Agricultural commodities

Research by the Australian Bureau of Agricultural and Resource Economics and Sciences

JUNE QUARTER 2012

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Cataloguing data

ABARES 2012, Agricultural commodities: June quarter 2012, vol. 2 no. 2, Australian Bureau of Agricultural and Resource Economics and Sciences, Canberra.

ISSN 189-5619 (printed)

ISSN 189-5627 (online)

ISBN 978-1-74323-025-1 (printed)

ISBN 978-1-74323-024-4 (online)

ABARES project 43006

Internet

Agricultural commodities: June quarter 2012 is available at: daff.gov.au/abares/publications.

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3

DairyOutlook to 2016–17

David Barrett

ABARES

Contents

Economic overview 7

Agriculture 25

Crops

Wheat 26

Coarse grains 33

Oilseeds 42

Sugar 51

Cotton 58

Wine and wine grapes 66

Livestock

Beef and veal 76

Sheep meat 84

Wool 92

Dairy 97

Fisheries 103

Boxes

Malaysia–Australia Free Trade Agreement 19

Palm oil 45

Turkish cotton industry 60

Australia’s market share in the UK and US wine markets 72

Lean Finely Textured Beef and implications for Australian beef exports to the United States 80

Competition in Australia’s live sheep export markets 88

Statistical tables 109

Report extracts 151

ABARES contacts 156

4 ABARES

ABARES is delivering commodity forecasts, research and analysis directly to rural and regional Australia again in 2012.

Promoting industry productivity, community vitality and environmental sustainability, the 2012 conferences will balance national and regional perspectives; focus on the future; and emphasise agricultural, fisheries and forestry strategies that work in a context of economic volatility and climatic variability.

ABARES invites collaboration from regional, state and national agencies to focus on industries and issues relevant to each region. Delegates from businesses, government, and the community will discuss industry trends, access forecasts and other information, make new contacts in their community and be exposed to new ideas while gaining an understanding of global issues that affect their region.

2012 locations and datesSouth Australia Berri 16 May

Northern Territory Alice Springs 13 June

Western Australia Margaret River 5 July

Victoria Horsham 25 July

New South Wales Bega 29 August

Tasmania Burnie 26 September

Queensland Toowoomba 25 October

Regional Outlook conferences 2012

For enquiries and to register your interest contact

Maree Finnegan Event ManagerPhone +61 2 6272 2260Email conferences@daff.gov.au

daff.gov.au/abares/regional

Economic overview

8 ABARES

Economic overviewPatrick Hamshere and Neil Thompson

Following growth of 3.9 per cent in 2011, world economic growth is assumed to moderate to 3.5 per cent in 2012, before improving to 4 per cent in 2013.

Emerging economies, particularly China and India, are expected to remain the main drivers of world economic growth.

Economic growth in the OECD is expected to be subdued, largely reflecting an expected slowdown in many European economies and weak growth in consumer demand in the United States and Japan.

There remains some risk of European economies deteriorating further which could have wider global impacts.

Global economic growth to moderate in 2012The pace of global economic growth has weakened since the beginning of 2012. Although activity in emerging economies, particularly in Asia, continues to underpin world economic growth, considerable uncertainty remains in the OECD economic outlook, especially over implementation and likely impact of austerity measures in the euro area.

World economic growth

%

a ABARES assumption.

–1

0

1

2

3

4

5

6

2010 2013a2007200420011998

9

Economic overview

ABARES

Private sector demand across the OECD is assumed to remain weak in the short term. Continued weakness in regional housing and labour markets are expected to be key constraints to any significant recovery in consumer spending. In addition, volatility in global financial markets has increased, following renewed uncertainty surrounding implementation of austerity measures in some European countries with newly elected governments. In preparing this set of agricultural commodity forecasts, world economic growth is assumed to average 3.5 per cent in 2012, before improving to around 4 per cent in 2013. For the OECD region as a whole, economic growth is assumed to be around 1.6 per cent in 2012, before strengthening modestly to 2.1 per cent in 2013. There remains a risk of deterioration in the economic performance of some western European economies which could have flow-on effects to growth prospects in other countries.

For emerging economies, the short-term outlook remains positive, although an easing of economic growth is expected. Export performance in many developing economies is expected to moderate in response to weaker growth in export demand from developed economies. Countries that have strong trade links with Western Europe, such as the Russian Federation, Ukraine and those in Eastern Europe and South-East Asia, will be particularly vulnerable to the spillover effects of weaker economic growth in that region. For developing economies as a whole, economic growth is assumed to average 5.9 per cent in 2012 and 6.4 per cent in 2013, compared with 6.4 per cent in 2011.

