The five meatiest grains themes for 2016

" A growing demand for meat and dairy could directly and indirectly impact the feed complex and Australian grain use."
Mark Bennett, Head of Agribusiness, Australia, ANZ

Existing high inventories have led to bearish forecasts in the market but it's worth looking beyond this in order to position the sector for future success.

A new report from ANZ, “The Grains Muster", argues Australia could increase wheat production by 20 per cent, from 25 to 30 million tonnes by 2030, which would see the sector generate an additional $1.3 billion in value to a total of $7 billion.

AUSTRALIA'S CURRENT STATE

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ANZ WHEAT MODEL - MODERATE VS AGGRESSIVE GROWTH

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Below are five key themes we've identified for the grain sector in 2016.

MAJOR OPPORTUNITY

• Rising global demand for animal protein around the world creates a major opportunity for the Australian grain sector because these animals must be fed. A growing demand for meat and dairy could directly and indirectly impact the feed complex and Australian grain use.
  
  Australia currently produces around 25 million tonnes of wheat, 18 million tonnes of which is exported.
  
  
• An increasing population and a growing middle class in Asia will support the future growth of Australian grains amid expanding food and beverage markets.
  
  A key driver of grain demand in China and South East Asia is wheat-based food production, namely noodles, breads and baked goods.
  
  Recent free trade agreements in key North Asia growth markets have improved Australian farmers' access to around 70,000 food consumers and 4.8 million livestock per farmer. There is room for mid-size grain traders and new entrants seeking markets in Asia but this space is complex and difficult.
  
  
• Infrastructure investment in this industry is necessary to improve efficiency. However this in itself is not the answer to farmer profitability.
  
  It remains problematic for farmers to attract investment interest. More work needs to be done in matching operations and capital, as well as positioning the industry as one worthy of investment.
  
  
• Investment in grain-producing assets is likely to come from outside the industry and this can have a positive impact.
  
  Investment in infrastructure will only come if the sector can demonstrate the right levels of return or strategic importance to a given investor. It is possible benefits of big-scale investment will take time and might only produce incremental benefits to the average farmer.
  
  Whether this comes from private or government or both is somewhat out of the hands of farmers. Focussing attention on what they can control and do in the meantime to improve production and business performance makes sense.
  
  
• Increasing productivity rates remains important to the industry. A key feature to farmer success is to understand your business well enough to make informed and effective strategic management decisions.
  
  Volatility in commodity prices and seasons remains a key obstacle to farmer success. Farmers should consider not just where the largest annual financial return is but how to produce a balanced and sustainable enterprise that trades in a lower range of highs and lows over time.
  

Mark Bennett is Head of Agribusiness, Australia at ANZ