Grain Imports on the cards as Drought Drives Up Prices and Crop Forecasts Slashed

Author: Kath Sullivan, ABC Rural 

Date: 1st November, 2018


Australia could be set to import whole grain for the first time in more than a decade as drought drives up prices.

It comes as the latest crop projections forecast Western Australia will produce more than half the national crop for the first time in 20 years.

Farmers are calling for increased returns for their produce to meet the cost of production.

In a statement, the Department of Agriculture confirmed it had received, and was assessing, five applications to import bulk whole grain from the USA and Canada.

The applications were for wheat, canola, corn, and peas through various Australian ports.

It is not clear for what quantity or purpose the applications have been made.

"It is not appropriate for the Department to provide details of individual exporters that have submitted applications," the statement said.

Crop production forecasts down

Drought has driven the demand for grain and prices have doubled in the past year.

Agri-lender Rabobank said they expected this year's harvest would "go down as one of the worst in eastern Australia's history".

They forecast the national winter crop would produce less than 30 million tonnes of grain — 23 per cent less than last year's crop, with exports expected to have halved, year on year.

Government forecaster ABARES also reduced its expectations.

"We expect 2018-19 winter crop production to be around 15 per cent lower than our September forecast of 33.2 million tonnes," spokesman Steve Hatfield-Dodds said.

Dr Hatfield-Dodds recognised poor rainfall, frosts, and a "higher than planned area cut for hay" as reasons for the reduced outlook.

Hope that WA will meet national demand

In Queensland and NSW the bulk handler GrainCorp has closed most of its silos because those farmers able to harvest a crop are — in the majority — expected to keep grain on-farm.

In its first harvest update of the season, released this week, the bulk handler had received 1,000 tonnes of grain in NSW.

A year ago it was 200,000 tonnes, and in 2016 it was 330,000 tonnes.

However Western Australia, which typically exports most of its crop, is on track to produce 15 million tonnes of grain.

Grain growers hope WA's harvest will meet national demand and prevent any need to import foreign-grown grain.

Despite having imported grain in previous droughts, most recently 2006-07, and strict import protocols, grain growers say the risk to biosecurity is too great.

NSW Farmers said grain imports from international markets should not be allowed without a "demonstrated shortage of grain stocks in Australia".

"We can't afford to take a 'she'll be right' approach to the import of grain," NSW Farmers grains spokesman Matthew Madden said.

Biosecurity concerns

One of the grains industry's greatest biosecurity concerns is the plant disease karnal bunt.

Plant Health Australia estimates if it was established in Australia, karnal bunt would restrict access to more than 45 international markets and the grain price would fall significantly.

"Our concerns are really around the potential for weed seeds and fungal disease to be brought in on the grain, that's our clear outlier that we're concerned about," Grain Producers Australia chairman Andrew Weidmann said.

Mr Weidemann has been calling for transparent stocks reporting, arguing that the industry will have a clearer understanding of what grain is available in Australia.

"There's grain available out there," he said of the current drought.

"We know there's grain on farms and we know there's grain in the system in some respects, but we don't know the total amount of grain and that's the value of having a more transparent grains system."

The current drought is widely understood to be the largest since the grain industry was deregulated.

Imports a 'band-aid'

Already the market has seen export prices reach parity with the domestic market.

"At least six months ago the domestic prices reached import parity on the east coast," grains industry consultant Chris Heinjus said.

"The market has priced itself such that WA grain is better going east, than west [into Asia]".

Mr Heinjus said imports were a "short term band-aid that could have a long-time application" .

He said a decision about importing grain into Australia should not be made before the current winter harvest is completed early next year.

"Based on advice from ABARES, the Department of Agriculture is confident there is enough grain for export as well as the domestic market," a spokesman for Agriculture Minister David Littleproud said .

"Biosecurity risks involved in each import application are assessed individually [so] if risks can't be managed, the imports are not allowed.

"Increased input costs put pressure on every farmer."

Egg and dairy producers feel pinch too

Meanwhile, the Commercial Egg Producers Association of WA has hit out at supermarkets and called for an adjustment in egg prices so that farmers can afford grain to feed their livestock.

"The reluctance of the major retailers to acknowledge the economic impact of increased feed costs to egg farmers is unrealistic," president Ian Wilson said.

"This attitude is placing strain on WA egg farmers who need an increase to be sustainable. There needs to be an adjustment in egg prices to offset the extra costs of grain."

South Australian Dairy Association president John Hunt wants processors to help farmers absorb the grain price hike.

"The farmer can't keep on sucking up these reduced margins," Mr Hunt said.

"The cost of production, as soon as it goes up, we should be able to pass it on, especially for those selling milk to the domestic market".

Mr Hunt said other commodities, such as beer, were able to pass the increased cost of production on, but dairy was overlooked as a perishable product.

"I don't blame the retailers as much; they get made out to be the bad guy but the processors have got all of the mechanisms in there, in their contracts, that they can pass the costs on [to the retailer]," he said.

He said the cost of production for dairy farmers had increased 25 per cent over the past four years, largely due to increased power and grain prices and many dairy farmers are struggling to break even.

"If [processors] don't pass it on, we're going to end up an importing country for dairy products and nobody wants that," he said.

Featured products

Save $10 + GST

Product's name

$77 + GST $87 + GST
Save $10 + GST

Product's name

$77 + GST $87 + GST