Australian Wheat is too Expensive – Interflour.

The World Wheat Market – Where is it going and where are we going with it?

Interflour has added to its Vietnam flour mill portfolio, with the purchase of an existing mill at Da Nang on the central coast adding to its site at Cai Mep (pictured). Photo Fairfax
Interflour has added to its Vietnam flour mill portfolio, with the purchase of an existing mill at Da Nang on the central coast adding to its site at Cai Mep (pictured). Photo Fairfax with thanks.

The recent comments reported to be made by Greg Harvey, Interflour’s Australian born Chief Executive, that Australian wheat is too expensive for the markets in Indonesia and Singapore defies belief. If we cannot be competitive in the big and expanding markets on our doorstep, with wheat at the price it is at present, where will that leave Australian grain merchants selling into markets around the world? What price for growers at the next harvest?

The move into Interflour was strategic for Cooperative Bulk handling making vertical integration a reality for Australian wheat growers. Recent announcements have reported Interflour expanding into Vietnam. Cooperative Bulk Handling the West Australian grain handling and marketing cooperative owns 50% of Interflour. Interflour, which now owns nine flour mills across Vietnam, Indonesia, Malaysia and Turkey is, one would think, integral to the prosperity of WA wheat production, if it is to meet the challenges of market expansion in the region in which Interflour operate.

This story fits in quite nicely with another story. A few years ago I was talking to a lady whose family had decided to build a new biscuit factory in Indonesia rather than Perth and then export their biscuits into Australia and around the world. I found their biscuits and good they were too, on the shelves of Woolworths. Out of curiosity and because of what was on their label I phoned their Perth office.  The lady was quite open in claiming that it was cheaper ‘for them’ to build a new factory and manufacture in Indonesia than in Perth. She claimed their factory was as clean as any Australian hospital and having a base in Indonesia it opened up the world wide Halal biscuit market to them.

I said I hoped they always used Australian wheat. Her answer was something like ,’We do when we can, at the moment we are using British wheat. Sometimes we can’t get Australian wheat.’ I never thought to ask if that was because of price — It never entered my head. If Australian wheat remains too expensive — just look at the markets below.

Egypt pays more for wheat – but will the price rises last?

Egypt, the world’s top wheat importer, paid more for wheat at its second tender of the season – defying discounting by many merchants which appeared to underline a shift eastwards in the focus of export competition.

Gasc, the Egyptian grain authority, over the weekend bought 300,000 tonnes of Romanian and Russian wheat at tender, adding to the Black Sea supplies ordered on Tuesday to take total purchases for 2016-17 to 480,000 tonnes.

The purchase price of the wheat bought at the weekend, at $174.99 (A$233) a tonne including shipping ($167.13 a tonne excluding shipping), was nearly $2 a tonne above the price Gasc paid on Tuesday.

“Operators have noticed that prices were up compared to previous tender,” said Agritel, the Paris-based consultancy.19 July 2016.

Australia vs Black Sea

Competition has been enhanced by weakness in freight rates, which has made it cheaper for importers to source supplies from distant and unusual origins, enhancing competition in agricultural commodity markets.

Talking of sales to Asia’s Asean trade bloc, historically a big customer for Australian wheat exporters, the bureau said that “as international freight costs are now very low, Australia’s traditional freight advantage into this market has been eroded.

Again, the bureau stressed the enhanced competitiveness of Black Sea exporters, such as Russia and Ukraine, saying that “the freight cost from Odessa to Indonesia is now reportedly cheaper than from some Australian ports to the same destination.

“In recent months Australian grain into South East Asian ports has traded at a premium to Black Sea wheat, reflecting the loss of Australia’s previous freight advantage.”

The comments follow the announcement by Singapore-based Interflour  last month, at the Agrimoney Investment Forum, that it was investigating sourcing more wheat from the Black Sea, and Argentina, because of the cheapness of their supplies compared with Australia’s.

“Wheat from Russia and Ukraine is of lower quality than Australian wheat, but not $40 a tonne lower,” Greg Harvey, Interflour’s Australian-born chief executive, said.

Meanwhile, grain merchant Nidera Australia separately on Wednesday said that “we continue to battle a tough market here in Australia.

“We face a wave of grain coming in from the northern hemisphere, which will only fuel the [wheat market] bear as time continues to tick by.”

Nidera Australia added that “every grain growing nation in the world is experiencing fantastic conditions and rain continues to hit the paddock here in Australia.

“The bottom line is there is going to be a heck of a lot of grain around within the next few months.

