Ground Cover North : Ground Cover 072 January-February 2008 - North
INDUSTRIES MEET TO FIND FEEDGRAINS PRESCRIPTION The GRDC is working with the feedgrains sector to find ways to ensure a reliable supply of suitable grain and lessen its need for overseas suppliers BY KELLIE PENFOLD n In a market structure geared to supplying grain for export, the issue of how to supply enough grain to a growing livestock feed sector, and potentially ethanol and biofuels, has only been made more complex by two years of drought. Two meetings were held in late October to look at ways of improving the flow of grain to livestock producers. The meetings comprised a drought summit and a gathering of the Feedgrains Partnership, a new alliance between the GRDC and the feedgrains industry representing beef and lamb feedlots, pork producers and the dairy and poultry sectors. GRDC manager of new grain products Dr John de Majnik says the theme of both meetings was sustainable production. “Two successive droughts have had a major impact on prices and grain volumes,” he says. “The irony of drought is that prices are at all-time highs – but most growers have no grain. The following year is usually a good year: there is plenty of grain, but the price is low, and also there are often fewer buyers because some have left the market owing to the previous year’s tight conditions.” In October 2006, there were 10 million tonnes of wheat in storage in Australia. Heading into the 2007 winter crop harvest, there was less than three million tonnes. The second half of 2008 is expected to be particularly tight for the domestic wheat market on Australia’s east coast. The Australian Lot Feeders’ Association (ALFA) and Meat and Livestock Australia (MLA) reported in their September quarterly survey of feedlot cattle a dramatic fall in numbers: down 22 per cent on the June quarter, which was 870,025 head. ALFA vice-president Jim Cudmore says the industry is facing the most difficult trading conditions ever, with local and export customers reluctant to raise prices and feeder cattle prices still not low enough to restore a margin, leaving feedlots unable to offset the escalation in feed costs. “There are few choices other than cutting back the numbers of cattle on feed,” he says. Australian Pork Limited (APL) declares that the combination of record levels of pig meat imports, the strong Australian dollar and the drought have brought the industry to its knees. APL CEO Andrew Spencer says the industry is losing between $3 million and $4 million a week, with individual producers losing more than $50 per pig sold. Chairman of the Feedgrains Partnership and APL general manager for policy Kathleen Plowman says that although EASTERN HARVEST FEEDGRAIN BY DEFAULT SAYS REPORT BY KELLIE PENFOLD n Research for a GRDC-commissioned report on the domestic feedgrain supply chain indicates grain producers in eastern Australia may have a false impression of how much of their cereals harvest is used for flour and malt production; not realising that much of it finishes as feedgrain. Report author John Spragg, a livestock feed industry consultant, says this illustrates the point brought out in surveys that there is poor understanding and communication between the grains and livestock industries, and that this is a cause of ongoing supply issues for feedgrains users. Due to be finished mid-year, the report brings together data on grain supply and demand across different growing regions. The data will provide the GRDC with additional information on the feedgrain market and this will help determine future research directions and activities, such as the work being done by the Feedgrains Partnership. “Feedgrain is the largest domestic market for graingrowers, and the grains industry needs to be able to meet domestic demand every year, not just in a normal- season year,” Mr Spragg says. Although it is hard to establish a normal- production year, given that four of the past 13 years have seen winter crop harvests of less than 20 million tonnes, the grains industry nonetheless works on the basis of an average year producing 32 million tonnes. Of that, 850,000t are retained for seed, 2.6 million tonnes go to flour production, 820,000t for malting and 8.9 million tonnes for animal feed. The frequency of poor cropping years has increased, reducing grain supply for the major feedgrain markets in Queensland, NSW and Victoria. Moving grain from WA and SA to the eastern states is not easy and adds to the cost. Put simply, the feedgrain supply issue in 2007 was the result of two consecutive low- harvest years, further affected by declining world stocks from higher conversion of corn to ethanol and growing world demand for livestock feed. This also made imported feedgrains more expensive. Mr Spragg says shipping costs to move grain in bulk ex-US are quoted at more than US$120 (A$138) a tonne before adding the expense of local handling, quarantine and transport. There are also quarantine restrictions limiting whole-grain processing to metropolitan-based feed mills. “Importing grain is not a long-term answer for Australia,” he says. “Both the grains and livestock industries are better-suited to producing more grain in a consistent year-on-year basis so we do not have to look at importing.” As to affordable grain for livestock, Mr Spragg suggests feedgrain buyers have to be prepared to pay enough to stop grain going into export pools; and should understand that in bumper years prices are closer to export parity, while during poor years they will be closer to import parity. “The grower should never get less than the price governed by the international market,” he says. GRDC Research Code JCS00002 the feedgrain sector did not advocate regular grain imports for stockfeed, in 2007 it was necessary for survival. “All eyes are now on summer crop production in Australia and hopefully that will meet some of the demand, but we cannot continually price ourselves out of production,” she says. “Imported grain will be necessary to meet that (supply) shortfall.” As for the long-term view, Ms Plowman says the Feedgrains Partnership is a way of creating a constructive dialogue between levy payers and end-users. She says the answer to situations like the current supply crisis is an integrated approach to research and development: “This will open communication between feedgrain users and graingrowers, and come up with production that meets the nutritional requirements of users while providing value for growers.” As for the prices, Ms Plowman says feedgrain users have to understand that a new benchmark may have been set and they will need to determine how their industries deal with this. Dr de Majnik suggests that for some intensive livestock industries, such as pork, even if a normal grain production occurred in 2008, the grain shortages and loss of domestic markets, and international markets, to imported pork would make it hard to return to viability. Dr de Majnik suggests a multi- targeted approach is needed: n the prediction of weather patterns and climate variability needs to be improved to allow industries to better plan for supply shortages; n a supply chain is needed that makes feedgrain users a high-priority market, not a secondary market for grain that fails to meet milling standards; and n a market-feedback mechanism is needed to direct crop-breeding programs on new varieties for feedgrain markets. “Feedgrain users, through the Feedgrain Partnership Program, are engaging with the grains industry to determine what prescription needs to be written for the perfect grain for their use,” Dr de Majnik says. He suggests one approach would be to develop varieties that meet both milling and feedgrains criteria, so the harvested grain has the potential to secure attractive prices in either market. Dr de Majnik says meetings to date have also discussed extending the growing zones for grains already known for good feed qualities, such as triticale and some pulses. More information: John de Majnik, GRDC, 02 6166 4500 Feedgrains GROUND COVER JANUARY -- FEBRUARY 2008 22 Research is needed to improve the flow of grain to livestock producers. PHOTO: BRAD COLLIS John Spragg: preparing a report on feedgrain demand issues for the GRDC.
Ground Cover 071 November-December 2007 - North
Ground Cover 073 March-April 2008 - North