Visibility n seeded as ‘mixed’ sentiment hits east-coast Australian grains
The first wheat imports to Australia in years raise concerns about the sector – but there is still interest in cropping properties.
Australia is getting its first female agriculture minister when Bridget McKenzie is sworn in with the rest of prime minister Scott Morrison’s cabinet this week.
With previous incumbent David Littleproud promoted to become minister for water and the drought taskforce, McKenzie said this week: “I believe in getting practical responses on the ground to those farmers doing it tough at the moment.”
One company that has taken its own practical step is Manildra Group, which secured a permit from the Australian government to import high-protein wheat from Canada’s west coast. It was the first time in the company’s 67-year history that it had to so and follows a shortfall in the wheat it needs to produce value-add export products, such as gluten and starch, at its plant in Nowra, New South Wales.
Manildra Group declined to comment on the imports beyond an open letter from managing director John Honan published last week and said that it “has sourced as much high-protein wheat on the Australian market and continues to do so.”
One market source described Manildra Group as a “great Australian company” that was very conscious of its social responsibility to its employees, suggesting the move to import wheat might have been necessary to protect jobs.
There is concern, though, that imports may put a ceiling on grain prices in drought years – lessening the ability for growers to make up revenue lost because of lower production through higher commodity prices, Grain Growers chairman Brett Hosking tells Agri Investor.
“It’s hard to say exactly how prices will be effected, but it’s a supply and demand issue – if there is more grain coming from elsewhere, there will be less demand for Australian grain,” he says.
Part of the problem, he adds, is that there is no clear picture of exactly how much grain is being stored in Australia. Grain Growers has called for the introduction of national grain stocks reporting to help assess whether Australia’s current grain supply is adequate to meet domestic demand requirements, a move that would help grant better visibility for everyone involved in the decision and provide greater transparency around the need for imports.
“I’m sure there is grain within Australia but that doesn’t necessarily equate to finding the amount Manildra needs each week [for its Nowra facility],” says Hosking.
Sentiment in the sector is “mixed,” he adds, with recent rain in some areas brightening moods and ongoing drought darkening others.
Mike Clifton, an agribusiness director for Colliers International based in Sydney, tells Agri Investor that confidence in the sector is still generally high despite the conditions.
“There is still interest in those cropping properties, but it has been impacted by the drought,” he says.
“There’s still plenty of confidence and commodity prices are good, but we’re approaching the end of the window of opportunity for planting – so properties for sale with crops already sown will see significant interest.”
Clifton adds there have not been many pure cereal cropping properties on the market in the east coast recently and describes successful transactions in that space as “well-earned.”
Grain is still in very high demand on the east coast due to the weather and demand from animal feed producers, which is helping to keep prices high, he says.
Another source says that while attention has been focused on high-value irrigated crops in recent years, concerns over water in the Murray-Darling Basin mean there will remain a place for large cropping properties for those looking to spread their risk and create a diversified portfolio, despite the seasonal and regional volatility seen in the last 12 months.
Graincorp’s recent half-year results, showing an underlying net loss after tax of A$48 million ($33 million; €30 million) days after Long-Term Asset Partners withdrew its takeover bid, were another reminder of the challenges and volatility that come with ag investing in general, and ag investing in Australia in particular.
But with the federal election out of the way the sector will hope that more certainty will start to emerge, at least on the regulatory and political front if not the weather.
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