The view of Ukraine Agro Consult.

South and Southeast Asian market is the most attractive for exporters. Wheat imports to this region are estimated at level, which is comparable to imports by African countries and exceeds considerably the needs of EU and Middle East. For Ukraine the importance to build its business in Asian market can hardly be overestimated.

The remarkable thing is that Ukraine makes quite successful steps in this direction – during the first months of the 2015/16 season about a half of overall wheat exports (49%) was supplied to countries of South and Southeast Asia compared to 31% last season. Moreover, three of four largest buyers of Ukrainian wheat refer to this region. The largest buyer – Thailand – has purchased about 1 MMT of wheat, which twice exceeds the volume taken last season. Potentially Thailand can import about 3 MMT of wheat. In other words, Ukraine has already supplied about 33% of the country’s needs with its grain

Elizaveta Malyshkois a grain market leading expert of “UkrAgroConsult”

This is no secret that Ukrainian wheat is in great demand in the world market. In the 2014/15 season exports reached 10.9 MMT, which is the highest level over the last 6 seasons. Egypt and Spain became the largest importers, as representatives of traditional market outlets for Ukraine – North Africa and Europe.

Meanwhile back in Australia.

The General Election is over thank goodness, anyone who didn’t get bored enjoys watching flies crawling over a window.

We got the usual promises from the usual people. To think we have to go through the whole thing again in 3 years is unimaginable.

It was a boring campaign, which was twice as long as necessary. The Prime Minister, Mr Turnbull, kept on saying ‘there has never been a more exciting time to be an Australian.’ The more he said the more his popularity went down.

As the polls got closer and Election Day approached, the more the leaders increased their rhetoric. The man who wanted to become Prime Minister, Mr Bill Shorten, sank about as low as one can go in politics. He finished his campaign with, ‘You can have Medicare – or you can have Turnbull — but you can’t have both’.

The pollsters say his despicable scare campaign worked, so some poor souls believed the lie. Is this kind of political lie, this garbage, now part of what is accepted in Australia? Is this how low our collective, our national standards have fallen?

Spreading alarm and despondency is a crime under British Military Law, so I presume the same goes for Australia. The punishment is anything from a few weeks to life. Maybe it should also apply to politicians?

The Roy Morgan Annual Image of Professions Survey for 2015  surveyed opinions of various occupations. The question to respondents was: “As I say different occupations, could you please say – from what you know or have heard – which rating best describes how you, yourself, would rate or score people in various occupations for honesty and ethical standards (Very High, High, Average, Low, Very Low)?”

Out of a list of 30 occupations, State politicians and Federal politicians came 23 and 25 respectively, with Union Leaders being 24. Says it all doesn’t it? Meat in the sandwich? Meat? well something anyway!!

Who do we trust the most? Number one was nurses, then pharmacists and then, doctors, school teachers and engineers in that order. Last in the survey were car salesmen, a position they have held for thirty years, unchallenged as Australia’s least trusted profession.”

We elected people to govern us in whom we have little trust, it doesn’t make sense especially when you have have a look at the professions of those who came below the Parliamentarians!

Once upon a time, Mary had a little lamb.

A few days ago a colleague in the WA Department of Agriculture confirmed that the flock in WA continues to decline at around 13 million. We are still selling more sheep than the ewe flock is producing. Nationally the trend is the same.

A decade ago I wrote somewhere, I can’t remember where, that if the then decline in sheep numbers continued, merino wool would finish up being a cottage industry.

I got little support at the time — some would have had me in the mulesing cradle. The exception came from an unexpected quarter, the then State Minister for Ag who said it would be a great shame if I were right, adding that the evidence was on my side.

I remember the post WWII great woolen mills of England. I remember when all of our clothing was made from either cotton or wool or a blend.

I remember Nylon arriving on the market after WWII and being told that NYLON was an acronym for Nuts You Lousy Old Japanese. Maybe Japan was producing synthetic textiles by then? Maybe it was revenge for the Japanese silk, the finest of fabrics used for ladies stockings. Very soon ladies stockings became known as ‘Nylons’.

The ICI British industrial giant  built a plastics and textile factory British Celanese close to where we lived.  It was the foulest stinking of factories and employed hundred of people and the yarn in turn was turned into a hundred and one fabrics. We wore Celanese ‘drip dry’ shirts, a boon to a mother with four boys. But they went yellow before the next one down the ‘hand me down line’ got them.

