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‘Return to ordinary times’: US grains expert

GrainAustralian grain growers should brace for a “return to ordinary times” for the foreseeable future, says expert.

As competition from the Black Sea region and Europe intensifies and the market remains heavily oversupplied, the market needs to adjust to a new reality, according to Stephen Nicholson, VP of Rabobank’s Food & Agribusiness Research and Advisory division.

Nicholson, a leading commentator on the US grains and oilseeds industry, 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 the market is 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.”

Stephen NicholsonIn 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 Southeast Asian market is also offering many opportunities, he said.

With global wheat stocks currently at record highs, 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.

“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.

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

“Not only is demand from both Southeast 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.”

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 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.

 

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