Ground Cover North : Ground Cover 055 April-May 2005 - North
7 Taking to the hustings: market specialists Lisa Wilson and Tremayne Watts emphasise the need for more tailored wheat products to meet speciﬁc and diverse buyer requirements. News APRIL/MAY 2005 GROUND COVER n Ask Lisa Wilson what Australia’s export wheat crop will look like in five years time and the answer is straight to the point: “Our hard wheat will be harder and our soft wheat will be softer,” and, by implication, don’t even consider anything in between. The marketing and compliance manager for the national pool, Ms Wilson has the job of convincing Australian growers to change and to change quickly. She cites pressure at the top and bottom ends of the market – increasing white wheat production by traditional competitors and a worrying decline in the quality of the jewel in our crown, Australian Prime Hard – as the drivers for the change. AWB’s grain development analyst, Tremayne Watts, weighs in with the facts and figures: North American production of hard white wheat, once the preserve of Australia, has reached two million tonnes a year and is expected to reach seven million tonnes within three years. He says the Canadians already have excellent baking qualities in their hard wheat and white wheat varieties suitable for yellow alkaline noodle. Sponge and dough baking varieties are next on the list. Mr Watts says that while North American growers do not like white wheat (they are learning about its sprouting problem) their production increase is driven by premiums, and in the case of the US, by increased subsidies. He also points out that while life at the top end of the market is getting tougher, it is no better in the bulk wheat market. There has been a seven percent annual increase in production from the former Soviet republics and a 20 percent increase in the area under broadacre crops. Poor production during the Soviet period has tended to cloud the fact that this region was one of the world’s traditional “bread baskets” and part of the territory Germany hoped to take from Russia in World War II. Today, as well as significant production capacity, the regions adjacent to Black Sea ports also offer considerable freight advantages for some of Australia’s principal markets in the Middle East. “And the big four international grain traders now control 73 percent of the market,” adds Ms Wilson, “We are seeing the concentration of the market in fewer hands.” With 60 percent of Australia’s crop now graded as ASW or APW, market specialists such as Ms Wilson and Mr Watts have taken to the hustings to emphasise the need for more tailored wheat products to meet specific and diverse buyer requirements. “The aim is to have 65 percent of the crop marketed to Asian customers within four years,” says Mr Watts. “They are the markets offering the greatest growth potential. Wheat consumption in our traditional Middle East markets is between 160 and 240 kilograms per head per annum. In Indonesia it stands at 16kg, and Asian markets offer the potential for increased demand based on population growth and per capita consumption growth as living standards rise. “But if we’re going to capture that market we must supply the type of wheat the market wants.” At the top of the list has always stood Australian Prime Hard, so it is a shock to hear Mr Watts describe a slow deterioration in quality over the past 10 years. “Its milling qualities are OK but its dough strength needs improving, and its ability to make yellow alkaline noodles needs a dramatic overhaul. Our customers aren’t making noises yet, but they have drawn our attention to it.” Prime Hard sourced from southern NSW also has its share of problems. Quality tends to vary according to the season, and while it mills well, Mr Watts says dough strength and end-product quality need attention. “Our target is to improve the dough strength of our hard wheat nationally, which means enhancing the protein quantity and quality. Hard-grained wheat at less than 10 percent protein is not much use for any particular end-product,” he says. “Also, if you’re producing ASW at 13 to 15 percent protein, you’re wasting your time and creating problems with the millers who are demanding uniformity.” Ms Wilson says AWB’s premium choice varieties program is an attempt to steer growers towards the crop type that will be in demand. The company guarantees a premium of between $5 and $14 a tonne for the varieties it wants. She says the varieties chosen and the level of premium was decided after discussion with customers, growers and agronomists. So, is the premium an indication of the sort of value the market will pay for quality wheat? “Not directly,” she says. “It’s a business decision, our attempt to send a clear market signal to growers. “Growers producing those premium varieties are improving the varietal mix within regions to improve the overall AWB national pool profile, and that’s why we think we can change the shape of the crop. If we can improve the balance between the present dominant varieties and premium varieties, we’re on the way to a better shaped crop.” Mr Watts says that there is breeding material in the pipeline that’s “cracking good” and while he does not signal new segregations, he will not rule out the possibility. The first move is already under way in WA with a special soft wheat segregation. A 500,000-tonne trial is planned with protein set below 10 percent and a potential market of two million tonnes. “The Pacific North-West is the competitor and China and South-East Asia are the potential markets,” he says. Ms Wilson says AWB has had a long hard look at the market and believes the most profitable path for growers is a differentiated business model, through which the industry strives to be different and superior to competitors. “We looked at the alternative – reducing segregations, getting our supply costs down and having growers concentrate on yield – but that’s the path to competition with the Black Sea suppliers on price, and we think a lot of value can be destroyed that way. “In the meantime the Canadian Wheat Board is altering its quality system to mirror ours and in the UK a similar system based on quality is in place. Canada is the big threat.” Mr Watts says the Canadian durum is top-notch, the breadmaking qualities of their wheat are excellent, and their growers are being offered incentives to go white. “The bottom line is we can’t stand still. We have to lift the bar.” ∆For more information: Tremayne Watts, 03 9209 2821, email@example.com; Lisa Wilson, 03 9209 2000, firstname.lastname@example.org Exporter ups the ante for crop change AWB Ltd used the recent round of crop research updates to deliver a blunt message – the wheat crop profile must change if Australian growers are to have a saleable product in the future, Alec Nicol reports KEY POINTS n North America moving into hard white wheat n Asia growth potential n Worrying APH quality decline Golden Rewards – Premium Choice Varieties for harvest 2005-06 & 2006-07 VARIETY PAY GRADE PREMIUM WESTERN AUSTRALIA EGA Castle RockA AH+ $5 EGA Bonnie RockA AH+ $5 Arrino APN $14 Cadoux APN $14 SOUTH AUSTRALIA YitpiA AH+ $5 VICTORIA YitpiA AH+ $5 NEW SOUTH WALES Southern/SunvaleA APH+ $5 Central/SunvaleA APH+ $5 Central/Sunco APH+ $5 Central/LangA APH+ $5 Northern/Sunco APH+ $5 Northern/LangA APH+ $5 QUEENSLAND EGA HumeA APH+ $5 Sunco APH+ $5 LangA APH+ $5 Premium Choice Varieties and the level of premium will be announced in August each year and apply for the harvest in the following year. The first time a variety premium is announced, the premium will be guaranteed for two harvests. Premiums listed above (announced in October 2004) are set for the 2005-06 and 2006-07 harvests. After the 2006-07 harvest, premiums for varieties will be subject to change. Premiums are quoted on a per tonne FOB, GST exclusive basis. This is a summary of the program only. For specific details about the entire Golden Rewards program, including Premium Choice Varieties and business rules, contact your AWB Grain Marketer or the AWB Grower Service Centre.
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