Broadacre grains production in Australia has huge export opportunities on its doorstep, underpinning its bright long-term future.
But the sector faces a big challenge due to its dependence on imported inputs, such as oil and fertilisers.
These will become expensive again in the medium term, despite the current sharp downturn in these input costs.
This optimistic outlook for demand and the warning about the need to budget for ongoing input costs is given by the WA Department of Agriculture and Food’s Associate Professor Ross Kingwell.
It's based on a talk he gave to advisers attending the Grains Research and Development Corporation (GRDC) Update, in Adelaide.
Prof Kingwell says Australian grains are well placed to service emerging markets in Asia, despite increased competition from emerging grain exporting countries.
Twelve grain importing nations in our region – China, India, Indonesia, Pakistan, Bangladesh, Japan, the Philippines, Vietnam, Thailand, South Korea, Malaysia and Sri Lanka – already represent more than half the world’s population.
By 2020, these nations are expected to have a combined population of almost four billion.
Australia, he says, is likely to specialise in human consumption grains, while other grain exporting countries focus more on serving the increased need for feed grain and fodder.
This will be needed because the region’s consumption of protein (beef, pork, chicken and dairy) will surge.
Demand for feed grains will rise dramatically, at a time when current global feed grain production growth only meets about a third of this demand.
All this could suggests sustained high prices for both feed and human consumption grains.
The combined forces of income growth, climate change, high energy prices, globalisation and urbanisation would also contribute and add to the lift in demand for such grains, arising from the increasing population.
Commentators, however, are confident that over the long term the cost of energy will increase, despite the recent drop in oil prices.
Herein, he says, lies one the biggest challenges facing Australian grain producers.
Already, he points out farmers have changed their tillage and sowing practices, partly in response to rising fuel prices.
And farmers are using more fuel-efficient farm vehicles and equipment, lifting productivity, which further helps offset rising fuel prices.
Despite this improved efficiency, Australian growers are more reliant on fuel – and more exposed to cost pressures from price rises – than ever before.
This is partly because farming in Australia has shifted further towards cropping and away from livestock, with sheep numbers in Australia at their lowest level since 1924.
And the long-term trend for higher oil prices will place upward pressure on other energy commodities, such as natural gas, the key ingredient in ammonia and urea production.
So nitrogen fertiliser is therefore also likely to become more expensive in the long run.
“The future, therefore, lies in energy-efficient production,” he says.
Climate change is the other big challenge facing Australian grain production, Prof Kingwell says.
While some experimental studies show that plant photosynthesis may be more efficient in an atmosphere with increased levels of carbon dioxide, the other effects of climate change – decreased rainfall and higher temperatures in southern Australia – will more than offset any yield gains from increased CO2.
Policy aimed at dealing with climate change may also result in an increase in farm costs.
“To meet these challenges and profit from emerging market opportunities, we will require science and innovation, sound advice, skillful farm management and policy to support farm business resilience,” Prof Kingwell says.
“It will be a great technical, scientific and farm management endeavour.
“History tells us that Australian farmers, scientists and advisers are likely to be up to the challenge.
“They are already experienced in dealing with climatic and price uncertainty and volatility.
“Farm businesses will need access to productivity-enhancing, energy-efficient innovations, if they are to prosper, or at least ease any pain of adjustment over the next few decades.”
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