POLICY is never far from the fore in global agricultural trade, but in recent months there have been a swag of policy developments impacting global trade flows – much of them positive for Australian growers.
For one, Egypt – the world’s largest importer of wheat – has walked away from its policy of zero tolerance for the fungus ergot in incoming shipments.
Unsurprisingly, it had failed to receive any offers on recent tenders after implementing the policy.
The debate around this issue – which has raged throughout the year – is not likely to turn to smooth sailing just yet, but the longer-term outlook appears more optimistic. The removal of this market barrier is timely for Australian growers.
Egypt has taken an average of 10 million tonnes from the world market over the past five years.
As well as being the largest wheat importer, Egypt is an important sponge for Black Sea and EU-produced grain, which would otherwise keep coming east toward what are already highly-competitive South East Asian markets.
With Russia likely to have an additional 7.5 million tonnes of wheat to export this season, taking its total surplus to 32 million tonnes, Australian growers can ill afford to see the Egyptian market closed.
Further certainty for Australian growers has come with China agreeing to extend its current rules on allowable levels of foreign material in canola imports from Canada to 2020.
Citing concerns over the risk of importing blackleg fungus, China had threatened to reduce the foreign material limit to no more than one per cent (from the current 2 to 2.5 per cent allowable level), beginning September 1.
The agreement between China and Canada has restored some certainty in the global export market.
China remains a huge influence on canola markets, importing 3.8 million tonnes of canola seed from Canada in 2015 – some 40 per cent of Canada’s seed exports.
Throughout 2016, canola prices in Australia have been holding up much nearer to 2015 levels than their wheat and barley counterparts as global stocks, at below the 10-year average, sit at far more sustainable levels than other grains.
The new China-Canada agreement will be tested in shipments through the coming months and may still impact local price spreads.
Completing a trifecta of recent policy shifts, India recently reduced the tax it levies on wheat imports from 25 per cent to 10 per cent to facilitate increased volumes of wheat coming into the country.
India is the second largest wheat producer in the world, and swings from net importer to net exporter depending on seasonal and policy conditions.
Faced with a 10 per cent reduction in local production in 2015-16, demand for imported wheat has soared.
Rabobank expects India will import up to three million tonnes of wheat in 2016-17.
Improved access to the Indian market is good news for Australia.
In the past seven years, Australia has on average delivered in excess of 90 per cent of India’s wheat imports (albeit often very small volumes).
Although this year more wheat will be available from alternative origins such as the Black Sea, the additional import demand will help soak up the 17 per cent increase in Australian wheat exports that ABARES expects to see in 2016-17.
So as the clouds – both rain and those of high stocks and suppressed prices – remain over the grains sector, international policy swings and roundabouts are providing some, albeit small, wins in export market certainty and opportunity.