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“Return to ordinary times” warns US grains expert



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, according to a leading commentator on the US grains and oilseeds industry. 

Hailing from St. Louis in the US 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.  

Mr Nicholson said while his message was “not what farmers wanted to hear”, it highlighted the “adjustment to a new reality”, 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.”

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 US, but also broadly speaking in other parts of the world, increasingly focus on “understanding their costs of production”, he said, with technological advances also key to optimising yields in a lower-profit environment.

Mr 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 US, 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.”

In light of this, Mr Nicholson said, Australia’s increased focus as a supplier of grain into South-East Asia offered many opportunities.

“Not only is demand from both South-East Asia’s food and feed sectors continuing to increase, but Australia is geographically well positioned to supply the market, whereas the US and Canada have a larger distance to travel across the Pacific,” he said.

“Australia, as well as the US and Canada, also have the advantage of being renowned as dependable suppliers into the Asian market, with their trade not disrupted by significant currency volatility, like we have seen in Europe, or trade barriers, such as embargoes out of Russia.”

Mr Nicholson said Asia’s rising incomes and westernisation of diets would particularly bode well for Australia’s canola industry, as consumers increasingly prefer canola oil (over palm oil) due to its lower saturated fat content when cooking chicken and pork dishes. 

During Mr Nicholson’s two-week visit to Australia, he has seen first-hand the potential of this season’s bumper crop. He said the US and Black Sea region were also on the cusp of a big wheat harvest this year.

“The only major grain-producing region facing a production setback at this point is western Europe, with heavy rains inflicting considerable damage to the French crop. However, with the market so oversupplied, this supply shock is not enough to drive a considerable shift in market fundamentals,” he said.  

While it hasn’t been factored into the market yet, Mr Nicholson said the rain damage had impacted France’s protein levels, which could leave a shortage in the market for high-quality wheat.

“This suggests Australian wheat with good milling and protein qualities could attract some premiums this season,” he said.

Mr Nicholson, who holds a Master of Science in Agricultural Economics from Iowa State University, has more than 30 years’ experience in cash grain markets, hedging, commodity/ingredient procurement, commodity risk management and commodity analysis. 


Rabobank Australia & New Zealand Group is a part of the international Rabobank Group, the world’s leading specialist in food and agribusiness banking. Rabobank has more than 115 years’ experience providing customised banking and finance solutions to businesses involved in all aspects of food and agribusiness. Rabobank is structured as a cooperative and operates in 40 countries, servicing the needs of approximately 8.6 million clients worldwide through a network of more than 1000 offices and branches. Rabobank Australia & New Zealand Group is one of Australasia’s leading rural lenders and a significant provider of business and corporate banking and financial services to the region’s food and agribusiness sector. The bank has 94 branches throughout Australia and New Zealand.

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Denise Shaw
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Rabobank Australia & New Zealand 
Phone: 02 8115 2744 or 0439 603 525 
Email: denise.shaw@rabobank.com  


Skye Ward
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Rabobank Australia & New Zealand
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Email: skye.ward@rabobank.com