demand for cereal grains in Aus- tralia due to both direct consumption of grain in products – such as break- fast cereals, bread, cake, biscuits, pasta and beer – and also derived demand for grains to feed livestock that supply animal protein products including beef, lamb, chicken, pork, eggs, milk and fish.”
This domestic appetite will also be augmented by a strongly growing de- mand for Australian beef and lamb in export mar- kets for at least the next five years, she said, as “the global protein market resets as a consequence of the African swine fever epidemic in China”.
Dr Kalisch Gordon said a higher level of growth in feed-grain demand – com- pared with human con- sumption – forecast over the next decade meant the share of cereal grains go- ing to feed in Australia would approach 70 percent by 2029/30, up from 64 percent (the five-year aver- age to 2018/19).
“As such, we will not only see increased demand for grains in Australia, but an increase in the relative www.porknews.com.au
importance of feed grain as an end use compared with milling, malting and processing for human con- sumption,” she said. Supply
On the supply side, the report says, production growth will not be able to keep up with the forecast increase in demand over the coming decade.
“We expect Australian cereal grain supply to in- crease by just 0.4 percent annually over the next 10 years,” Dr Kalisch Gordon said.
“In the absence of any new technologies that offer step change improvements in yield growth – and in the face of a drying cli- mate and challenges to crop management, such as herbicide resistance and potential limits on the use of glyphosate – we do not expect future yield growth to exceed histori- cal growth trends.”
Dr Kalisch Gordon said with a ‘southerly contrac- tion’ already occurring across Australia’s crop- ping belt due to climate challenges, as well as rela- tive commodity pricing, the bank was not expect- ing cropping area growth in the forecast period.
“And while genetic mod- ification and new plant- breeding techniques of-
fer the potential for step change increases in yield that would offset the feed grain squeeze, we consider the likelihood of develop- ment, adoption and end- market acceptance low within the coming dec- ade,” she said.
As such, the report says, Rabobank expects average Australian cereal grain production to be at around 37.5 million tonnes by 2030, up from the current five-year average of 35.8 million tonnes.
“However, Australian production will continue to be prone, and possi- bly more vulnerable, to year-to-year variation, so a range of 20 million to 52 million tonnes must be considered part of the out- look,” Dr Kalisch Gordon said.
Exports and imports
The report says the ex- pected low rate of pro- duction growth, together with the forecast increase in domestic demand, will reduce Australia’s annual export surplus – from an average of 22 million tonnes of wheat, barley, oats and sorghum (2014/15 to 2018/19) to an export surplus closer to 20 million tonnes by 2030.
“This will result in the proportion of Australia’s grain production going
to exports reducing from typically being 60 percent of annual production to 53 percent by the end of the next decade,” Dr Kalisch Gordon said.
And, while Australia would “remain a net ex- porter of cereal grains”, she said, there was in- creased potential to see further grain imports com- ing into the country over the next decade.
“Feed grains may be im- ported if the basis (price) reaches sufficiently high levels to cover freight and compliance with import biosecurity measures,” she said.
“However, the import of food-grade grains for milling, malting or other processing will be more likely.”
East/west divide and price
The Rabobank report says grain ‘balance sheet’ tightening will be particu- larly focused on Austral- ia’s eastern states “where supply growth will be low- est and demand growth highest”.
“The highest forecast growth in cereal supply will be in Western Aus- tralia and South Austral- ia,” the report says.
When it comes to de- mand though, growth will continue to be con-
centrated on the east coast of Australia.
“Together, Victoria, NSW and Queensland account for close to 80 percent of Australia’s population and have the highest forecast popula- tion growth over the com- ing decade,” Dr Kalisch Gordon said.
“They also have more than 90 percent of the country’s feedlot capacity, more than 65 percent of its milling capacity and more than 70 percent of poultry sector capacity.”
This tightening is ex- pected to see the aver- age underlying east coast basis rise by as much as 5 percent per annum, she said.
“For WA and SA, high- er supply growth will put downward pressure on the basis between local grain prices and global prices, though prices are expected to be supported more often by demand for their grain from the eastern states.”
The growing demand for livestock feed will also narrow the premiums for food-grade grain and im- prove the profitability of growing feed grains in Australia, especially in Queensland, NSW and Victoria, the report says.
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Australian Pork Newspaper, November 2019 – Page 7