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Rabobank: Premium demand falls

Rabobank analysts predict lower-end alternatives in wheat will do better in South East Asia – plus some hope for barley growers

Rabobank Singapore-based grains analyst Oscar Tjakra
Rabobank Singapore-based grains analyst Oscar Tjakra

Fancy cakes and pastries are off the menu, but instant noodles and biscuits are in, accord

biscuits are in, according to a Singapore-based grains analyst for agricultural bank Rabobank.

Oscar Tjakra says in a new podcast from the bank that he expects exports into South East Asia, which accounts for about 40 per cent of Australian wheat exports, will shift accordingly

Slowing economic growth brought on by COVID-19 will boost demand for cheaper products requiring a slightly lower-grade of milling wheat, such as instant noodles and biscuits, he says.

This will counter a loss of demand for high-grade wheat – typically used in higher-end products such as cakes and pastries – and support stable demand across the whole wheat complex.

That said, Tjakra also forecast flat demand for milling wheat, with a best-case scenario of marginal growth – at 1.5 per cent in 2020, considerably lower than pre-COVID-19 forecasts.

On top of this, Tjakra predicts that South East Asian demand for meat will also fall due to a fall in disposable income –driving down demand for grain in the feed complex.

“In the five major South East Asian countries – Indonesia, Vietnam, Philippines, Thailand and Malaysia – we forecast that the demand for grains and oilseeds for animal consumption will drop 5.5 per cent, year on year,” he says.

Demand for feed wheat in the Philippines and Vietnam may also be reduced due to there being more US corn on the market, with lower oil prices making its export a more attractive proposition, Tjakra says.

That said, South East Asia will provide an important alternative market for barley growers, following the recent announcement of 80 per cent tariffs on Australian barley into China.

Rabobank senior grains analyst Cheryl Kalisch Gordon says Thailand is one of the fastest-growing destinations for Australian feed barley, albeit not in the quantities bought by China.

“With recent drought in the region, there’s been a much-reduced domestic production of rice, corn and cassava typically used to support feed rations,” she says.

Tjakra adds that whether Thailand will be the next major market for Australian barley would depend on the composition of animal feed used.

He also added that Thai government regulations aimed at protecting local farmers would still restrict Australian barley being brought into the country.

“Thailand’s feed millers are required to purchase domestic corn over imported feed wheat at a ratio of three to one,” he says.

“However even after importing the required feed wheat, there is still a gap, and Thailand fills this gap with Australian feed barley.

“There is potential to increase Australian feed barley into the swine feed mix, but all of this will depend on feed barley price and a strong marketing effort by Australia to foster this relationship,” he says.

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