Grain Business magazine - March 2015

MARCH 2015

PRODUCED FOR THE BENEFIT OF AUSTRALIAN GRAIN GROWERS BY

Chasing the big yields in 2015 COVER STORY/ GRASSTREE AND ARLINGTON FARMS, YANDILLA, QUEENSLAND

BARLEY/ MALTING VARIETIES TO WATCH

GLOBAL INSIGHT/ GRAIN IN UKRAINE HOT COMMODITIES IN CHINA

SCAN MORE FIELD

SEE MORE YIELD

Topcon CropSpec® Crop Canopy Sensors have the largest sensor footprint in the industry for more accuracy in variable rate applications.

CropSpec reduces fertilizer costs by applying N on-the-go and only on crop need … or by creating prescription maps for later applications. Reduce input costs while improving stand and yield in small grains or in row crops.

See CropSpec sensors at topconpa.com

Call toll free:

1800 1 TOPCON

MARCH 2015

PRODUCED FOR THE BENEFIT OF AUSTRALIAN GRAIN GROWERS BY

01 02 04 08 12 16 18 24 28 30 34

FOREWORD/ PRODUCTION GAINS KEY TO AUSTRALIA’S COMPETITIVENESS

GRAIN MARKET UPDATE/ GRAIN AND OILSEED PRODUCTION SET NEW LEVELS

YIELD/ CHASING THE BIG YIELDS

GLOBAL INSIGHT/ HOT COMMODITIES IN CHINA

GLOBAL INSIGHT/ GRAIN IN UKRAINE

BARLEY/ MALTING VARIETIES

FARM PROFILE/ GRASSTREE AND ARLINGTON FARMS, YANDILLA, QUEENSLAND

ROTATIONS/ HOLY CANOLA

QUALITY/ TIME TO FOCUS ON QUALITY

FARM MANAGEMENT/ A FRESH PERSPECTIVE TO BOOST YOUR FARM BUSINESS IN 2015

INDUSTRY SPOTLIGHT/ 10 FACTS ABOUT GLENCORE IN AUSTRALIA

© Copyright. Editorial material published in Grain Business is copyright and may not be reproduced in any form without written permission from the Publisher or Editor. Print Post Approved: PP 510545/00616 PUBLISHER Glencore Grain Pty Ltd 124-130 South Tce Adelaide, SA 5000.

T: (08) 8211 7199 E: gbm@glencoregrain.com.au DESIGN & PRODUCTION fuller.com.au ADVERTISING Jane McBride Communications Manager, Glencore Grain T +61 8 8304 1368 jane.mcbride@glencoregrain.com.au COVER NOTE Rob and Cheryl Kingston COVER PHOTO: timswinson.com

At Grain Business, we want to provide useful, insightful, and up to date information in each and every issue. If there are any topics you would like to see featured in future editions or if you have any feedback about Grain Business, please contact us at gbm@glencoregrain.com.au

With us, secure payment for your sorghum and cotton is

INGRAINED

With us, secure payment With us, secure payment forforyour sorghum and cotton is your sorghum and cotton is

INGRAINED INGRAINED Our worldwide marketing and logistics network Glencore Grain is backed by the strength of the global Our us worldwide marketing andtologistics Glencore Grainaisleading backedmarketer by the strength of the global provides with unrivalled access marketsnetwork so we Glencore business, of agricultural provides us with unrivalled to markets Glencoreinternationally business, a leading marketer agricultural can offer you competitive pricingaccess for your grain. so we commodities and one of theof world’s can offer you competitive pricing for your grain. commodities one of the world’s largest diversified internationally natural resourceand companies. largest diversified natural resource companies.

Glencore Grain’s financial strength means you can be Glencore Grain’s financial strength means you can be assured of payment security. assured of payment security.

www.glencoregrain.com.au 1300 453 626 (1300 GLENCORE) www.glencoregrain.com.au 1300 453 626 (1300 www.glencoregrain.com.au 1300 453 GLENCORE) 626

160_Glencore_SorghumCotton_FP_v2.indd 1

24/02/2015 7:41 pm

FOREWORD

FOREWORD/

PHILIP HUGHES, TRADING MANAGER, GLENCORE GRAIN

PRODUCTION GAINS KEY TO AUSTRALIA’S COMPETITIVENESS The winter crop harvest for 2014/15 is complete and given the warm, dry spring conditions across many growing regions it was a fantastic result.

T

otal Australian winter crop production is estimated to be slightly higher than the 10 year average at 37 million tonnes and quality held up well. The result is testament to the agronomic advances and crop management practices which effectively utilised the available moisture from heavy rainfall early in the growing season.

Globally, grain and oilseed production in 2014/15 set new records for the second year in a row, as a result of good seasonal conditions in all major production regions. In the grain market update I provide more detail and touch on early forecasts for the coming year.

Weather in the northern hemisphere and the planting of the US corn and soybean crops will be the next factors to influence markets.

Australia’s summer crop harvest is now underway. Harvesting of early sorghum crops commenced in February and with the wide planting window across different regions, harvest will continue through until June/July.

MARCH 2015

The cotton harvest in central Queensland also started in February.

Total summer crop production is forecast to be lower year on year although sorghum production will likely be closer to a million tonnes higher.

The area planted to summer crops fell due to unfavorable seasonal conditions during winter and spring in Queensland and northern New South Wales. However, conditions during the growing season have been more positive with average to above average rainfall in January.

In this edition of Grain Business we profile Rob and Cheryl Kingston, farmers in southern Queensland and take a look at their sorghum crop.

For southern growers attention turns to planting the 2015/16 winter crop.

Australia is known to produce high quality, consistent grains and oilseeds.

Now, the greatest opportunity to improve Australia’s competitiveness and profitability is through increased crop production and yield. Increased

grain production will provide multiple benefits to growers, all businesses along the supply chain and the Australian economy more generally.

Mace is leading the way as a highyielding wheat variety. We have reviewed its performance in 2014/15 as well as looked at the performance of Hindmarsh barley and upcoming malt varieties Compass and La Trobe.

Break crops are an important consideration in the cropping program to manage soils and nutrients. The most common break crop, canola, was impacted by Beet Western Yellows Virus in some areas last year. Grain Business provides insight into how to monitor crops closely this year.

I wish you all the best as you plant your 2015 crops.

Philip Hughes Trading Manager, Glencore Grain.

GLENCORE GRAIN | GRAIN BUSINESS MAGAZINE

01

GRAIN MARKET UPDATE

GRAIN MARKET UPDATE/ WORDS/ PHILIP HUGHES, TRADING MANAGER, GLENCORE GRAIN

GRAIN AND OILSEED PRODUCTION SET NEW LEVELS Global grain and oilseed production has again seen bumper record crops for wheat, corn, soybean, canola and sorghum as well as an above average global barley crop. There were no major production issues in any regions in 2014/15 and while consumption of grain and oilseeds continues to rise at pace – total global demand for wheat, corn and soybeans is up an incredible 167 million tonnes in two years – global stocks for all commodities are at comfortable levels.

However, while stocks to use ratios are at relatively comfortable levels, this can change quickly if there are any crop failures in the major northern hemisphere production regions.

February to May is the key period for weather in the northern hemisphere. Crops have either been planted and are in the dormant winter period, or will be planted in the northern spring once the weather improves.

Beyond weather, ongoing geopolitical and economic factors will influence what crops are planted and individual countries export policies.

02

WHEAT There has been record global wheat production for the second year in a row. 725 million tonnes was produced around the world in 2014/15, an increase of 10 million tonnes on last year. Production increased in the EU, Russia, Ukraine, China, and India, all of whom experienced record crops. While there were slight decreases in the US, Canada and Australia wheat crops, there were no significant weather issues across any production origin, and they still produced historically good size crops.

Global wheat consumption was also at record levels for the second consecutive year, up 11 million tonnes to 715 million tonnes. Consumption increased in the EU, China, and Middle East. The increased demand is across milling and feed wheat and is due to changing diets and population growth. The demand for feed wheat in any given market is influenced by the availability of alternate feed grains. The consumption of wheat was down year-on-year in the US, due to the volume of corn available.

There were concerns about wheat supply from the Black Sea region in late 2014 with Russia implementing measures to curb their export program. The Russian ruble depreciated significantly in recent months, and wheat was exported at a record pace. In 2014/15 with exports of 20 million tonnes, Russia is forecast to be the fourth-largest exporter in the world. The government attempted to slow exports by enforcing tight sanitary and phytosanitary requirements and limiting the availability of transport and logistics. The Russian government also announced a wheat export duty to come into effect from 1 February to 30 June, in an attempt to lower domestic grain prices and food inflation levels.

However, most of the country’s wheat exports have already been executed. Only one to two million tonnes remained to be exported, so the impact on global wheat supply is expected to be minimal.

The main buyers of Russian wheat are the Middle East and North Africa. Depending on if export restrictions are extended, the EU and Ukraine are the first alternative export origins followed by Australia and Canada.

