Australian Grains: Trade War Tremors Descend on Dry Down Under

This will reconfirm the importance of crop choices and risk management strategies for Australian grain farmers and supply chain participants. To contribute to informed decision making, Rabobank assesses the likely impact of three credible trade war scenarios on Australian grain & oilseed exports and pricing.

The volume and value of Australian grain exports in 2019/20 will almost certainly be up year on year, but the extent of the increase will greatly depend on how the trade war plays out. The value of exports could fall by as much as 18% below its five-year average if the trade war escalates and directly includes Australia. In contrast, it could gain by as much as 5% in the scenario that China turns to Australia for additional grains & oilseeds at the expense of the US.

Under all circumstances we expect Australian domestic wheat prices to fall compared to 2018/19 highs as domestic supplies improve, but to be firm to higher over the next two years relative to average prices.

In contrast, Australian barley and sorghum prices will be highly impacted by the way in which the trade war plays out, and only push above five year average pricing if the focus of the trade war remains between the US and China.

“The trade war will have enduring and drastic impacts on global grain & oilseed markets regardless of which scenario plays out, affecting all involved,” says Cheryl Kalisch Gordon, RaboResearch Senior Analyst – Grains & Oilseeds. Grains & oilseeds exporters should consider the merits of further diversifying their markets. Farmers should consider reducing reliance on more easily substituted grains & oilseeds and produce higher quality fit for purpose products instead. “All participants in the Australian grains supply chain will need to continue to refine strategies for operating in a lower margin environment, including using technology to contain costs and risk management tools to secure higher values,” continued Dr. Kalisch Gordon.