A REPUTABLE Australian grain analyst and broker, IKON Commodities, posted last week that Australian grain and oilseed export capabilities are estimated to be more than 50 million tonnes in season 22/23.
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That's grown nearly 10 million tonnes in just two years.
Let's take a moment to reflect on this.
According to the Australian Bureau of Agricultural and Resource Economics' March 2023 Crop Report, production of all winter crops in Australia in the past three seasons have totalled 57.075 million tonnes in 20/21, 63.222mt in 21/22, and 67.259mt in 22/23.
Before this, the highest Australian winter crop production was 56.675mt in 16/17, and that was surrounded by years of production between 30 and 40mt.
Carry-over stocks of grain in Australia from consecutive years of record production, and an insatiable appetite by the world for Australian grain have encouraged significant investment in Australia's grain supply chains and export capabilities.
The increase in export capacity is a testament to the entire Australian grain industry, particularly given it has been achieved during the challenges incurred by the COVID pandemic.
Growers have grown massive crops, and the supply chain has responded by trying to move as much as possible including investing in new infrastructure.
These investments carry considerable risk.
Australia's exportable surplus of grain above domestic consumption can vary considerably year to year which can leave export assets idle and unused.
Now let's switch focus to price.
There has been plenty of commentary on the discrepancy between prices trading in international markets versus prices trading within Australia.
In terms of explaining the discrepancy, there has been a lot of attention put on the fact that Australia has been producing more than we can export or consume domestically.
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In my humble view, the single largest determining factor of Australian prices trading below export parity is likely the fact growers have been selling their grain at those prices.
There is room for growers to ask more for their grain and not just rely on a buyers bid as price discovery.
Any market has a bid and offer, and growers can get better at showing their offer prices.
The Australian grain industry has undergone a considerable structural shift in the past three years, with new production records met with new export capacity.
The market signals have been strong enough to see more investment in Australian export capacity.
They should also be strong enough to see a significant improvement in market information and education of growers to determine what their grain is worth.
For more information or to see what values are trading contact Clear Grain Exchange on 1800 000 410 or support@cgx.com.au