CORN Global corn production was also a record for the second year, though only up slightly. Consumption of corn is up 22 million tonnes year on year to 975 million tonnes and this amounts to an increase in consumption of 110 million tonnes in two years. The increase in consumption has largely

GRAIN MARKET UPDATE

been in the US, Brazil, Mexico, and China, where good supply availability means it makes up a greater percentage of feed rations. A significant amount of corn is also used in biofuel production; however, demand in this market has been relatively stable.

BARLEY Global barley production in 2014/15 is down five million tonnes on 2013/14 to 140 million tonnes. As was the case for wheat, there were no production issues in any of the major production origins. Canada was back to average production after record production in 2013/14, and Australia fell slightly year on year. Consumption has remained at similar levels year on year at 141 million tonnes. This means global stocks have tightened slightly but remain at a comfortable level with a stocks to use ratio of 17 per cent.

OILSEEDS Global canola production in 2014/15 is the same as last year, an estimated 71 million tonnes. Global consumption has also experienced a two million tonne increase to 71 million tonnes. China is the only major consumer to decrease its consumption year on year, EU, India, Japan and Canada have all increased their consumption.

Soybean production increased in the major production regions of US, Argentina and Brazil, with production globally up 10 per cent year on year to a record 315 million tonnes.

There are record exports being executed out of the US to ship the record crop.

Soybean consumption has also increased year on year to 288 million tonnes. The difference between production and consumption means that global stocks are increasing and sit at a very comfortable 31 per cent stocks to use ratio.

The South American soybean harvest has started with another record crop expected, this should keep stock levels and supply up for most of 2015.

PULSES Hand to mouth buying is continuing in the major consumer and importing markets, where currency devaluation against the US dollar has reduced their buying power. There has been good demand for lentils and chickpeas with increased lentil consumption in non-traditional markets. The export demand may be short-lived as India, the biggest producer and consumer of lentils, starts its harvest in late March. At this stage the Indian crop is looking very good.

AUSTRALIAN EXPORTS Australian wheat is being exported to meet core demand in Asia. Australia may see increased demand from Africa depending on export supply from the Black Sea region.

Australian exports of barley are largely being exported from the key export origins of Western Australia and South Australia. China is buying Australian barley for stock feed consumption as a result of import restrictions of US corn.

Therefore this year most of Australia’s malt and feed barley exports are going to China rather than the other key export market of Saudi Arabia. Current demand in Saudi Arabia is being met by imports from the EU and Black Sea regions.

Global demand for Australian canola has been steady in recent months with average uptake from China and Japan.

Europe has been a major buyer of Australian canola, despite early predictions of a smaller requirement after the record EU harvest.

LOOKING AHEAD TO 2015/16 There are not currently any significant weather concerns around the world, although we have a lot of weather risk to get through in the next six months.

Consecutive record corn crops are expected to lead growers in the major production regions to plant less corn and more soybeans in the coming year. In the US there is also expected to be less wheat production.

India, the world’s second biggest producer of wheat in 2014 after China, looks likely to harvest another bumper crop this year, its eighth in a row. The crop, which will start being harvested around April, has experienced good growing conditions so far. India’s current stock levels far exceed the Government’s target, and therefore they may allow wheat to be exported.

The political and economic environment in Russia and the Ukraine may impact wheat supply from the Black Sea. The situation may affect growers’ ability to purchase crop inputs and produce a crop as well as impact on exports if restrictions are maintained.

Consumption demand for grains and oilseeds overall is expected to continue increasing though there may be movement between commodities and relative demand from export origins.

With production and consumption tracking at similar levels the potential for volatility remains as growers make their final planting decisions for 2015/16 and macroeconomic and political factors have the potential to impact on supply availability.

Source: United States Department of Agriculture, World Agricultural Supply and Demand Estimates, February 2015, usda.gov/oce/commodity/wasde MARCH 2015

GLENCORE GRAIN | GRAIN BUSINESS MAGAZINE

03

YIELD

YIELD/

WORDS/ PETER FULLER

CHASING THE BIG YIELDS When Mace was introduced in 2010 it promised to be the perfect all round wheat for Australia’s dryland grain growers.

04

YIELD

“The reason Mace is so popular is its ability to perform in most seasons - it’s your middle order, all rounder.”

F

our years later more than half of all wheat exported from Australia is Mace and according to breeder Steve Jefferies of Australian Grain Technologies (AGT), it is now the most popular wheat variety ever released in Australia’s history.

But how much longer will it hold this remarkable crown? And what are the risks of growing one dominant wheat variety?

The main selling proposition of the Wyalkathchem-type Mace was its very high yield potential in Western Australia and South Australia and its stem rust resistance – and it has certainly lived up to expectations.

Mace accounts for 60% of South Australian wheat plantings and regularly achieves a state average yield of two tonnes/ ha (from Eyre Peninsula right through to the Murray Mallee) although it has recorded freakish yields of eight tonnes/ha in the Mid North.

In Western Australia where the 2014 season finished early with some warm weather in August and September, the best of the central region Mace crops still managed almost four tonnes/ha.

Synergy farm consultant David Pfeiffer said the Mace phenomenon should not be underestimated.

“I’d say up to 70 per cent of wheat grown in Western Australia is Mace,” he said. “In 2014 that’s about three million hectares at an average yield of two tonnes/ha or about six million tonnes of that one variety.

“I imagine that will put a smile on the faces at AGT and underwrite research well into the future.”

Steve Jefferies is certainly proud and pleased.

“You have to take the good with the bad and this has given us a great chance to invest in future varieties,” he said.

“The reason Mace is so popular is its ability to perform in most seasons - it’s your middle order, all rounder.

“In 2013 Western Australia had a very wet spring and Mace finished in the top two or three. But in a drought it will also finish in the top two or three. Where as varieties that are bred for high yields in high rainfall areas really pack up in a drought.”

MARCH 2015

David agrees.

“When growers ask the question ‘Why mace?’ my answer is ‘Why not?’

“Even with the recent breaking down of its leaf rust resistance in Western Australia, growers remain happy to take the risk - especially with regular crop monitoring and preparedness to commit to a fungicide regime.

“I can understand that any mono-culture represents a risk. If we had a massive leaf or stripe rust outbreak across Western Australia we would be very vulnerable.

“But with the range of modern fungicides available and our understanding of weather predictors, spray regimes and monitoring, those risks have been overstated.

“For most growers the big yields plus disease package – not to mention its wheat on wheat rotation flexibility – always outweigh the downsides.”

Frost – the other threat to Mace’s dominance especially in the Great Southern and Lakes region of Western Australia – is always a consideration, David said.

“Frost is something which affects every wheat variety – it’s all about timing and maturity,” David said. “Mace, like other early to mid season varieties is susceptible to frost, hence the need for a later maturing option depending on time of sowing.”

David says Intergrain’s IGW4012 Wyalkatchem and Spear derivative is looking promising, as is the Calingiri replacement Zen (IGW 6046) but the National Variety Trials (NVT) data will highlight how they have performed in 2014.

AGT will also release a late season variety WAGT 328 in autumn and another is nearing final trials with an expected release date in 2016.

But agronomic advantages aside, it is Mace’s Australian Hard quality classification which has made it the wheat of choice in Australia.

Even in the eastern wheat belt of Western Australia where yields in 2014 were being measured in kilograms not tonnes, growers received the $15 - $20/tonne hard wheat premium.

With its good grain size it has a very low probability of downgrading through screenings and blackpoint tolerance is an added bonus.

GLENCORE GRAIN | GRAIN BUSINESS MAGAZINE

05

YIELD

Barley David said it is that “premiumisation factor” which also explains the co-dominance of Mace’s barley partner Hindmarsh.

“More than 50 per cent of Western Australia’s barley is currently Hindmarsh for the very same reason that grain growers chose Mace - that there isn’t anything better,” David said.

“Hindmarsh isn’t a malting variety but it only just misses out - which means that it usually makes food grade for the Chinese market which attracts a $20 - $30/tonne premium on stock feed.

“In a year like 2014 when feed barley prices have been as high as $270/tonne cash you can walk away with almost $300/tonne for food grade which is very appealing – especially when some are growing three tonnes/ha.

“Growers have realised that it is all very well to grow malting but if the segregation facility is not available locally then you are better off planting Hindmarsh with its disease resistance and yield advantages.”

It may not be long before growers get access to malting accredited varieties with all of Hindmarsh’s attributes, including La Trobe and Compass.

La Trobe was released last year by InterGrain, touted as a “Hindmarsh alternative for growers with excellent yields in the low to medium rainfall environments and from a quality perspective, possesses malting characteristics potentially well suited to export brewing industries.”

La Trobe is currently undergoing commercial malt evaluation with accreditation likely in March 2015.

National Variety Trial (NVT) data compiled from 2005-13 06

indicates that La Trobe consistently matched Hindmarsh, yielding 110 per cent or above of the site mean yield across the NVT sites, making it one of the highest yielding potential malting barley’s across the country.

“La Trobe is exciting for growers, because it yields like Hindmarsh, with the added benefit of potentially gaining malting barley status,” said InterGrain Marketing Manager Ash Brooks.

“It also has excellent head retention and good straw strength which is an improvement over Buloke, good disease resistance and the ability to handle a slightly tougher finish, is ideal for growers in the low to medium rainfall areas.”

