TPP optimism for grains
AN EXPERT on trade agreements and their implications for the grains industry has said Australian croppers should be pleased with the recently revived Trans Pacific Partnership (TPP).
The deal between 11 nations, crucially excluding the United States, is now scheduled to be signed off in Chile in March.
Cheryl Kalisch Gordon, Rabobank grains industry analyst, said Australia would benefit in comparison to the US in terms of access to key eastern Asian markets such as China and Japan, both part of the TPP.
She said while Australia’s other key rival into Asia, Canada was part of the deal, it was a boost that there would be an advantage over the US.
“The US has a large market share in Japan and the buyers are happy with US wheat, but once the pricing changes come in and Australian and Canadian wheat is subject to the lower tariffs, meaning lower prices, then you would expect buyers to start switching.”
Dr Kalisch Gordon also said it was good to shore up markets from the threat of emerging competition, such as the Black Sea nations like Russia and Ukraine, which have been an increasingly prominent source of wheat into south-east Asia in recent years.
Asked to identify potential opportunities in TPP participating nations, Dr Kalisch Gordon nominated Vietnam.
She said other Asian signatories, such as Japan, were relatively mature markets but said there was still scope for strong growth in Vietnam.
“It will be an area to watch.”
The news of the rejuvenated TPP has raised the ire of powerful US lobby group US Wheat Associates.
USW director of policy Ben Conner hit out at US president Donald Trump for pulling out of the deal, saying it jeopardised US exports to Japan.
He said the deal could see US wheat producers at a price disadvantage of $US200 million per year.
“As the agricultural community warned when the President made the announcement, withdrawing from TPP was shortsighted and unnecessary, and now U.S. wheat farmers could take the hit,” Mr Conner said.
North American Wheat Growers president and Montana wheat producer Gordon Stoner said the agriculture sector would be putting pressure on Mr Trump to engage on trade.
“If nothing else, this announcement should serve as a rallying cry for farmers, ranchers and dairy producers calling for the new trade deals we were promised when the President walked away from TPP.”
In Australia, Victorian grain grower Chris Kelly said he was generally pleased with the news.
“It ensures access to those critical Asian markets, which is great.”
However, he expressed concern that cheap Canadian wheat could land in Australia in drought years here, reducing the drought premium which many east coast growers rely on to generate a profit in lower than average production years.
“Many farmers have done very well out of storing grain and waiting for a dry spell in the key grain consuming regions north of Dubbo,” Mr Kelly said.
“It would be a shame if the deal meant end users could simply buy up cheap grain from North America and keep the price down.”
Dr Kalisch Gordon said Australia already operated under a zero tariff policy so it was not going to matter.
Instead, she said the reason foreign consignments were so rare in Australia even in drought years was the strict phytosanitary requirements.
“The grain needs to be processed at the port, it is a costly exercise, so that is why you are nearly always going to see Australian grain used to satisfy the domestic market.
“In dry years with limited supply the grain could come to the east coast from South Australia or Western Australia, but it very rarely is imported and that won’t change under the TPP.”