February 22, 2007

 

Australia's GrainCorp sees bullish outlook for grains industry

 

 

The potential for grain plantings in Australia has rarely been so bullish, if normal season conditions resume, underpinned by increased demand and liberalised markets, GrainCorp Ltd Chairman Don Taylor said Thursday (Feb 22).

 

In view of reduced livestock numbers, farmers will be looking to grain production to turn around their financial position, he said in a speech to be delivered to the company's annual shareholder meeting.

 

Coupled with this, world grain prices are strong and underpinned by international biofuel growth, he said.

 

"As a result, Australian growers will be encouraged to plant a winter crop in 2007 with a great deal of confidence, provided there is a decent seasonal break," after a severe drought in 2006 cut winter grains production by more than 60 percent, he said.

 

Australia is normally a major supplier of wheat and barley and some other winter grains.

 

On Wednesday, the Australian government's Bureau of Meteorology said an El Nino climate event in the Pacific has ended and a 20 percent chance exists of its opposite, La Nina, developing, which generally means wetter-than-normal conditions across eastern Australia from autumn.

 

Taylor said that in North America the mandating of ethanol usage in many states has seen demand boom for corn as the base feedstock with consequent price increases and flow-through to wheat, while European demand for biodiesel is fuelling demand for canola, he said.

 

As US, European and Canadian grain is diverted into biofuel production, "exciting opportunities emerge in human consumption markets for Australian grain producers to become the principal suppliers to Asia," he said.

 

Taylor also said that in Japan, monopoly purchases of grain through a single government department are being dismantled while international customers clearly indicate they aren't prepared any longer to purchase all their needs from a single supplier.

 

GrainCorp supports a move to open and contestable markets and is well placed to undertake bulk wheat exports from Australia if a current government review decides to liberalise export wheat marketing arrangements, he said.