Another high yielding newcomer with domestic and export malting potential is Compass, developed by the University of Adelaide barley breeding program, and commercialised

by Seednet.

Compass is most similar in plant architecture to Commander, but with notably improved straw strength and lodging resistance. It offers exceptional grain yield, excellent disease resistance, low screenings and superior grain plumpness.

Commander has strong demand internationally and domestically, evidenced by the premium it has attracted this year, especially in South Australia. Once approved, Compass is expected to have the same level of demand with the additional benefit of increased yields.

A decision on its malting accreditation status is expected in 2016.

Program Leader at the University, Jason Eglinton, said Compass had demonstrated its robustness during trials and yields about 10 per cent more than the dominant Commander variety.

YIELD

ONE HUNDRED PER CENT MACE

Left: Mace in glass house, courtesy of Stuart Milde, Australian Grain Technologies Above: InterGrain Marketing Manager Ash Brooks in a Horsham La Trobe barley crop during winter 2014.

“The improvements that we’ve been able to achieve are incremental,” he said.

“There’s better disease resistance, grain size and grain size stability and small improvements in its developmental pattern,” he said.

Chair of Barley Australia Andrew Gee said it would be for the market to determine which of the newer varieties take off.

“The farmers continue to want high yields as well as strong agronomic performance and the brewers want varieties that go through their brewing process most easily.

“Any new variety that is granted malting barley accreditation will need to demonstrate superior performance either in the paddock, the malthouse or the brewery to replace the already established varieties.

“Yield, straw strength, disease resistance and vigour will be the determinants,” he said.

Andrew said from a brewer’s perspective, consistency was key.

“The domestic brewers are seeking reliable and repeatable performance from the malt varieties used in sugar-adjunct beers, whilst the overseas brewers who use starch adjuncts have different malting requirements, but nevertheless seek the same consistent seasonal performance,” he said.

MARCH 2015

Goomalling, Western Australia farmer Chris Schell decided after the wet 2013 spring that he would become a 100% Mace wheat grower and has no regrets.

“I had late season Magenta planted right alongside Mace and although we received a lot of rain in September and October it was Mace which achieved Hard classification and Magenta was classed as Feed,” he said.

“It has good grain size so it is not affected by the falling numbers and because it is a Hard variety is doesn’t take on moisture.”

The decision paid off in 2014. Like much of Western Australia, the western wheat belt season finished early but Chris found himself reaping a crop in November that yielded 2.6 tonnes on 230 millimetres of rain.

He received APW1 rather than Hard for most of the crop “once yields go up the protein goes down” but at $320/tonne Chris said it wasn’t worth chasing a $7 or $8 premium.

“We used to plant quite a bit of Calingiri and try to chase ANW but the noodle market is fickle and you are at the beck and call of export markets,” Chris said.

“It’s cheaper and easier to plan our cropping strategy with Mace. My late season cereal strategy is to use barley, mainly Bass and that also works well in our rotation.”

Chris said if there is a disadvantage with Mace, it is its reliance on fairly high nutrition levels.

“It is a hungry plant and this year we gave it three applications of nitrogen to chase yield,” he said.

“I sow at a rate of 90 to 100kg on a 13 inch row spacing so the nitrogen is important to get it to stand up and compete. But it does handle all the pre-emergent chemicals and establishes well.

“Overall there is nothing else out there that has such a good all round yield and quality mix so my plans are to stick with Mace.”

“With China now by far the largest beer producer in the world and the largest consumer of barley for beer, it will continue to seek large imports of malting barley so there is strong market opportunity there for growers, but as with any commodity it is heavily influenced by price.

“The challenges facing farmers remain the same - they base their planting decisions on market demand for established varieties and then face the annual gamble with the weather conditions, understanding fully the risk/reward of growing malting barley,” Andrew said.

Following a bumper crop in Australia in 2013/14, the barley harvest was about 15 per cent down in 2014/15, due to poor rainfall conditions, especially in the eastern states.

Worldwide, barley production continues to be generally stable at around 135 million tonnes annually.

“Farmers will generally seek to grow malting barleys for the malting premium, knowing that if their crop fails to meet receival standards then it will revert to lower priced feed.

“There is a steady demand for feed grain domestically with the expansion of the feed-lot operators, especially on the eastern seaboard, as well as overseas. Although the price of feed is dependent on the world supply and demand for other feed crops, especially corn,” he said.

GLENCORE GRAIN | GRAIN BUSINESS MAGAZINE

07

GLOBAL INSIGHT

GLOBAL INSIGHT/ HOT COMMODITIES IN CHINA China is the biggest producer and consumer of grain globally. With the world’s highest population who are continuing to transition to higher consumption of meat and Western type flour products, China’s consumption of grain looks set to continue.

Australia is one of the top exporters to China, given its regional proximity and ability to supply the products demanded by customers.

China is the largest Australian grain importer by volume and it buys high quality. There is huge growth potential, if Australia can position itself as a consistent quality supplier.

Grain Business has spoken to a range of Chinese customers who buy Australian grain to get their perspective on their preferred Australian grains, and what they consider in their purchasing decisions.

08

WHEAT Zhaoqing Four Gardener Flour Co., Ltd. Q Please tell us about your business and your products?

A Zhaoqing Four Gardener Flour Co Ltd. (FG) is one of the subsidiary companies of Zhaoqing Four Gardener Investment Holdings Ltd, ranked by the Government of Guangdong Province as one of the Top 100 private companies.

Zhaoqing Four Gardener Investment Holdings Ltd has diversified business in grain processing, trading, storage, investment, port services and logistics.

FG’s major product is wheat flour, with our FG Flour a “Guangdong Famous Product”, and “Jia Fu” and “Bai He Hua” brands awarded as “Guangdong Famous Trademark”.

FG is a joint venture and since its formation we have adhered to the business strategy of “specialized and high-class products”.

Q What grain do you buy?

A The wheat we buy includes APH, ASW, APW, DNS/NS, SWW, CRWS Q What countries do you buy from?

A USA, Australia and Canada.

Q What is important when deciding what grain to buy and from where?

A Price and quality Q Why do you buy Australian grain?

A Based on medium/special flour formula and good quality.

Australian wheat has preferable quality attributes and lower moisture. For example APH, due to high gluten and extensograph result, can achieve good results on cake and bread baking and noodle production.

Why do you buy grain from other origins?

A The wheat from different origins has different features. We can mix them, to help us achieve better products.

Q What do you think will be important in future grain purchases?

A We will consider the cost and quality of wheat.

Q Do you have anything you would like to say to Australian grain growers?

A Keep the consistency of good quality wheat that suits Chinese flour mill.

Q

Guangdong Jinhe Flour Co., Ltd. Q Please tell us about your business and products?

A Guangdong Jinhe Flour Co., Ltd. has top international production line processing medium and high quality special flour. It has the capacity to process 800 tonnes per day, with 55,000 tonnes of storage and deep water berths of 3000MT. Q What grain do you buy?

A APH, ASW, APW, DNS/NS, SRW, CRWS Q What countries do you buy from?

A USA, Australia and Canada Q What is important when deciding what grain to buy and from where?

A The most important factor is quality, next is price.

Q Why do you buy Australian grain?

A For APH, its quality attributes can help to produce high quality noodle products.

Q Why do you buy grain from other origins?

A Lower price or special usage.

Q How important are relationships along the supply chain?

A The punctual delivery of goods that meet our specifications is very important.

Q What do you think will be important in future grain purchases?

A Quality and price.

GLOBAL INSIGHT

Australian wheat has preferable quality attributes and lower moisture.

MARCH 2015

GLENCORE GRAIN | GRAIN BUSINESS MAGAZINE

09

GLOBAL INSIGHT

MALTING BARLEY

FEED BARLEY

Summary of answers from Supertime, COFCO, Tsingtao, Malt Europ, CRE and others.

Q What grain do you buy?

A Malt 1, HIND1, FAQ Q What countries do you buy from?

A Australia, Canada, France, Argentina Q What is important when deciding what grain to buy and from where?

A Steady supply of good, known and consistent quality grain. Fast shipping voyage is also important.

Q Why do you buy Australian grain?

A Large production and good export volume. Price advantage over other origins. Australian barley has high frangibility, moderate protein content and enzyme activity, which is appropriate for Chinese brewing accessories input formula, and wellcontrolled malt quality.

Q Why do you buy grain from other origins?

A Specific quality or demand, or lower price.

Q How important are relationships along the supply chain?

A It’s very important to maintain the steady and good production both in quantity and quality.

Q What do you think will be important in future grain purchases?

A The quality always the first and most important factor.

Q Do you have anything you would like to say to Australian grain growers?

A Continue the good quality malting barley that fits Chinese brewers’ production and strengthen the promotion of new varieties.

Foshan King Pore Q Please tell us about your business and products?

A We are a high-tech enterprise, focused on animal feed and feed premix including research and development, production, sales and service. Our main feed products are for pigs, but also poultry and fish.

Q What grain do you buy?

A Energy feed grains, including sorghum and barley, that are on the China Inspection and Quarantine Services (CIQ) allowed list. For pork feed production the grain needs to be high quality.

Q What countries do you buy from?

