Grain sector forecast to ride Asian growth wave

Australian grain and oilseed exporters are in a prime position to take advantage of a ‘shift’ in diet that is driving increasing food consumption in Asia.

Wheat harvesting in action. Picture: Zoe Phillips

Australian grain and oilseed exporters were in a prime position to take advantage of a “shift” in diet within growing Asian populations which is driving increasing food consumption, according to new research.

The report by agribusiness specialist Rabobank said given the slowdown in Chinese grain and oilseed imports and a surge of new geopolitical frictions, increasingly wealthier south and southeast Asian nations may become key markets for Australia’s growing grain and oilseed production.

“A shift towards western diets in many south and southeast Asian nations – which includes more meat, dairy, eggs and processed food – is driving demand,” the report said. “And this demand will be met partly by boosting local animal protein production and partly through imports, providing an opportunity for increased Australian feed grain exports to the region.”

RaboResearch analyst Vitor Pistoia said Australia’s location gave it a competitive advantage over other global grains and oilseeds exporters.

He said wheat and feed grain imports were expected to grow steadily in the region as populations and gross domestic product expanded.

“While malt barley exports to south and southeast Asian nations will continue to face fierce competition – due to a favourable global supply – pulses have strong growth potential, albeit having to factor in the uncertainties of India’s harvests and import duties, which are often influenced by seasonality, as has been seen in recent years,” Mr Pistoia said in the report, adding that the region’s GDP per capita growth – in a world reshaped by US trade behaviour – will impact trade dynamics.

“South and southeast Asian countries generally have positive trade balances with the US and many western countries, but negative balances with China and Australia,” he said. “Any trade wars could reduce buying power in countries in south and southeast Asia, indirectly affecting Australian farm-gate prices, as there is the possibility consumption growth there might slow”

Mr Pistoia said there were contrasting drivers for wheat consumption across the region, with buying power, self-sufficiency levels and import regulations influencing demand.

“The region’s wheat consumption dynamics can be divided into two groups: those nations nearing self-sufficiency and those reliant on imports,” he said.

“The first group – the self-sufficient nations – includes India, Nepal and Pakistan. If India enters the international wheat market as an importer, it can create major opportunities for Australian exporters due to its enormous demand.

“In times of shortage and high local prices, India may remove import duties, as seen in 2016, potentially lifting global wheat prices.”

Mr Pistoia said of the second group of nations – the importers – only Bangladesh had significant wheat production, although it meets only 20 per cent of its own needs.

“In this set of wheat-importing nations – apart from in Sri Lanka, Malaysia and Singapore – wheat consumption positively correlates with per capita GDP growth, that is economic growth equates to growing demand for wheat,” he said.

Originally published as Grain sector forecast to ride Asian growth wave