Saturday 29th Feb, 2020

Domestic grain demand to overtake supply

Cheryl Kalisch Gordon. Photo: Rabobank

Demand has outstripped supply for Australian grain to feed livestock, along with growing human consumption, according to a new industry report.

Agribusiness banking specialist Rabobank found in its Australian Feed Grain Squeeze report that the proportion of Australia’s grain harvest exported annually will decline from the current 60 per cent to 53 per cent by 2030, and may also increase the likelihood of further grain imports into the country.

It also reports that the domestic market for cereal grains, such as wheat, barley, oats and sorghum will soak up an additional six per cent of the country’s annual production, leaving available supply for exports down by two million tonnes (ten per cent under the current five-year average).

Livestock feed will take an increasing proportion of Australia’s domestic grain supply, driven by a rise in the number of stock being fed grain to satisfy demand for animal protein, according to the report.

The author of the report, Cheryl Kalisch Gordon, said increasing human consumption of food products containing grain will also fuel part of the rising demand.

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“Despite changing diets, which have seen people’s consumption of wheat and other coarse grains fall on a per capital basis, Australians will still consume more grain due to population growth,” Kalisch Gordon said.

“Overall, this will see an increase in demand for cereal grains in Australia, due to both direct consumption of grain in products – such as breakfast cereals, bread, cake, biscuits, pasta and beer – and also derived demand for grains to feed livestock that supply animal protein products, including beef, lamb, chicken, pork, eggs, milk and fish.”

Kalisch Gordon said the domestic appetite will also be augmented by strongly-growing demand for Australian beef and lamb for at least the next five years as the global protein market resets as a consequence of the African swine fever epidemic in China.

She adds a higher level of growth in feed-grain demand, compared with human consumption, forecast over the next decade meant the share of cereal grains going to feed in Australia would approach 70 per cent by 2029/30, up from 64 per cent (the five-year average to 2018/19).

“As such, we will not only see increased demand for grains in Australia, but an increase in the relative importance of feed grain as an end use compared with milling, malting and processing for human consumption,” she said.

The report also found that production growth will not be able to keep up with the forecast increase in demand over the coming decade.

“In the absence of any new technologies that offer step change improvements in yield growth – and in the face of a drying climate and challenges to crop management, such as herbicide resistance and potential limits on the use of glyphosate – we do not expect future yield growth to exceed historical growth trends,” Kalisch Gordon said.

Kalisch Gordon said with a southerly contraction occurring across Australia’s cropping belt due to climate challenges, as well as relative commodity pricing, the bank was not expecting cropping area growth in the forecast period.

“And while genetic modification and new plant-breeding techniques offer the potential for step change increases in yield that would offset the feed grain squeeze, we consider the likelihood of development, adoption and end-market acceptance low within the coming decade,” she said.

The report expects average Australian cereal grain production to be at around 37.5 million tonnes by 2030, up from the current five-year average of 35.8 million tonnes.

“However, Australian production will continue to be prone, and possibly more vulnerable, to year-to-year variation, so a range of 20 million to 52 million tonnes must be considered part of the outlook,” Kalisch Gordon said.