Why did wool lose its preeminent place in the world as the finest of all textiles? Why after the Korean War when the USA realised what a valuable fabric wool was did Australia fail to reach trade agreements with them?

The answers lie in Charles Massy’s astounding book ‘Breaking the Sheep’s Back’. The conclusion I came to after reading Charles’s book was that in the late 50s and 60s, pig-headed farmers and many so-called the finest and ablest leaders of the Australian merino wool industry planted the seeds of where the merino wool industry is today, which is probably terminal.

We still have more committees and so-called Peak Bodies than one can poke a stick at yet agriculture’s terms of trade continues to decline.

There is no debate that merino wool produces the finest clothing fabrics known to man and those fabrics can be worn in every climate. Why then is the merino wool industry controlled by China?

Why, now that we are back to merino wool production levels not seen since the 1920s are we so indolent, lazy, couldn’t care less, stupid call it what you will that the greatest birth right our forefathers could have given us, something no-one else has, the Australian merino sheep, is now controlled by a country who really couldn’t  care less about it. Australian merino wool to the Chinese is just another commodity.

Napoleon called the British a nation of shop keepers. Had he known Australia he might well have called us a nation of miners. We are not very good at value adding to what we produce. Maybe it’s beneath us? If we are to forge a new future for ourselves, a technical and innovative future it’s time we stopped being miners of everything from wool to iron ore and decided to test ourselves instead of always taking the easy way out virtually dig it up and ship it out.

Now that wool production in Australia is back to where it was about 100 years ago, isn’t it time we tested the Prime Minister’s ambition for Australia to become an innovation nation? Every picture tells a story:

Production statistics 2015 / 2016

For the full production year 2015 / 2016 total production has declined by a further 6.2%
words in italics and graph from
Note: A production year runs from July to June
The  chart demonstrates the decline in merino production over the last 25 years. The data is for full years to June 30, 2015.  This chart is only updated once per year in July.

What will replace sheep if grain yields continue to decline?

Isn’t it time that Australian investment took over the Australian merino wool processing industry? If the Prime Minister is right and I agree, we have the talent and expertise in Australia to do anything, why can’t we take to take the world’s premium clothing fibre, which we own, which is our inheritance, on the journey from the sheep’s back to a finished high quality and unique product? Why should China monopolise yet another market?

It has nothing to do with my heritage that I am wearing a wool pullover that came from Britain by mail and arrived less than seven days after ordering. It has a label proudly stating that it is made from 100% British Wool. ( I have found the prickle factor is low, but not next to skin low. Australian scientists invented the process that reduces the prickle factor. The pullover is machine washable. Another process invented in Australia.

Why did my wife buy a pullover for me which, was made in not the UK you may notice but Britain? (1) Price — about half of what one would pay in Australia for a similar article and these days the pennies matter like never before. (2) Design — The design is simple and traditional and I like the leather elbows and shoulder patches, the size of the article is consistent with the label claim, which is refreshing. (3) Colour — muted brownish and green tweedy. I have a dark blue heavyweight cardigan from the same manufacturer.

A few years ago while visiting one of the four knitting mills left in Australia, this one in Tasmania, we were told that the only place that shrink proof and non-prickle yarns were available at that time, was from China.

A family factory, started by the lady of the house many years ago, her husband joined her when he gave up sheep farming. The husband told the story of buying superfine wool from his brother and before the bales went to China for processing he took samples and established the DNA of his consignment.

When the wool was returned, shrink and prickle proofed and ready for knitting, further tests revealed that the wool they got back from China was not the wool they had sent, the DNA samples did not match. The fibre diameter did, but not the DNA.

I am extremely pessimistic for the Australian merino wool industry. Why? Because I have just finished reading an article in ‘Moffits Farm’.

Apparently the worldwide demand for unmulesed wool is rapidly increasing. Manufactures of quality fabrics are progressively looking toward South Africa, New Zealand and Argentina for wool from sheep, which have not been mulesed.

It looks like there is a heavy dose of Australian arrogance when it comes to this question of mulesing. Like it or not the the people who turn merino wool into fine clothing ever increasingly want unmulesed wool.

Are we going to respond by changing or are we going to see the merino disappear from Australia— let those to whom we have sold our best merino genetics be the ones who benefit from the generations of work our forefathers put into producing the finest wool apparel sheep in the world.

The great challenge will come if wheat prices continue to decline and Australian average wheat yields continue to go the same way’

The Regional Institute. Australian wheat yields decline. Donald revisited
Graph courtesy Dr Wal Anderson

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