The ongoing trade tension between China and the US has strengthened the need for China to diversify its grain and oilseed suppliers, potentially reducing its reliance on America.
While Brazil is likely to be the major beneficiary of increased oilseed demand, Australian oilseeds and grains are likely to see increased attention from Chinese buyers.
One factor which may temper this is the impact of the African Swine Fever outbreak in China on grain supply chains.
With some forecasters predicting between 30 and 70 percent of China’s pigs may need to be slaughtered, the impact on feed demand may take some time to play out. That said, a resultant increased demand for red meat imports from Australia could boost domestic feed demand even further.
While every year the Australian grains and oilseeds sector takes stock of the challenges and opportunities which it faces, the current period, on the precipice of the 2020s, brings some unique ones.
In particular the current tension over a number of major global trade relationships, most notably the US and China, may well impact trade flows of major of major agricultural commodities, particularly grains. The flow-on effect could touch on many issues including pricing, demand specifications, and investment flows.
Domestically, overall acreage and production levels continue to be volatile, in the wake of the past few years’ record high production, followed by drought decimated crops. The impact of this volatility on the national sector goes well beyond individual farmgate production levels.
For international markets, the need to ensure continuity of supply means trade relationships with other partners are increasingly likely, particularly from South America and the Black Sea region. These producers may take a greater share of Australia’s traditional markets in the longer term.
Over the past sixty years, Australia’s share of global wheat production has remained relatively consistent, despite the strong growth in production. In volume terms, Australian wheat production since 1960 has almost tripled, growing 180 percent from around seven million tonnes to 21 million, according to the USDA. Global growth has been slightly stronger, rising from 233 million tonnes to 772 million tonnes over the same period, a rise of 230 per cent.
In terms of exports, the change in Australia’s share of world trade is more noticeable. For much of the past 60 years, Australia has continued to occupy a position as one of the world’s major wheat exporters. While there has been reasonable volatility, Australia’s share of global exports has traditionally sat between ten and fifteen percent.
Since 2000, this share has trended down noticeably. This has been driven by a number of factors, both global and domestic. Globally, the growth of new competitors, particularly Russia and the Ukraine, has undoubtedly eaten into Australia’s market share.