AS 2018 drew to a close, the rescued Trans Pacific Partnership trade agreement, TPP-11, began delivering new trade advantages for the Australian grain industry.
Eastern Australia’s capacity to immediately capture the opportunities presented will naturally be limited – until at least late 2019 or 2020 – due to a dearth of supply.
So the nation will be looking to Western Australia, with a bumper haul now in the bin, to make market inroads on the back of TPP-11 concessions.
The most important gain for the Australian grains industry from TPP-11 is improved access to the Japanese market.
Australian wheat, malting barley and malt have all received a boost in competitiveness with both local Japanese and non-TPP-11 origin product in the Japanese market after the deal came into force on December 30, 2018.
Prior to this, milling wheat imported to Japan via its WTO access quota was subject to a 17 yen/kg mark-up – for every tonne of imported wheat used, the equivalent of $220/t was required to be paid to the responsible Japanese government agency.
On December 30, the mark-up on TPP-11 origin wheat was reduced to 16.2 yen/kg, and then to 15.3 yen/kg on January 1 in the first of another nine cuts to be made annually until 2026.
From 2026, Japan will import wheat from TPP-11 countries at a mark-up of 9.4 yen/kg.
That is still equivalent to $120/t, but is 45 per cent lower than without the TPP-11, and fills in a gap in JAEPA (the Japan Australia Economic Partnership Agreement), which did not provide concessions for Australian milling wheat.
For barley, the mark-up on TPP-11 imports to Japan has been reduced from the equivalent of around $100/t to $93/t and will be just shy of $60/t by 2026.
This allows for more competitive access for malting barley, while Australian feed barley already has unhindered access under JAEPA.
In addition, a new plurilateral barley quota volume has been opened up for TPP-11 members, as well as country-specific wheat quota volumes for both Australia and Canada.
A duty-free country-specific quota for roasted and unroasted malt has also been allocated to Australia and to Canada.
All of this adds up to increased competitiveness for Australian grains in the Japanese market, compared to Japanese domestic grain and non-TPP-11 origin grain.
US Wheat Associates have forecast US wheat exports to Japan will fall by 50 per cent within a few years as a result.
Canada, however, is part of the TPP-11, so has increased its competitiveness in Japan in step with Australia.
And Canada is coming off an above-average production year so is well placed to take advantage of the opportunities presented by TPP-11 in Japan.
The task for Western Australia this year will be to keep the east coast supplied with grain, keep international customers using Australian grain and to make further inroads into the Japanese market while opportunity presents.
No small challenge is ahead.