A USA, Australia and Argentina Q What is important when deciding what grain to buy and from where?

A Price, quality, stable supply and shipment.

Q Why do you buy Australian grain?

A Because of its high quality.

Q Why do you buy grain from other origins?

A High performance cost ratio.

How important are relationships along the supply chain?

A A stable supply chain is very important for our formula.

Q What do you think will be important in future grain purchases?

A Price

10

New Hope Liuhe Q Please tell us about your business and products?

A New Hope Group (NHG) is one of the largest suppliers of meat, eggs and dairy products in China. The business has three major industrial processing chains in the pig, poultry

and dairy industries. NHG’s annual processing capacity 750 million head of poultry, 10 million pigs and 800,000 tonnes of milk.

NHG also produces feed products for pigs, chicken and ducks.

Their annual production capacity of feed has already achieved 26.6 million tonnes and sales volume of 12 million tonnes which ranks No.1 in China.

Q What grain do you buy?

A We buy corn, sorghum and barley.

Q What countries do you buy from?

A We buy corn and sorghum, from the US and Argentina. We buy feed barley from France, Australia, and Canada.

Q What is important when deciding what grain to buy and from where?

A Price, quality, availability, delivery period. Quality is the most important. Second is price.

Q Why do you buy Australian grain?

A We have good relationships and cooperation in Australia.

Q Why do you buy grain from other origins?

A The price of the other countries is sometimes cheaper than Australia, at the same time the quality can fit the requirements of our feed mills.

Q How important is relationships along the supply chain?

A The supply chain is very important.

For our feed mills, we are working with international companies establish strategic relationships.

Q What do you think will be important in future grain purchases?

A The stable supply is very important because of the need for feed and energy feed protein raw materials.

GLOBAL INSIGHT

“In 2014/15, China is forecast to produce 126 million tonnes of wheat. This is record production for China as a result of increased plantings due to government price support and record yields.”

WHEAT PRODUCTION

CONSUMPTION

IMPORTS (MILLION TONNES) 150 100 50

07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15

0

CORN PRODUCTION

CONSUMPTION

IMPORTS (MILLION TONNES) 250

CHINA PRODUCTION, CONSUMPTION AND IMPORTS

China is significant producer and consumer of wheat and corn, with import figures a small percentage of the total consumption. However, for soybeans and barley China produces a very small quantity and imports a majority of what they consume.

In 2014/15, China is forecast to produce 126 million tonnes of wheat. This is record production for China as a result of increased plantings due to government price support and record yields.

Consumption is forecast at 124 million tonnes. According to the USDA, China will import 1.5 million tonnes, a decrease of five million tonnes on last year due to the record domestic production.

Corn production in 2014/15 is forecast at 216 million tonnes, a fall of 3 million tonnes from 2013/14, due to dry summer conditions in the growing regions. Consumption is forecast to increase four million tonnes year on year to 216 million tonnes in 2014/15. Imports are estimated at two million tonnes.

China consumes a significant amount of soybeans, which is processed into oil and meal for domestic consumption. Consumption is forecast to be 86 million tonnes in 2014/15, a record amount.

Domestic production is only 12 million tonnes, meaning 74 million tonnes will be imported, also a record figure.

Compared to other grains, barley is used in much smaller quantities.

Domestic Chinese production has been relatively consistent in recent years, around 2 million tonnes. Consumption has increased in the past two years to six million tonnes, with 2014/15 imports forecast at 4.5 million tonnes.

200 150 100 50

07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15

0

SOYBEAN PRODUCTION

CONSUMPTION

IMPORTS (MILLION TONNES) 100 50

07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15

0

BARLEY PRODUCTION

CONSUMPTION

IMPORTS (MILLION TONNES) 8 4

07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15

0

Source: United States Department of Agriculture, World Agricultural Supply and Demand Estimates, February 2015, usda.gov/oce/commodity/wasde MARCH 2015

GLENCORE GRAIN | GRAIN BUSINESS MAGAZINE

11

GLOBAL INSIGHT

GLOBAL INSIGHT/

WORDS/ ANDREW VROLAND, DIRECTOR OF MARKETING, GLENCORE

GRAIN IN UKRAINE Ten years ago Ukraine had very little influence on global grain markets. Today it is a major exporter, with increasing production, quality and significant potential to continue this growth. The good news for Australian growers is, while the Ukraine is one to watch, it is yet to be a significant competitor in Australia’s markets.

U

kraine is part of the Black Sea region along with Russia and Kazakhstan. The country produces primarily crops of corn, wheat, barley and canola.

In general, productivity and production in Ukraine is increasing. Farm sizes are increasing, as growers build their economies of scale, and yields increase year on year. The rich soils available for cropping in the Ukraine indicates its production potential is far greater than current volumes.

From an agronomic perspective Ukrainian farming practices are less sophisticated than Australian practices.

Growers use fewer inputs, fertilisers and crop treatments.

While this is changing, it is highly dependent on cost of inputs, which was high last year due to the depreciation of the local currency.

Corn is Ukraine’s largest crop with production in 2014/15 forecast at 28 million tonnes. Production has grown from seven million tonnes in 2007/08 and was as high as 31 million tonnes last season. Approximately one third of the corn is consumed domestically, with two thirds of the crop exported to the feed markets in the Middle East and Asia.

In the past 18 years, Ukrainian wheat production has been highly variable, as low as four million tonnes and as high as 26 million tonnes. The trend is increasing production year on year, with wheat production in 2014/15 forecast to be 25 million tonnes, with the 10 year average production of 19 million tonnes.

Ukrainian wheat exports are also on an upwards trend,

12

though again over the past 18 years exports have ranged from less than one million tonnes to 13 million tonnes. This year, exports from Ukraine are forecast at 11 million tonnes.

Approximately 30-40 per cent of Ukraine’s total wheat production is currently feed wheat with the remaining milling wheat; however milling wheat percentages appear to be increasing. Most wheat downgrading to feed is a consequence of Sunn pest damage. The quality and consistency of Ukrainian wheat is gradually improving through improved agronomic practices.

Ukraine’s milling wheat has protein levels of up to 12.5 per cent. Therefore it enters the Middle East and African markets as it is more suited to flat breads. Ukraine supplies one quarter of Egypt’s imported milling wheat. The main markets for Ukraine’s feed wheat are Israel, Bangladesh, Japan and Philippines. In addition, Ukrainian feed wheat enters the EU under a levy and duty free quota.

Australia and Ukraine are not direct competitors in the global wheat market unless Australia produces large quantities of feed wheat. However, Australia has lower import tariffs in some Asian destinations which is a competitive advantage over Ukrainian wheat.

Barley is Ukraine’s third largest crop with production of nine million tonnes in 2014/15, an increase of two million tonnes on the previous year. Production has varied in recent years between six and 13 million tonnes, but is not trending upwards like wheat and corn.

GLOBAL INSIGHT

Australia and Ukraine are not direct competitors in the global wheat market unless Australia produces large quantities of feed wheat. However, Australia has lower import tariffs in some Asian destinations which is a competitive advantage over Ukrainian wheat.

MARCH 2015

Port of Illichivsk, owned by Glencore, situated on the south western coast of Ukraine.

GLENCORE GRAIN | GRAIN BUSINESS MAGAZINE

13

GLOBAL INSIGHT

Ukraine production 2014/15

Corn: 28 million tonnes Wheat: 25 million tonnes Barley: 9 million tonnes Canola: 2 million tonnes

In 2014/15, Ukraine’s domestic barley consumption is five million tonnes and exports are forecast at three million tonnes, a majority being feed barley. The remainder will build Ukraine’s stock levels.

Ukraine is a direct competitor with Australia for feed barley exports. A majority of Ukraine’s feed barley exports are to Saudi Arabia with small volumes destined for other Middle East countries such as Kuwait. Ukraine has also been competitive into the Chinese stockfeed market and if this market grows, Ukraine and the Black Sea region is expected to compete with Australia in this market.

Storage and handling in Ukraine Ukrainian growers have both on-farm storage as well as access to bulk central storage systems. There is sufficient storage capacity for the annual crop. There are many port terminals along the Black Sea coast line with most owned and operated by global and domestic grain marketers. A majority of exports are shipped through four port terminals, Mykolayiv, Odessa, Ilyichivsk and Yuzhny. Grain is moved to port via road and rail with railway delivery speed improved in recent years.

Grain is either sold delivered to port (CPT) or delivered to upcountry storage (EXW). Delivery EXW trades at a premium to CPT, with more than 20 exporters competing to buy grain.

Challenges The political and economic environments in the region pose considerable challenges for the grain industry in Ukraine. The currency, Ukrainian hryvnia, has devaluated significantly, hitting record lows in late 2014.

The grain market is deregulated; however, there is the ongoing potential for export bans and restrictions by the Government depending on production levels and the political environment. There are also restrictions on the sale and foreign ownership of farming land. There have been a series of temporary moratoriums on land sales and foreign investors are only able to lease parcels of land rather than purchase outright.

The potential for crops to be damaged by winter kill is also a challenge for Ukrainian growers with any crops planted in autumn at risk during the winter period. However, depending on timing there is the opportunity to replant with corn or barley.

