26 April 2006

An increase in the demand for feed grain is presenting the Australian grain industry with the opportunity to venture into new markets, according to a recently-released industry report by the world's leading agribusiness bank, Rabobank.

Grains specialist with Rabobank's Food and Agribusiness Research (FAR) division, Ingrid Richardson says that exports are still the dominant outlet for Australian wheat despite growing domestic demand, particularly in the east coast of Australia.

"Around 70-90 per cent of wheat, barley and canola is distributed to overseas markets," Ms Richardson says. "This export focus sets up tension between Australian wheat marketers and feed grain end-users, particularly apparent in times of drought when grain supplies are short," she adds.

The tension between export and domestic markets has increased in recent years as the number of animals on feed has grown. Feed grain demand growth is particularly apparent in the cattle feedlot, dairy, pork and, to a lesser extent, poultry industries.

Global animal protein production is also forecast to increase and in turn, the production of feed grains and compound feed must follow suit as much of this animal protein will be fed on grain rather than grass, Ms Richardson says. "From both a global and a local perspective, the growth in demand for animal protein is going to be significant over the coming decade. All the evidence leads to the simple conclusion that feed grain demand is going to grow substantially," Ms Richardson says.

Keeping pace with this demand presents a challenge for the Australian grain sector because despite a decade of sizeable growth in grain production, several studies by ABARE suggest that there is a regularly occurring deficit of grain for feed on the eastern sea board of Australia. Ms Richardson says that Australian grain production is restrained by water availability and frequent droughts that make production highly volatile.

"It is a given that the volatility of Australia's weather is not going to decrease in the future, but it is possible to work to increase the reliability of feed grain production, through research and development into improved varieties."

Any future increases in area devoted to feed grains will depend upon the price signals growers receive: if feed grains perform financially on returns per hectare basis, then they will be planted, at the expense of other crops or livestock.

The price of feed grain will always be the sticking point for both participants in the supply chain - grain growers and end users. Grain growers require a price incentive to devote time, money and area to feed grain crop at the expense of other crops.

In summary, Ms Richardson says that be it domestic or export, the demand for specificity and traceability of grain is only going to increase.

"For the Australian grain sector, there is a unique opportunity to develop a market which has been perceived as a secondary market and largely ignored," she says.

Developing this domestic market has similarities with the development Australia has pursued overseas - it requires cooperation between the grain marketing sector and the customer in order to develop and consistently produce the most appropriate grain.

Rabobank Australia is a part of the international Rabobank Group, the world's leading specialist in food and agribusiness banking. Rabobank has more than 100 years' experience providing customised banking and finance solutions to businesses involved in all aspects of food and agribusiness. Rabobank has a AAA credit rating and, in recent years, has twice been awarded the title of the world's safest bank by Global Finance magazine. Rabobank operates in 38 countries, servicing the needs of more than nine million clients worldwide through a network of more than 1500 offices and branches. Rabobank Australia is one of Australia's leading rural lenders and a significant provider of business and corporate banking and financial services to the Australian food and agribusiness sector. The bank has 46 branches throughout Australia.

Contact

For further information please contact Denise Shaw, Public Relations Manager (Tel: +61 2 8233 8744) or email on sydney.mediarelations@rabobank.com.