Regional economic growth

%

world

Russian Federation,Ukraine, Eastern Europe

Latin America

non-OECD Asia

OECD

20112012a

2013a

1

2

3

4

5

6

7

8

a ABARES assumption.

10

Economic overview

ABARES

Key macroeconomic assumptions

World 2010 2011 2012 a 2013 aWorld 2010 2011 2012 a 2013 aE i thEconomic growthOECD % 3.2 1.6 1.6 2.1OECD % 3.2 1.6 1.6 2.1United States % 3.0 1.7 2.2 2.6United States % 3.0 1.7 2.2 2.6Japan % 4 4 – 0 7 2 0 1 6Japan % 4.4 – 0.7 2.0 1.6Western Europe % 2 0 1 5 0 2 1 1Western Europe % 2.0 1.5 0.2 1.1

Germany % 3 7 3 0 1 2 1 8– Germany % 3.7 3.0 1.2 1.8France % 1 7 1 7 0 6 1 2– France % 1.7 1.7 0.6 1.2U i d Ki d 2 1 0 7 0 7 2 0– United Kingdom % 2.1 0.7 0.7 2.0g

– Italy % 1.8 0.4 – 1.8 – 0.2 Italy % 1.8 0.4 1.8 0.2Korea, Rep. of % 6.3 3.6 3.2 4.0Korea, Rep. of % 6.3 3.6 3.2 4.0New Zealand % 1.2 1.4 2.3 3.2New Zealand % 1.2 1.4 2.3 3.2

D l i t i % 8 0 6 4 5 9 6 4Developing countries % 8.0 6.4 5.9 6.4OECD A i 9 8 2 9– non-OECD Asia % 9.7 7.8 7.2 7.9

South-East Asia b % 7.0 4.5 5.3 5.8 China c % 10.4 9.2 8.5 8.7 China c Chinese Taipei % 10.7 4.0 2.9 4.5p Singapore % 14.8 4.9 3.2 4.6 Singapore % 14.8 4.9 3.2 4.6

India % 8.4 7.5 6.1 7.5 India % 8.4 7.5 6.1 7.5– Latin America % 6.2 4.5 3.7 4.0– Latin America % 6.2 4.5 3.7 4.0Russian Federation % 4 3 4 3 3 7 3 9Russian Federation % 4.3 4.3 3.7 3.9Ukraine % 4 1 5 2 3 5 3 7Ukraine % 4.1 5.2 3.5 3.7Eastern Europe % 4 5 5 3 1 7 2 8Eastern Europe % 4.5 5.3 1.7 2.8W ld d % 5 3 3 9 3 5 4 0World d % 5.3 3.9 3.5 4.0

flInflation United States % 1.6 3.2 2.1 1.9United States % 1.6 3.2 2.1 1.9Interest ratesInterest ratesUS prime rate e % 3 3 3 3 3 3 3 3US prime rate e % 3.3 3.3 3.3 3.3

2009 2010 2011 2012Australia –10 –11 –12 a –13 aAustralia 10 11 12 a 13 aEconomic growth % 2 3 1 9 3 0 3 25Economic growth % 2.3 1.9 3.0 3.25I fl i % 2 3 3 1 2 4 2 5Inflation % 2.3 3.1 2.4 2.5Interest rates g % 6.0 6.6 6.2 5.6g

Australian exchange ratesAustralian exchange ratesUS$/A$ 0 88 0 99 1 03 1 00US$/A$ 0.88 0.99 1.03 1.00TWI for A$ h 69 74 76 74TWI for A$ h 69 74 76 74

a ABARES assumption. b Indonesia, Malaysia, Philippines, Thailand and Vietnam. c Excludes Hong Kong. d Weighted a ABARES assumption. b Indonesia, Malaysia, Philippines, Thailand and Vietnam. c Excludes Hong Kong. d Weighted using 2011 purchasing-power-parity (PPP) valuation of country gross domestic product by the International a ABARES assumption. b Indonesia, Malaysia, Philippines, Thailand and Vietnam. c Excludes Hong Kong. d Weighted using 2011 purchasing-power-parity (PPP) valuation of country gross domestic product by the International Monetary Fund. e Commercial bank prime lending rates in the United States. g Large business weighted average

a ABARES assumption. b Indonesia, Malaysia, Philippines, Thailand and Vietnam. c Excludes Hong Kong. d Weighted using 2011 purchasing-power-parity (PPP) valuation of country gross domestic product by the International Monetary Fund. e Commercial bank prime lending rates in the United States. g Large business weighted average variable rate on credit outstanding. h Base: May 1970 = 100.