Andrew Vroland, Director of Marketing, Glencore, presented on the Black Sea Market Outlook at the International Association of Operative Miller’s Conference in Cape Town, South Africa in December 2014.

14

ARE YOU SEEKING MORE FROM YOUR SOILS?

HAS THE ANSWERS.

WHO WE ARE

WHAT WE DO

EDUCATION

Injekta Field Systems is a soil advisory company that applies recognised soil science into effective field solutions.

We specialise in diagnosing soil condition to improve soil, plant and animal performance.

The key to improved productivity is to optimise soil function and performance.

We provide education to agronomists, farm advisors and farming groups to engineer improved soil performance.

SOIL MANAGEMENT Soil investigations and recommendations to improve profitability

ADVICE & SUPPORT

Providing detailed advice using established science

FERTILISER EFFICIENCY

PRECISION INTEGRATION

Extracting greater efficiency from your most expensive inputs

Understanding Precision Ag information to implement management change

Level 1, 69 Fullarton Rd, Kent Town SA

www.injekta.com.au

1300 550 440

info@injekta.com.au

BARLEY

BARLEY/

WORDS/ JONATHON EVANS, BARLEY TRADER, GLENCORE GRAIN

MALTING VARIETIES TO WATCH Malting barley continues to have strong demand both domestically and internationally, and while there are a large number of varieties there are a few growers should focus on to maximise their returns.

T

he production of larger volumes of a smaller number of varieties will provide greater opportunity for exporters to accumulate for vessels and support efficiencies in the supply chain, both which benefit growers.

In all states, marketers and bulk handlers are focusing two main varieties of malting barley – Scope and Hindmarsh.

Growers are encouraged to grow Scope barley as it is agronomically superior to Buloke and is becoming increasingly popular due to strong end-user customer demand in China.

Hindmarsh is a well-established barley variety and provides excellent yields and high quality, and like Scope, has strong market demand in China.

From a regional perspective, Western Australian growers are also encouraged to grow the Bass variety. Limited volumes of Baudin and Commander will also be targeted in the Kwinana

Commander and Buloke remain in demand in the eastern states, and Baudin has reasonable domestic demand in NSW. While Gairdner is still grown, it is becoming more difficult to accumulate parcels for export.

Varieties to watch in the future are La Trobe and Compass.

La Trobe is the malting equivalent of Hindmarsh, and is well suited to low to medium rainfall areas Australia wide. It is expected to gain malting accreditation this year and will most likely be commercially available for growers next season.

Compass is closely related to Commander but is significantly higher yielding, and is also awaiting malting accreditation which is expected to happen in 2016.

Growers are encouraged to grow Scope barley as it is agronomically superior to Buloke and is becoming increasingly popular due to strong end-user customer demand in China.

16

Zone to fulfil specific demand.

In South Australia, Commander continues to see strong ongoing domestic and international demand.

There will be limited segregation capacity for Buloke, with growers being encouraged to grow Scope as an alternative.

570

high load

COMMERCIAL 20 MINUTE RAINFAST OFFER.*

QUALITY YOU CAN TRUST.

SOW WITHIN 1 HOUR OF SPRAYING.

Partner of *Roundup ULTRA® MAX, when used in tank mixtures with an approved penetrant, should deliver commercially acceptable weed control even if moderate rain occurs just 20 daylight minutes after spraying. Sinochem Australia will replace up to 100% of your initial use amount of Roundup ULTRA MAX for re-treatment if a commercially acceptable weed control result is not achieved. For enquiries, visit Roundupag.com.au. This offer is in addition to other rights available to the consumer under the law. The product label should be consulted before use of Roundup ULTRA MAX and where required seek professional advice. Roundup ULTRA is a registered trademark of Monsanto Technology LLC used under licence by Sinochem Australia. © 2014 Sinochem International Australia Pty Ltd.

FARM PROFILE / GRASSTREE AND ARLINGTON

GRASSTREE & ARLINGTON FARMS FARM PROFILE WORDS/ MEL KITSCHKE

OWNERS/MANAGERS

Rob and Cheryl Kingston and their three children, Eliza 10, Josiah, 8, and Milo, 6.

The farming business is a combination of family trusts with a single trustee company. Rob is director of the trustee company and Cheryl is an equal shareholder in that company.

PROPERTY NAMES

Grasstree and Arlington (two neighbouring properties).

RAINFALL

Long term average 630 mm Last 12 months 685 mm

SOIL TYPES

More than 80 per cent of the property comprises black self-mulching soils, with the remainder being areas of brigalow and box belah.

TOTAL FARM AREA

930 hectares owned plus 160 hectares leased (from a neighbour).

TOTAL CROPPING AREA ANNUALLY

Around 900 hectares. This comprises 300 hectares furrow irrigation and 520 dryland cultivation where cotton, sorghum and corn are grown, plus 80 hectares of finecut Rhodes grass which is cut for hay.

EMPLOYEES

Casual help is employed at planting and harvest when needed, with some labour shared with Rob’s father, Trevor, who is also farming in this district.

MACHINERY

Casse STX 485 tractor Case MX 290 tractor Case MX 250 tractor Case 3330 sprayer Case 2188 header Hodgco Laser Bucket 8 x 4 Volvo truck mostly used on farm Combination of 10 and 12 metre 3PL planters and fertiliser rigs A range of tillage and irrigation equipment

18

FARM PROFILE / GRASSTREE AND ARLINGTON

Rob and Cheryl Kingston and their three children, Josiah, 8, Eliza 10, and Milo, 6.

MARCH 2015

PROPERTY LOCATION

Yandilla, in the Millmerran area, 45 minutes south west of Toowoomba.

GLENCORE GRAIN | GRAIN BUSINESS MAGAZINE

19

FARM PROFILE / GRASSTREE AND ARLINGTON

“We use just one sorghum variety (Pioneer G22) which retains the stubble standing well for the following cotton crop.”

When was the farming district settled?

This whole district was most notably held by the Gore Family who came out from Ireland in the 1840s.

Q What is the history of your farm? When settled and by who?

A The district was mostly used for sheep grazing and dairying until farming gradually took over.

This immediate property was largely cleared and first farmed by the Simmons family in the 1950s.

Q What made you want to be a farmer?

A I can’t ever remember a time where I wanted to be anything else - maybe it’s an affliction I was born with! I love growing crops. Farming can be a rewarding and satisfying lifestyle. It can be disheartening at times but you make up for that in the times when it works out.

Q Why grain farming - why not stock?

A Black self-mulching soils are more suited to cropping. We do have some lighter country suitable for stock where we grow grass for hay, but there isn’t enough of it to have an economy of scale for livestock. And at least this way we can manage the ground cover.

This area of our farm is quite erosion prone and the Rhodes grass grows there like a weed, and gives us pretty good returns and acts like a filter pack for water coming off the ground above it.

Q What education and training did you undertake?

A I did two years tertiary study but not related to agriculture because at that time my parents had sold the family farm and had not yet bought another property. I haven’t done any formal study in agriculture or business Q A

20

but have a very keen interest in these things and read a lot. The Internet holds a wealth of information and there’s no shortage of other growers willing to share their information and experiences.

Q How do you manage your cropping program?

A The whole cultivation area is in two metre tram tracks or furrows. The main row crop tractor is on two metre wheel centres, the sprayer and combine are on four metre centres. We often alternate the wheel tracks used by the sprayer into different runs so as not to run the same tracks down too deep.

We use Case/Trimble RTK for auto-steer and Topcon for land levelling.

The usual rotation is cotton alternating annually with sorghum. The sorghum is in one metre rows which are left zero till with the stubble standing. We plant the cotton in two metre rows, with one row directly under the centre of the tractor effectively in the middle of a two metre bed, and 50 cm away from the sorghum stubble rows.

This strategy allows for pupae busting tillage every two years following the cotton crop, which is a resistance management requirement of growing Bollgard GM Cotton.

This means planting cotton on irrigation country in a dry land configuration but spreading our limited water out on a larger area.

We use a contractor for the cotton picking and he is able to cover eight meters in each pass quite easily.

This cropping strategy means we have good opportunities to control grasses and

other weeds with glyphosate in the Roundup Ready cotton crop, and easy control of volunteer cotton and other summer weeds in the subsequent sorghum crop.

It has also meant a much lower reliance on the use of residual herbicides which is always a complicated issue as Grasstree Creek runs through the property.

The main fertiliser input is nitrogen which is mostly in the form of Anhydrous Ammonia gas, and this is applied on the two metre beds between the plant rows either all pre plant or in crop depending on planting opportunities.

Application rates are usually in the order of 160 kg N applied pre-plant for sorghum and corn and a 160 kg of N split 50/50 pre and post plant in the cotton.

We try to apply 50 kg/ha of Potassium Sulphate every two years on all the country and 50 kg of MAP every year in or near the plant row.

We have used John Adriaans as our

FARM PROFILE / GRASSTREE AND ARLINGTON

consultant agronomist for several years.

Having an outside party involved to provide comment and advice on planting strategies and farm development planning has been extremely valuable in recent years.

