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EASTERN Australia's largest grains handler GrainCorp has urged governments to invest in rail infrastructure to benefit more greatly from China's growing demand for the nation's food.
The Australian Financial Review reported on Wednesday that China was poised to become the biggest buyer of the nation's wheat, leapfrogging Indonesia and South Korea.
More than 2 million tonnes of wheat from this year's yet-to-be-harvested crop has already been sold to Chinese buyers.
GrainCorp chief executive Alison Watkins said growing Chinese demand was an early sign of the "huge demand" to come from Asian customers but warned Australia needed to invest to ensure it remained cost-competitive.
GrainCorp estimates Australia's proximity to Asia delivers it a freight advantage worth about $10 a tonne of grain. "As a country we have a significant ocean freight advantage to service Asia, but it's critical that there is investment to keep the costs of other parts of the supply chain down, or we risk losing the advantage," Ms Watkins said.
She said under-investment in railways was forcing more grain to be transported to ports by truck.
"Australian rail productivity substantially lags that of Canada and other major competitor nations," Ms Watkins said. "When you compare 18 trains to load the average export vessel with about 900 truck trips, the efficiency dividend of rail is clear."
The bullish outlook for Australia's food production has prompted numerous takeover bids for agricultural business, with the latest a $3 billion offer for GrainCorp by US agribusiness giant Archer Daniels Midland. The deal has yet to receive Foreign Investment Review Board approval.
ANZ Banking Group senior agriculture economist Paul Deane said China was buying more wheat from Australian farmers this year largely to make up for a cut of between 10 per cent and 15 per cent to its own production because of poor weather.
Wheat prices have also been weaker in the past year, prompting greater buying activity. "Prices in the past four to five years have been very high and volatile," Mr Deane said. "They have not had the opportunity to restock and have been living hand to mouth."
Wheat prices have softened to about $250 per tonne, their lowest price in a year, due to forecasts for record global grain production.
Tom Puddy, head of marketing for West Australian bulk handler CBH Group, said the co-operative had noticed increased buying from Asian customers as they moved to make up production shortfalls. China produces between 110 million tonnes and 120 million tonnes of wheat, compared with about 23 million tonnes produced in Australia.
"Over the next five years demand from south-east Asia, not just China, is forecast to increase by 11 million tonnes," Mr Puddy said. "The question is where is that wheat going to come from?"
This article first appeared on www.queenslandcountrylife.com.au
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