Feed grain sector a big winner in Indonesian FTA

04.09.2018

AUSTRALIAN grain growers could receive a $150 million windfall due to increased access to markets as a result of the newly inked Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) free trade agreement (FTA).

The gains are likely to be made in the area of feed grain, with a key plank of the FTA that Australia be able to export 500,000 tonnes of feed grain, including wheat, barley, sorghum and oats, without incurring any tariffs.

Australian grain industry figures believe feed wheat producers will likely be key beneficiaries from the deal, which is expected to be formalised in time for the 2019-20 winter crop harvest.

Grain Producers Australia chairman Andrew Weidemann said the ability to export feed wheat to Indonesia was a big win for the Australian wheat industry.

In spite of being Indonesia’s largest supplier of milling wheat and exporting up to 25pc of its total annual wheat exports to its northern neighbor, Australia currently does not supply any of Indonesia’s 2-3 million tonnes a year of feed wheat imports.

Mr Weidemann said he expected the majority of the 500,000 tonnes of quota-free exports to be wheat.

This would equate to around $150 million in value for the Australian industry, based on a price of $300 a tonne should exporters be able to supply the whole quota.

Another big winner from the IA-CEPA will be Western Australia.

Western Australian growers lack the domestic feed wheat market available to their counterparts on the east coast.

Mr Weidemann said opening up the Indonesian feed market would mean WA growers could happily plant high yielding feed wheat varieties rather than rely solely on milling lines.

“High rainfall parts of Western Australia would be well suited to growing feed wheat but there hasn’t been the market for it prior to now - this deal might change it.”

GrainGrowers chief executive David McKeon said the deal would have massive implications into the medium term given the projected growth in the Indonesian economy.

 “Indonesia is a country with 263 million people and is forecast to grow to 295 million by 2030,” Mr McKeon said.

“Indonesia is already Australia’s largest wheat market, valued at roughly $1.3 billion with trade volumes around 4.2 million tonnes per year, and wheat is already Australia’s single largest export to Indonesia,” he said.

The Australian Export Grains Innovation Centre (AEGIC) also highlighted the growth potential in our northern neighbour.

AEGIC chief economist Ross Kingwell said Indonesia was evolving into one of the largest economies in the world and that grain consumption was soaring.

“By 2030 it will be the world’s fifth largest economy,” Prof Kingwell said.


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