In terms of varieties, our mainstay cotton variety is either 71 RRF (Roundup Ready but not Bollgard) or 71 BRF (Roundup Ready and Bollgard). The most common variety is 75 BRF, but the better establishment of 71 suits our early planting preference.

We use just one sorghum variety (Pioneer G22) which retains the stubble standing well for the following cotton crop.

We tend to change our corn varieties each year. We often have Pioneer corn variety trials on our property.

We grow a combination of processing corn and feed corn, with the decision made at the time of sowing depending on the premium for processing varieties at the time.

Feed corn is easier to deliver, more robust in MARCH 2015

yield, and more reliable, but in recent years we have seen more consistent yields from processing varieties.

We are busy developing more land for furrow irrigation to help with crop rotations and make better use of soil profile moisture.

We have had some fields miss out on a summer crop last season just because the top 20 cm stayed too dry through lack of rainfall, despite of having a flood the previous summer.

If we could have applied 60 mm in irrigation to those fields they would have grown a whole crop on the stored moisture.

We’re using a Hodgco Laser Bucket to level and drain fields with my own designs generated with the Topcon AgForm 3d software.

Sorghum and corn is all stored in our own silos and sold on an ex-farm basis. We have 3,300 tonne of aerated storage spread across three locations and grain is transported from the header via chaser bins direct to the silos.

Finecut Rhodes Grass is cut just once a year and is usually made into 8 x 4 x 4 large squares.

However, this season we are planning to make round bales to suit a new market opportunity.

Q How do you sell/market your crop?

A We do some forward sales once the crop is growing, but rarely any more than a third of anticipated production. Most of the rest is marketed either at or soon after harvest time. We’re not keen on holding grain to speculate on the price and treat the storage more as harvest convenience than a marketing strategy.

Q Who do you rely on for grain marketing advice?

A We seek out general market commentary from a variety of sources to try to get a handle on the general trend of what’s happening in the market. We have very useful input from a Toowoomba based broker (Pete Johnson, from Left Field Solutions).

GLENCORE GRAIN | GRAIN BUSINESS MAGAZINE

21

FARM PROFILE / GRASSTREE AND ARLINGTON

What are the three biggest challenges/risks to your farm business?

A 1. Rising fertiliser prices. Because they are our biggest single expense every year, they don’t have to go up by much in percentage to have big impact on our net result.

2. Floods and droughts. In the past four year period we have had the worst drought and two of the worst floods that people have experienced in this area. Last year lots of people missed out on planting a summer crop for the first time ever. We can adapt to these things happening once in a while, but not too regularly.

3. Rising Interest rates. A lot of people have heavily borrowed against their capital for working cash, which is easy to justify while rates are low. But if rates were half as high again it would be very difficult.

At the moment, commodity prices, fertiliser prices and interest rates are all in a range where farming is viable. We could handle it if there was movement in any one of these areas, but significant movement in two of the three would make it a different world.

Q How do you try to manage those challenges/risks?

Q

22

We try to minimise fertiliser usage and/or wastage by splitting applications of nitrogen at least twice, sometimes in thirds. We are always striving to find better ways to apply fertiliser in crop and have just purchased a new spreader which will hopefully help.

The land levelling and irrigation development plan is as much as we can do to make use of flood water to irrigate in a subsequent season. The only positive to a drought is that it’s nice and dry to do more earthmoving.

We have done many surveys and trial configurations to develop the best layout possible.

There’s not much we can do about interest rates at the moment but we have done some fixing in the past.

Q What technological developments do you foresee which will improve your family farm?

A Improvements in solar to make it more affordable would have a big impact because a lot of our irrigation water is from bores. We have four locations that would benefit from solar but we need the electricity companies to get to the stage where they will allow us to have a single 100kw system at one site to A

share with the other sites, rather than having 4 x 25kw systems spread over the property.

Four separate units would be considerably more expensive to install and have higher risk of theft.

Q Do you have future expansion plans?

A We probably need an extra 300-400 hectares of cultivation to be more secure but we’re not in a position to do anything at the moment. Average values are $5,000/ha for dry land farms with black soil. Irrigation country is typically $10,000/ha. Overseas buyers are certainly keeping values up, but the reality is, most of us need values to be maintained to preserve our own capital positions. Leasing extra farming area is becoming more common to generate a better economy of scale, and overseas investors often provide that opportunity for local growers. Our focus at the moment is making our existing areas more productive through earthmoving and development work.

Q Would you shift to another district for cheaper land or if rainfall becomes a problem due to climate change?

A Having a reasonable bore water allocation and a reasonably reliable overland flow catchment

FARM PROFILE / GRASSTREE AND ARLINGTON

for irrigation provides a degree of insulation from lower rainfall years, but our biggest disasters have been from floods not drought.

Q Do you have a business diversification strategy?

A We have some modest off farm residential property investments but no strict diversification strategy. There’s still plenty of scope for diversification within the farming business given our good soils and ready access to water.

Q Do you think food production has a good future in Australia?

A We’ve had good improvements in farm profitability over the past decades but there has always been a catalyst for it. More efficient machinery during the 70s and 80s, zero tillage technologies in the 80s and 90s and GM crops, especially cotton, in recent years. It seems that the one thing that has not changed dramatically is the farm gate price of the commodity we’re growing.

This year we have seen a generally upward trend in farm gate prices, albeit largely a function of local production issues and our recently depreciating dollar. These prices are more realistically what we require to make farming sustainable.

Q Will you encourage your children to return to the farm?

A We’d love them to have the opportunity to return to the farm if they choose to. I would love if it they did, but would hate for them to feel compelled to.

Q What is your retirement/succession plan?

A Family trust structures and trustee company shareholdings have largely taken care of those issues well ahead of time. We’re trying to keep an active plan in place that remains adaptable to changing family circumstances. Taxation rules and title transfer duties certainly complicate those issues.

MARCH 2015

“Overseas buyers are certainly keeping values up, but the reality is, most of us need values to be maintained to preserve our own capital positions.”

GLENCORE GRAIN | GRAIN BUSINESS MAGAZINE

23

ROTATIONS

ROTATIONS/ WORDS/ PETER FULLER

HOLY CANOLA Is the crown held by Australia’s most popular rotational break crop about to slip? For the first time in half a decade canola plantings are expected to decline in Australia in 2015.

24

ROTATIONS

“A mapping of BWYV outbreaks in canola in 2014 found they were associated with autumn and early winter infestations of green peach aphid.”

T

he Oilseeds Federation of Australia predicts that the 2015 canola crop could be as low as three million tonnes - down by 20 per cent on previous years.

The OFA says lower than expected yields in 2014 and a drop in prices are expected to combine to discourage new season plantings of the popular rotational cash crop.

While the 2.4 million hectares of canola sown across Australia in 2014 was about the same as 2013/14, yield was down by around nine per cent due to poor winter rainfall, a dry spring and severe frosts in the core growing regions of southern New South Wales, central Victoria and the Wimmera districts in the east and South Australia.

But it is also the newest challenge to canola growers – Beet Western Yellows Virus (BWYV) – which delivered a lower than expected crop to many growers in South Australia and Victoria – and it is expected some growers will be cautious about planting canola again in 2015.

Early infection from BWYV in South Australia wiped out some crops and caused below average yields in the Mid and Lower North, Murray Mallee and South East.

Primary Industries and Regions South Australia’s (PIRSA) Crop and Pasture Report released in January told the canola story of 2014. From 302,400 ha just 314,200 tonnes was harvested (an average of one tonne/ha), down by 30 per cent from the 434,000 tonnes harvested from a similar 301,000 hectares in 2013/14.

A mapping of outbreaks during 2014 undertaken by the Victorian Department of Economic Development, Jobs, Transport and Resources (formerly Vic DEPI) in conjunction with South Australian Research and Development Institute (SARDI) and the Department of Agriculture and Food Western Australia (DAFWA), found that the outbreaks were associated with autumn and early winter infestations of green peach aphid (GPA).

This is the principal vector of BWYV and researchers are MARCH 2015

recommending growers are vigilant with their monitoring in autumn 2015.

Bill Kimber, SARDI said optimal timing of monitoring for GPA was late morning to early afternoon when temperatures were higher.

GPA is most commonly found on the undersides of leaves but could also be detected on stems, among buds and flowering heads. Bill recommends visual monitoring directly searching for aphids and plants by checking at least five points in the crop and 20 plants at each interval.

“Spraying with insecticide should be undertaken with care. Growers could easily be confused between GPA and other aphid species such as winged turnip aphid. In this case spraying would not only be a waste of money but could increase the risk of insecticide resistance in GPA and destroy beneficial insects and bees,” he said.

Monitor early and often to beat the virus Balaklava, South Australia wheat and canola grower Grant Anderson stared down a BWYV fungal infection in 2014 but he won’t be changing his rotation program in 2015.

“We were pretty lucky with only about 40 hectares affected,” said Grant, who farms 2,200 ha east of Balaklava in a fairly reliable rainfall area near the Clare Valley foothills.

“We sowed early so the plants were quite strong when the virus hit in June but it really did knock them around.

For a start I thought it was hormone damage but when we inspected it more closely with our agronomist we found it was BWYV. “We sprayed with insecticide and we had good rains in July and August so the crop recovered. It finished up yielding 1.3 tonnes/ha compared to the unaffected canola which yielded 1.9 tonnes/ha.

