North American drought creates export opportunity for Australian food manufacturers

Posted by AFN Staff Writers on 18th July 2012

The North American drought devastating American corn crops and wheat crops is creating export opportunities for Australian food processors despite the high Australian dollar.

Global wheat prices rose by 6.8% to AU$320 a tonne over the past week and the  September corn future prices on the Chicago Board of Trade rose by 6.1% during the past week to AU$301 a tonne.

The United States Department of Agriculture (USDA) reduced its production estimate for corn to a nine-year low.  About 19.2 million tonnes was wiped off from the USDA’s June forecast of domestic consumption of corn and its estimate of exports reduced to 40.6 million tonnes from 48.3 million tonnes in June.

“Reduced supplies and higher prices are expected to sharply lower 2012-13 corn usage with the biggest reduction for feed and residual disappearance,” the USDA said.

The crop market price spikes have also affected meat and dairy industry costs across the globe as stock feed prices have risen. Lot-feeding margins have become tighter. By contrast, Australian agriculture has experienced extremely good growing conditions for the past two seasons, with excellent rainfall and good grain crops again on the way around Australia. Furthermore, many of Australia’s beef cattle and dairy-cow herds are grazed in open-range conditions and pasture-cover has been excellent with plentiful water—in stark contrast to a decade of dry conditions which ended when the drought broke about 2 years ago.

The deficit in global supply of wheat and corn is creating new export opportunities for Australian suppliers on several fronts. According to anecdotal reports, the export opportunities are not limited to just agribusiness products.  Australian manufacturers of baked products and snack products that use grains (such as wheat or corn) are finding new markets all around North America.

Australian-sourced food marketers are attracting good enquiries from prospective buyers at trade fairs shows aimed towards American-based customers. These have included niche markets such as for organic foods, Kosher foods and other buyer niches such as smaller retailers in regional areas around North America.