Chinese demands are industry challenge

China will continue to be a lucrative market for Australian grain, but the local industry will have to adapt to increasingly stringent biosecurity and quality standards. 

“Since 2013 there has been a move away from attempting to be self-sufficient in food production to strengthening food stability, which has implications for grain imports,” Mr Ek said. 

The key change in this space has been a winding back of domestic prices for farmers, which have been way above international parity. 

Australia has been a beneficiary of increased demand but Mr Ek warned of a tightening of import standards, particularly in regards to phytosanitary requirements. 

He pointed to levels of diseases such as ergot as potential flash points. 

There have been Chinese media reports of Australian wheat not being accepted at a Chinese port due to new regulations regarding levels of the fungal disease ergot, although there is no official confirmation from either Chinese or Australian administrators of such a case. 

Sources from the Australian grains industry strenuously deny there have been any ergot issues, but acknowledge there will be strict scrutiny on bio-security in China. 

The increased focus on quality and environmental concerns are spin-offs from China’s attempts to reposition itself in the manufacturing sector as a quality producer. 

“Quality in whatever sector is a really big thing in China at present,” Mr Ek said. 

This has led to an overhaul of more than 6000 national standards for food, including the ergot regulations. 

While there will be an increased focus on compliance, the potential rewards are huge, with Mr Ek estimating China would continue to import more than 100 million tonnes of grain per annum, in spite of increasing domestic production.

“Domestic Chinese production is expected to hit 600mt by 2020, but demand is around 700mt, so they will need to import the remainder.” 

Chinese grain imports this year are predicted to be around the 120mt mark, with soybeans the major crop brought in. 

Mr Ek said Australia had a good reputation as a high quality, safe provider of food, which was important in China where there was widespread consumer mistrust of domestically produced food. 

“There are concerns about both a lack of quality and more importantly a lack of safety, with unsustainable practices damaging water, soil and air.” 

In spite of this, he said many Chinese consumers would remain heavily conscious of price. 

“We’re moving away from a trader/supplier led demand for grain to consumers, but most people in China care more for price than quality,” Mr Ek said. 

He said the Australian industry would need to create consumer demand for branded Australian products. 

“The ability to make high quality noodles from Australian wheat has huge implications. 

“You see Chinese consumers flocking to local noodles from a particular region, they have the nostalgia for their mum’s food, you need to win them over to a new, premium experience.” 

In terms of world trade Mr Ek said China would look to influence world grain markets through schemes such as developing futures markets for product. 

“China is thinking globally on this one and they see futures as a very important tool, they feel if they can keep grain prices good then China will be good, which is a change from past policies.” 

Mr Ek said responsibility for food security was likely to be devolved to a provincial level. 

“The central government is saying ‘we will provide credit lines and you need to pay back’ to the regional administrations.”

Source: Farm Weekly. Date: 2017-08-21