“So we were more fortunate than others in the Mid North and Mallee who lost quite a bit.”

GLENCORE GRAIN | GRAIN BUSINESS MAGAZINE

25

ROTATIONS

1

3

2

4

Grant said canola played such an important role in his rotation that he had no plans to discontinue it this year.

“We sow wheat on wheat then have a clean break with hay or beans one year and canola the next. We find that strategy provides good control of brome and ryegrass and at $500/ tonne canola provides a better return than other break crops.”

At the time of talking to Grain Business, just before Christmas, he was still holding half of his canola crop waiting expectantly for prices to lift above $480/tonne.

“You have to get at least $500/tonne for canola to be profitable – we work on twice the price of wheat, given the lower yield.

“The market was depressed late in 2014 due to oversupply in the northern hemisphere but we have seen things change before so we are just waiting and watching.”

Grant said he was treating the BWYV infection as a “oneoff” at this stage.

“The aphid infestation was unprecedented,” he said. “We think it was possibly a result of a lot of marshmallows growing around fence lines in autumn which acted as a host.

“The aphids are very hard to see - you have to get out of the ute and actually turn the leaves over to identify them.

“I guess they are there all the time but the conditions were just right for an outbreak. We will start monitoring much earlier this year and spray early if we see any outbreaks.”

26

1. Green peach aphid on underside of canola leaf - Photo courtesy of Peter Norris, Agronomy for Profit 2. BWYV testing results from Vic Department of Economic Development, Jobs, Transport and Resources (formerly Vic DEPI). 3. BWYV infection in seedling canola. 4. BWYV symptoms in older plant with purpling on leaves from the base of the plants - Photos courtesy of Andrew Pfitzner, Eudunda, SA.

CANOLA CRASH Canola prices were hit for six in August last year when the global production outlook indicated strong supplies of canola coming onto the market after the northern hemisphere harvest.

While growers started 2014 looking at prices in excess of $500/ tonne expectations gradually declined due to the huge US corn and soybean crop and a Black Sea rapeseed harvest that continued to grow.

In fact forecasters were predicting the lowest Australian canola prices since 2009, in the weeks prior to harvest.

Back in September the November 2014 Intercontinental Exchange fut¬ures price for canola was around $414.07 a tonne on 10 September, while new season cash contracts del¬ivered in Geelong were being offered at $445-$450.

In December prices had risen to $470/tonne (at port) but many growers were still playing wait and see.

The Sprayer

POMMIER & AutoTerrain...

Revolutionising the spraying experience!

SARITOR with AutoTerrain & Pommier TR5 36.5 to 42.5m, B3 48.5m aluminium booms

COMMANDER with AutoTerrain Pommier 36.5 to 48.5m B3 aluminium booms Growers attending recent HARDI Ride&Drive events held around the country have been surprised by the incredible boom performance accredited to AutoTerrain boom height and stability control, and POMMIER aluminium booms which are half the weight of their steel equivalents.

POMMIER 30.5 to 48.5m aluminium booms deliver incredible performance through design and construction techniques perfected over 30 years of manufacturing experience.

AutoTerrain sets new standards in boom height control by allowing the boom to follow the terrain contour at the pre-selected distance off the crop or ground.

These sprayers deliver a new level of accuracy and uniformity to broadacre spraying, unlike anything experienced before!

Visit hardi.com.au for more about HARDI technical innovations that will make spraying easier for you, or to register your interest in attending a Ride&Drive demo near you.

Call 1300 042 734 for more info.

QUALITY

“Grower returns are directly influenced by the quality they deliver. Without this classification system, there would be less quality assurance available to buyers.”

QUALITY/ TIME TO FOCUS ON QUALITY If Australia is to compete effectively in rapidly evolving international wheat markets it is essential that it continues to provide the quality of wheat that meets customer needs and expectations.

That’s the view of two of Australia’s most experienced grain leaders: Peter Reading, Chairman of Grain Trade Australia (GTA) and Ron Greentree, a Director of Wheat Quality Australia (WQA) and Chair of the Wheat Classification Council.

28

Global wheat “We are all aware of the importance of China, the fastest growing economy in the world,” Peter said.

“There is an increasing demand for Western style foods such as bread, biscuits and pasta and major wheat exporters will be competing for that critically important market.

“The stakes are getting higher and if we want to grow our share of that market then we have to be better than our competitors.

“To intensify that competition, the former Soviet Union grain producing nations are getting their acts together and are becoming increasingly significant players in the world wheat trade.”

As the former Chairman of GrainCorp and Grain Growers Association, Ron says the biggest message Australia needs to send to its overseas customers is that “we are listening”.

“There is intense international competition for the Asian market and a noodle producer in Shanghai may not know whether he is using Australian wheat or a blend of wheats from the Ukraine and USA,” Ron said.

“We have to prove to the buyers, the processors and the millers that we are absolutely committed to producing the type of wheat that they want – that we care about the quality of our grain.”

As pointed out by Peter Reading,

major components of Australia’s wheat quality system are the GTA Trading Standards and the Wheat Classification System.

Classification Variety classification that was previously part of AWB’s quality control role, was handed over to Wheat Quality Australia, a joint venture between GTA and Grains Research and Development Corporation (GRDC), and they release the annual Wheat Variety Master List.

“After two years of transitional funding arrangements the GRDC now funds WQA’s operations,” Peter said.

“GTA is very pleased with the role that WQA plays in producing the Wheat Variety Master List and the market signals that variety classification provides to farmers and the grain trade.

“Growers probably don’t fully appreciate the detailed technical evaluations that are required to annually produce and maintain the Master List.”

The Master List contains the names and highest possible grade for wheat varieties approved by Australia’s wheat classification process. Released in September each year it forms part of each season’s Grain Trade Australia Wheat Standards.

The 2014 list includes 11 new varieties – Kiora, Condo, Sunmate,

QUALITY

Mitch, Supreme, Viking, DBA Aurora, Harper, Scenario, Adagio and Manning.

Viking is a new Udon noodle wheat for Western Australian growers.

Ron said the Wheat Variety Master List was a vital public acknowledgement of the industry’s commitment to quality.

“It shows our customers that Australian wheat growers are serious about classification and that they only grow varieties which have been approved for certain end uses,” he said.

“Growers must sign a statutory Variety Declaration when they deliver grain to an Australian receival centre.

Wheat that is not classified is rejected for domestic or export markets, although it can still be stored and sold as feed wheat.

“Grower returns are directly influenced by the quality they deliver.

Without this classification system, there would be less quality assurance available to buyers, which would affect Australia’s competitiveness in marketing wheat to domestic and global customers.

“It’s another reason why WQA is currently deleting some of the older varieties from the list,” Ron said.

Last year WQA identified 46 old wheat varieties which will be deleted from the list in 2015. Each of the varieties are 12 or more seasons old,

they do not attract any PBR payments and they do not have a “quality” class ie their maximum grade is GP or Feed.

“Classification is critical, to ensure Australia remains a trusted world leader in the quality of its wheat varieties,” Ron said.

“So I always tell growers to consult the Master List and use it – it is our

the world.”

Feed wheat demand Last year around 33 per cent of grain produced in Australia was used for feed.

“The last few dry years on the eastern seaboard have seen a lot of grain which would normally have been exported go down the throats of feedlot cattle,” he said.

“The prediction of a doubling of the size of the chicken meat industry by 2021 and the Asian demand for our pigs and cattle means that many wheat growers will achieve higher prices and better returns by growing feed.

“With a number of Chinese investors setting up abattoirs in NSW and Queensland, that demand is only going to continue.

“WQA has a role in working with the MLA and the chicken and pork sectors, to quantify this demand and send those signals back to breeders and growers.

“Maybe it’s time for breeders to focus on high yielding feed varieties – there doesn’t seem to be much sense in growing Prime Hard wheat just to feed animals.

“The good thing is that there are a range of opportunities for growers – you can chase the high quality export market or the domestic or international feed market.

“It’s all about growing for purpose.”

“It shows our customers that Australian wheat growers are serious about classification and that they only grow varieties which have been approved for certain end uses”

MARCH 2015

guarantee of quality.

“I don’t think it is essential to understand the technical aspects of classifying a wheat variety as AH or ASW or APW - it is a very thorough process involving breeders and the most eminent plant scientists, agronomists and marketers in Australia.

“For growers it is more important to use the Master List as a quality guide and a benchmark.

“If every Australian grain grower starts to think about meeting customer needs when they choose the variety they plant – not just on its stripe rust resistance or yield – then we will remain the best wheat growers in

GLENCORE GRAIN | GRAIN BUSINESS MAGAZINE

29

FARM MANAGEMENT

FARM MANAGMENT/ WORDS/ OLIVIA FULLER

A FRESH PERSPECTIVE TO BOOST YOUR FARM BUSINESS IN 2015 Australian family businesses using advisory boards to professionalise their operations are outperforming their competitors who rely on the experience of family members alone.

