Aussie grain growers return home from tour of Europe's 'bread basket'

Aussie grain growers return home from tour of Europes bread basket

A group of nearly 30 leading Australian and New Zealand grain growers – including ten from Western Australia – has just returned from a two-week grains tour through the EU and Black Sea region.

An opportunity to visit European counterparts on their farms, the tour also provided insights into the supply chain dynamics influencing global trade, with visits to grain-processing operations, major European ports, agri-chemical suppliers, machinery manufacturers and grain marketers in the Netherlands, Germany and Ukraine.

Hosted by global agribusiness banking specialist Rabobank and drawing on its local EU client and industry networks, the tour – which started in Amsterdam and wrapped up 13 days later in Kiev – was the second international grains tour led by the bank, following last year’s trip through America’s mid-west grain belt.

For Western Australian grain growers, Simon and Debra Metcalf from Wongan Hills, the opportunity to visit Ukraine was the main impetus for heading on the tour.

“I am very interested in Ukraine and wanted to see if they are a competitor to us,” Mr Metcalf said. “I walked away thinking they are a competitor at this stage, but a possible threat in the future.”

It was a similar conclusion for George Clyne, from Moree in New South Wales, who travelled on the tour with his wife Tina.

“They are an enormous threat in terms of the sheer quantity of wheat they produce in Ukraine, and the potential in Russia,” he said.

Travelling to Kiev, Odessa and Mykolaiv in Ukraine, the tour included visits to the largest crop producer in Ukraine with 560,000 hectares of crop sown annually, and also their sunflower crushing plant and port facilities.

Ukraine produces on average 80 million tonnes of grains and oilseeds each year, of which 45 million tonnes is exported. By 2030, Rabobank forecast export volumes to increase to between 55 and 60 million tonnes, as this trend growth in production is expected to continue.

With most of this projected increase in production expected to be achieved via wheat yield advancements, Mr Metcalf said, the Ukrainian farming operations they had visited were harvesting around five tonnes of wheat to the hectare – double the Australian average.

“That said, their annual rainfall is much higher at around 400 to 600 millimeters,” he said.

In Ukraine around 6.5 million hectares is sown to wheat (to produce an average 26 million tonnes) and a similar acreage to sunflowers, while there has been an increase in corn in recent years, with sunflower seeds predominately crushed for meal and oils.

“They are producing enormous amounts of sunflowers,” Mr Clyne said. “But they have such consistent climate and rainfall, they are able to grow them on rotation with wheat.”

Also struck by the dominance of sunflower production in Ukraine, Mr Metcalf said the push towards sunflowers was also due to better margins of sunflowers than wheat and corn.

With Ukraine having a comparative freight cost advantage, the tour focused on the state of its road, rail and port infrastructure, with visits to two major Ukrainian ports. Strategically positioned with access to the Suez to export to key importers in north Africa, there was also investment in infrastructure to export more to Indonesia, Vietnam, the Philippines and Malaysia.

Mr Metcalf said while Ukraine’s port infrastructure was efficient, their roads were terrible. “We did a lot of driving on roads and they were full of trucks doing 60 kilometres per hour,” he said.

Another key insight from the tour was the value of agricultural land in Europe and the structure of land ownership in Ukraine.

“We heard of land selling for 35,000 euros per hectare (in Western Europe),” Mr Clyne said. “And while this land can produce 10 tonnes of wheat to the hectare, the value of their land is still a lot higher than here in Australia.”

While in the Ukraine, he said, it was not possible to buy land, with the land split between its citizens at an average holding of four hectares per person. Much of these holdings were then leased out, with vertically-integrated agro-complexes managing in excess of 100,000 hectares to control around a third of total production of the land.

“So while Ukraine has many competitive advantages, I have no idea how they will work out their land structure going forward, and it could prove to be something that ‘holds them back’,” Mr Clyne said.

Rabobank group executive Country Banking Australia, Marcel van Doremaele, who accompanied the grains study tour, said the tour came about due to the rising influence of the Black Sea region in global markets – from comprising less than 10 per cent of global wheat trade in the early 2000s to around 40 per cent today.

“We wanted to see for ourselves the potential of Ukraine, their competitive advantages, and the state of their infrastructure,” Mr van Doremaele said. “And with 31 million hectares of arable farmland, development of farming practices and the scale of their infrastructure such as port facilities, there is no doubt they are an increasingly dominant player in the global grains and oilseeds market.”

Mr van Doremaele said wheat, corn and sunflowers are the “big three” at the moment, with Ukraine’s cost of production increasingly becoming more and more in line with international producers.

Following the success of the international grains study tours and the recent lamb and wool tour through southern Australia, Mr van Doremaele said Rabobank will run study tours next year to various countries, with a focus on commodities such as cotton, sugar and beef.

“There is a real thirst amongst farmers to connect with others, gain knowledge and share innovative farming practices,” he said. “And we have seen this with the WhatsApp group we formed on tour, which keeps buzzing on a daily basis with messages to and fro, even weeks after we have returned home from Europe.”

Providing a platform for like-minded farmers to share knowledge, compare notes and generate ideas for the betterment of their farming enterprises, Mr van Doremaele said this was the main impetus for Rabobank taking these study tours. “With participants learning from the visits, but perhaps even more so, from the other farmers on the bus”.

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