by Professor Ross Kingwell – AEGIC Chief Economist.
Key message: Australia continues to increase its production and export of wheat; Australia’s principal grain. However, growth rates in the global export of other grains outstrip that of wheat. This is causing the pie of international traded grains to grow, with Australian wheat’s share of that pie gradually shrinking; even though wheat production in Australia remains profitable.
In a world affected by COVID, most people learn quickly that disease growth rates matter. If small outbreaks are not contained then COVID can spread rapidly; and so governments and communities must work together to lessen the strain on their health systems and prevent serious economic damage.
Obviously grain markets grow differently to a contagious disease. Grain markets grow far more slowly and are affected by often slowly changing factors like population increase, per capita income increase, and dietary and lifestyle change. Yet over a few decades different rates of growth in various grain markets can profoundly affect crop production and export opportunities.
A bird’s eye historical view of the global grain trade reveals the growth rates of the world’s main grains (see Table 1). It’s worth remembering that Australia’s main export grain by far is wheat; yet as shown in Table 1, among the listed grains, wheat has one of the smallest annual rates of growth in global trade. The largest growth rates in trade volumes are in the oilseeds, vegetable oils and coarse grains (mostly corn). Australian farmers have participated in the high growth of trade demand for oilseeds and coarse grains through their increased production of canola and barley.
What these different growth rates reveal is how the world’s appetite for different grains has changed. Human consumption grains like wheat and rice have experienced positive but comparatively small growth rates. By contrast the demand for feed and energy grains (principally corn and soybeans) has grown strongly. Global trade in oilseeds now almost equates to that of wheat and the volume of coarse grain trade over much of the last decade outstripped that of wheat. Although wheat remains a vital grain in the international trade of grains and oilseeds, its relative importance is declining.
Similarly for Australia, although wheat production in Australia continues to increase (see Chart 1), nonetheless the share of Australian wheat in the international trade of grains and oilseeds continues to shrink (see Chart 1) as more grains are traded for feed and energy.
Chart 1: Australian wheat exports as a share of all global grains and oilseeds exported; and Australian wheat production since 1998/99.
As shown in Table 1 the fastest growing grain export market has been for oilseeds, supported by a surge in demand for renewable fuels. However, the very interesting and fast-looming strategic question for grain industries in many countries is: Will this energy demand for crops quickly dissipate? If electric vehicles increasingly become the preferred means of transport over the next two decades, then the demand for energy crops could rapidly weaken.
Conversely, as people become more numerous and richer and increase their consumption of foods underpinned by feed grains, then feed grains will become increasingly demanded. How the interplay of these future trends regarding feed and energy play out in grain markets and in farmers’ fields is important. AEGIC will be doing its part to help examine and forecast opportunities for Australian growers that might arise from these changes. Providing foresight to crop breeders helps them undertake strategic decisions from which Australian grain growers will benefit. Ultimately, Australian grain farmers, crop breeders and other support services will make the necessary strategic shifts about crop portfolios to maintain business profitability. Australian grain farmers are noted for their adaptability and resilience.
Photo: A world record attempt for biggest pie in Okmulgee, Oklahoma, USA, 1989. Source: Guinness World Records
HORIZONS: the AEGIC Economics and Market Insights blog
Expert grains industry analysis and commentary from AEGIC’s Economics and Market Insight Team on a range of big-picture topics that affect Australia’s export grains sector.