30

FARM MANAGEMENT

K

PMG’s 2013 Australian Family Business Survey of 600 family enterprises revealed that businesses with formal advisory boards or panels, made up of family and non family members, performed better in business and achievement of family goals, compared to those who did not use external advisors.

For farming family businesses that have been reluctant to open their operations up to the advice of external parties, Senior Consultant and Director of BW Business Development, Bill Winter, says now is the time for a strategic rethink.

“In multi-generational agribusinesses you have different levels of knowledge, skill, business acumen, a variety of emotions and different individual aspirations,” said Bill, an advisor to farm businesses for more than 15 years.

“Engaging non family member advisors will provide the family with an objective, non emotional perspective on issues that are often too sensitive for the family to deal with by themselves, such as ownership shares, rights and responsibilities, and the competence of family-member managers.

“My experience working with family agribusiness boards shows that an advisory panel will provide knowledgeable, clear and sometimes alternate thinking, reinforcing core competencies and asking the difficult questions when required.

“They are not bound by traditional farming assumptions and they are not influenced with internal family issues and emotions,” he said.

Bill said when a business only had family members involved who had never worked anywhere else, it was very difficult to avoid becoming insular in their thinking.

“They lack external expertise in some of the things a board needs to be accountable for, such as compliance and risk management,” he said.

Bill said farming family enterprises needed to recognise the high level of compliance responsibilities – and the consequences of non-compliance - businesses faced today.

“These are too numerous for the typical family business – agribusiness or otherwise – to understand, which is where an external advisor can play a valuable role.

“Any breach of regulation, such as workplace rights and rules under the Fair Work Act, carries significant financial penalties, that can be in the hundreds of thousands for individuals and companies,” he said.

MARCH 2015

“For farming family businesses that have been reluctant to open their operations up to the advice of external parties, now is the time for a strategic rethink.”

GLENCORE GRAIN | GRAIN BUSINESS MAGAZINE

31

FARM MANAGEMENT

Establishing an advisory panel Bill said the first step to introducing an advisory panel was to discuss the benefits to be gained from engaging an external advisor on a panel or board, and the risks of sticking with the status quo.

“An effective advisory panel includes a non-family member who is there to challenge your assumptions, bring wide industry based experience to the table and to fill a recognised skill gap within your business,” he said.

“They can also act as a mentor to younger generations in the business, who may feel more comfortable confiding in a non family member about certain frustrations or professional development needs.

“An advisory panel has no legal liability – it is there only to provide advice. In most cases this structure is more appropriate than engaging an advisor as a director on the board, due to the onerous obligations and responsibilities applicable to being a formal director under the Corporations Act 2001.”

Bill said it was important to do a skills gap analysis to look at what was missing from around the table, to ensure the advisor brought new knowledge and experience relevant to the business.

“The breadth of skills required to govern a business in 2014 and beyond includes workplace relations, workplace safety, financial understanding, governance, compliance, risk management, legal, conflict resolution and succession planning.

“Think about people who understand families in business, but who also have the skills and experience required.

“It is important to remunerate your advisor to ensure the relationship is established as a professional business partnership from the outset. There is no set guideline for fees but work on the basis that it is a commitment of one day a month for someone with equivalent value to an accountant,” he said.

Bill said a family charter, or constitution would lay the foundations required to get the most out of an external advisor.

“A family charter provides the agreed rules and regulations for dealing with family and business issues, and can include Key Performance Indicators for external advisors.

“Setting specific Key Performance Indicators (KPIs) will help the family to review the relationship and value being delivered from an external advisor.

“KPIs can be based on improving the business’ professionalism; establishing systems for managing risk; and increasing awareness of business opportunities,” he said.

“Use formal meeting agendas, minutes and actions to track progress. Treat the relationship like any other new business initiative – trial it for six months with an interim three-month review.

“At the end of three months you need to have a robust discussion with the panel, about value added. Where were we three months ago compared to where we are today?”

Contact: Bill Winter, BW Business Development, billwinter@bigpond.com.au 32

“An effective advisory panel includes a nonfamily member who is there to challenge your assumptions, bring wide industry based experience to the table and to fill a recognised skill gap within your business.”

FARM MANAGEMENT

A FAMILY CONSTITUTION A Family Constitution is a document which outlines the family’s values and pre-agreed rules for how family members can participate and be recognised in the family business – and only 16 per cent of surveyed family business owners have one.

Each family constitution needs to reflect the unique characteristics of both the business and the family to which it relates. However, certain matters are commonly covered: • Strategic business objectives reflecting agreed family values and aspirations for the business.

• The process for hiring, assessing and remunerating family members employed in the business.

• The rules for nominating, training, assessing and appointing management successors.

• Processes for nominating and assessing individuals for appointment to the family company’s board of directors and/or the family council (or equivalent) if one exists.

• The composition and rules of conduct for a family council or equivalent body.

• Communication and disclosure policies between company and family.

• The process for resolving conflicts about the business between members of the family.

• Recommended or compulsory retirement age for family directors and managers.

• Policies concerning external, non-family ownership and management of the business.

• A properly administered process of developing and continually updating these pre-agreed rules.

MARCH 2015

KPMG Family Business Survey 2013.

GLENCORE GRAIN | GRAIN BUSINESS MAGAZINE

33

INDUSTRY SPOTLIGHT

INDUSTRY SPOTLIGHT/ 10 FAST FACTS ABOUT GLENCORE IN AUSTRALIA

Ever wonder about the financial security of your grain trader?

Grain growers are familiar with the Glencore Grain business; however, grain is just one part of the company in Australia.

The strength of Glencore’s business in Australia and globally gives the confidence of financial strength to growers doing business with Glencore Grain; payment security is assured.

Here are 10 things you may not know about the broader business.

1

Diverse

In Australia, Glencore has a presence in multiple industries including coal, copper, cotton, grain and oilseeds, nickel and zinc. The operations include mining, processing, logistics and port facilities across all mainland states and the Northern Territory.

2

Grain

7

Copper, Lead and Zinc

The company operates Australia’s deepest and highest grade underground copper mines including Australia’s largest mine, the zinclead-copper Mount Isa Mines operation in Queensland. The Australian zinc operations extract from the world’s largest zinc resource base.

Significant Employer

Glencore employs 19,000 people across its Australian operations including many in regional areas.

3

5

Glencore Grain is one of the largest buyers of wheat, barley, oilseeds, pulses, sorghum and cotton direct from Australian growers.

It has accumulation offices located across five key growing states; Western Australia, South Australia, Victoria, New South Wales and Queensland.

Economic Contributor

Glencore’s diverse operations make it a major contributor to local, state, regional and national economies. In 2013, Glencore contributed $14 billion to the Australian economy in the form of wages and salaries, taxes and royalties, goods and services, capital investment and community support.

Major Exporter from Australia 4

The commodities from the Australian operations play an integral role in the production of essential day-to-day products for developed and developing countries.

8 6

Thermal Coal

Glencore is Australia’s largest producer of thermal coal, with 13 mining complexes across New South Wales and Queensland.

Laterite Nickel

In Western Australia, Glencore’s Murrin Murrin project is the world’s only single-site laterite nickel production facility. Glencore is the second largest nickel producer in Australia.

9

Technology

Glencore’s pioneering technology business has developed significant mineral processing innovations, metal smelting and refining technology and marketed these to the global mining industry.

10

Global

Glencore is one of the world’s largest diversified natural resource companies, and a major producer and marketer of over 90 commodities worldwide. It operates in more than 50 countries and provides employment to around 200,000 people.

34

GreenStar™ 3 2630 Display

StarFire™ 3000 Receiver

Free up your budget and your time with 0%* p.a. finance on hands-free Ag Management Solutions.

Go with AutoTrac™, a GreenStar™ 3 2630 (GS3) display and a StarFire™ 3000 receiver and you’ll have hands-free guidance in your John Deere tractor, harvester or self-propelled sprayer. Take the next step with GreenStar activations for your GS3 display such as John Deere Section Control, Active Implement Guidance and iGrade™ and you’ll unlock even more efficiency and profitability throughout the year.

For these and other Ag Management Solutions, plus limited time 0%* p.a. financing, see your John Deere Dealer today.

Nothing Runs Like a Deere™

* Conditions apply. Finance available through John Deere Financial Limited to approved commercial applicants only. Offer is based on 25% deposit and 36 month term. Fees and charges apply. If not amended or withdrawn earlier, the promotion runs from 01/02/15 and expires on 30/04/15. Other terms and rates are available.

JohnDeere.com.au

With us, secure 12 day payment* is

INGRAINED Glencore Grain is ingrained in Australia as one of the

us with unmatched access to markets, so we can offer

largest buyers of wheat, barley, oilseeds, pulses, sorghum

you competitive prices.

and cotton, direct from growers.

You can also have your money in the bank sooner with

Backed by the strength of the global Glencore business

12 day end of week payment terms*.

and with unrivalled grain trading experience, Glencore

Ask us today about how we can meet your needs through

grain offers payment security.

flexibility on contract terms such as pricing, payment

Our worldwide marketing and logistics network provides

options and delivery periods.

www.glencoregrain.com.au 1300 GLENCORE www.glencoregrain.com.au 1300 453 (1300 626 453 626) *Grain transferred within an approved bulk handler