Aussie Grains, Oilseeds Eye South Asia Market Boom
Larger and wealthier populations in South and South-East Asia are driving food consumption growth and opening opportunities for Australian grain and oilseed exports, according to a new report by agribusiness banking specialist Rabobank.
The report, Unlocking Opportunities: Australian Grains and Oilseeds Exports to South and South-East Asia, by the bank’s RaboResearch division, says given the slowdown in Chinese grain and oilseed imports in recent years and a surge of new geopolitical frictions, South and South-East Asian nations may become key markets for Australia’s increasing grain and oilseed production.
“A shift towards western diets in many South and South-East Asian nations – which includes more meat, dairy, eggs and processed food is driving demand. And this demand will be met partly by boosting local animal protein production and partly through imports, providing an opportunity for increased Australian feed grain exports to the region,” the report said.
Report author, RaboResearch grains and oilseeds analyst Vitor Pistoia said Australia’s geographic proximity gives a competitive advantage that other major global grains and oilseeds (G&O) exporters do not have.
Mr Pistoia said wheat and feed grain imports are expected to grow steadily in the region as populations and gross domestic product (GDP) expand.
“While malt barley exports to South and South-East Asian nations will continue to face fierce competition – due to a favourable global supply – pulses have strong growth potential, albeit having to factor in the uncertainties of India’s harvests and import duties, which are often influenced by seasonality, as has been seen in recent years,” he said.
Mr Pistoia said the region’s GDP per capita growth – in a world reshaped by new US trade behaviour – will impact trade dynamics. “South and South-East Asian countries generally have positive trade balances (when a country exports more goods than it imports) with the USA and many western countries, but negative balances with China and Australia.
“Any trade wars could reduce buying power in countries in South and South-East Asia, indirectly affecting Australian farm-gate prices, as there is the possibility consumption growth there might slow,” he said.
Wheat opportunities
Mr Pistoia said there are contrasting drivers for wheat consumption across the region, with buying power, self-sufficiency levels and import regulations influencing demand.
“The region’s wheat consumption dynamics can be divided into two groups: those nations nearing self-sufficiency and those reliant on imports,” he said.
“The first group – the self-sufficient nations – includes India, Nepal and Pakistan,” Mr Pistoia said. “If India enters the international wheat market as an importer, it can create major opportunities for Australian exporters due to its enormous demand. In times of shortage and high local prices, India may remove import duties, as seen in 2016, potentially lifting global wheat prices.”
Of the second group of nations – the importers – only Bangladesh has significant wheat production, although meets only 20 per cent of its own needs, he said.
“In this set of wheat-importing nations – apart from in Sri Lanka, Malaysia and Singapore – wheat consumption positively correlates with per capita GDP growth, that is economic growth equates to growing demand for wheat,” Mr Pistoia said.
“Beyond GDP per capita, wheat demand is also influenced by import regulations and duties.”
For example, he said, Indonesia sets yearly import quotas for feed grains, with higher import taxes for feed grains than food grains.
“Feed grains usually have higher import taxes applied by importing nations – aimed at supporting local production – providing a larger market for local feed grains, and thus better prices for local farmers,” he said.
“In recent years, feed wheat use has increased in many of these nations. One reason for this trend is that wheat not only has a higher protein content than corn, but also its amino acid profile is more adequate for animal feed.”
Mr Pistoia said forecasts for GDP per capita and population growth suggest South and South East Asian nations could significantly increase their wheat consumption.
“Furthermore, Australia has developed well established G&O research programs and specific grain classes tailored to meet the quality needs of South and South-East Asia. For instance, there are special wheat varieties for Udon-style noodles.”
From 2019 to 2023, South and South-East Asia represented 47 per cent of all Australian wheat exports, Mr Pistoia said.
For Australian wheat producers and exporters, wheat price competitiveness relative to other feed sources, as well as import regulations, are key factors dictating overall demand from South and South-East Asia, the report says.
Pulse outlook
Mr Pistoia said the South and South-East Asia region is a “global powerhouse” in terms of pulse production and consumption.
“Despite vast production,” he said, “demand can only be met though through imports.
“The bulk of the pulse trade between South and South-East Asian nations and Australia has been concentrated in lentils and chickpeas. From 2019-2023, chickpeas accounted for 84 per cent and lentils for 83 per cent of Australian pulse exports to the region – focused chiefly on Bangladesh, India, Pakistan and Sri Lanka.
“Pulses have grown to become an important crop in many Australian grain growers’ crop rotations, and this surge in production is expected to continue, based on the profitability of these export markets,” Mr Pistoia said.
“However, currency volatility – particularly the expected rise of the US dollar – and challenging climactic conditions have the potential to create headwinds in these markets.”
Barley and malt exports
Across the South and South-East Asia region, Mr Pistoia said, consumption of beer and other alcoholic beverages is relatively low, as government regulation, cultural practices and illicitly-brewed alcohol limit consumption.
“However, as western diets become more prevalent in South and South-East Asian societies, beer market growth is expected,” he said.
Mr Pistoia said Australian barley and malt barley exporters needed to be conscious of remaining price competitive. “The current global overcapacity in malt production and declining beer consumption in (northern hemisphere) countries, which lead the way in beer consumption, is intensifying cost competition,” he said.
Oilseeds
Of the big three Australian winter crops – wheat, barley and canola – canola exports to South and South-East Asia are small, representing only 11 per cent of total exports during the 2019-2023 period, the report says.
Mr Pistoia said this is due to the vast amount of palm oil production in the region, leaving only small opportunities for other oilseeds in niche markets.
RaboResearch Disclaimer: Please refer to Australian RaboResearch disclaimer here