g p g p p y ( ) y g p yMonetary Fund. e Commercial bank prime lending rates in the United States. g Large business weighted average variable rate on credit outstanding. h Base: May 1970 = 100.Sources: ABARES; Australian Bureau of Statistics; International Monetary Fund; Organisation for Economic

f

y p g g g g gvariable rate on credit outstanding. h Base: May 1970 = 100.Sources: ABARES; Australian Bureau of Statistics; International Monetary Fund; Organisation for Economic

f

y p g g g g gvariable rate on credit outstanding. h Base: May 1970 = 100.Sources: ABARES; Australian Bureau of Statistics; International Monetary Fund; Organisation for Economic Co-operation and Development; Reserve Bank of AustraliaSources: ABARES; Australian Bureau of Statistics; International Monetary Fund; Organisation for Economic Co-operation and Development; Reserve Bank of Australia

11

Economic overview

ABARES

Economic prospects in Australia’s major export markets

United States

In the United States, real gross domestic product expanded at a year-on-year rate of 2 per cent in the March quarter 2012, following growth of 1.6 per cent in the December quarter 2011. The main contributors to growth in the March quarter were consumer spending and private investment, which were partially offset by a decline in government spending.

Partial indicators released recently suggest that private demand, in particular consumer spending (which accounts for around 70 per cent of gross domestic product), is likely to improve only gradually. Private consumption expenditure, in real terms, rose at a year-on-year rate of 2.1 per cent in April 2012, compared with 1.8 per cent in March and 1.9 per cent in February.

The US labour market has continued to show signs of improvement since the beginning of 2012. In the first five months of 2012, 823 000 jobs were created, driven by job growth in education and health services, professional and business services, and manufacturing industries. However, jobs gains have been largely offset by an increase in the number of people looking for work. Consequently, the unemployment rate has remained largely unchanged since the beginning of the year, recording 8.2 per cent in May, compared with 8.3 per cent in January.

Growth in industrial production has been strong since the beginning of 2012, signalling that manufacturing activity will remain a source of growth in the short term. The index of industrial production increased year-on-year by 4.3 per cent in the March quarter 2012, following growth of 4 per cent in the December quarter and 3.3 per cent in the September quarter 2011. Recent improvements in industrial production largely reflect increased production of motor vehicles and parts, which grew at a year-on-year rate of 17.9 per cent in the March quarter 2012.

US consumer spending and confidence

% index1985=100

Consumer spendinggrowth

Consumer confidence(right axis)

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

10

20

30

40

50

60

70

80

Apr2012

Jan2012

Oct2011

Jul2011

Apr2011

Jan2011

12

Economic overview

ABARES

In the short term, economic activity in the United States is assumed to strengthen gradually. For 2012 as a whole, economic growth is assumed to average 2.2 per cent. In 2013, improvements in private sector activity are expected to more than offset the adverse effect of reduced government sector spending on general economic activity, with overall economic growth assumed to average 2.6 per cent for the year as a whole.

China

Reflecting the adverse effects of weaker growth in export demand, economic growth in China has moderated in recent months. Real gross domestic product grew at a year-on-year rate of 8.1 per cent in the March quarter 2012, after expanding 8.9 per cent in the December quarter and 9.1 per cent in the September quarter 2011.

OECD economic growth

a ABARES assumption.

Western EuropeJapanUnited States

%–1.0

–0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2013a2012a2011

US jobs created in the first five months of 2012, by sector

–50 50 100 150 200 250

Mining and logging

Construction

Manufacturing

Trade, transportation and utilities

Information

Financial activities

Professional and business services

Education and health services

Leisure and hospitality

Other services

Government

0’000

13

Economic overview

ABARES

China’s export growth eased in the March quarter 2012 to a year-on-year rate of 7.6 per cent. This compares with growth of 14.3 per cent in the December quarter, and more than 20 per cent for 2011 as a whole.

In contrast, growth in domestic demand has remained relatively strong, with investment in fixed assets growing at a year-on-year rate of around 21 per cent in the March quarter 2012, down slightly from 23.8 per cent achieved for 2011 as a whole. Growth in retail sales eased somewhat but continued to remain firm, increasing at a year-on-year rate of 14.1 per cent in April 2012, compared with 15.2 per cent in March and 14.7 per cent in February.

Consumer price inflation eased in recent months, rising at a year-on-year rate of 3 per cent in May 2012, following 3.4 per cent in April and 3.6 per cent in March. Increases in food prices continued to drive inflation, contributing around 2 percentage points to the overall inflation rate in May 2012. Easing inflationary pressures in China are expected to provide room for more accommodative monetary policy in the short term.

In preparing this set of agricultural commodity forecasts, economic growth in China is assumed to remain relatively robust at an average rate of 8.5 per cent in 2012. In 2013, economic growth is assumed to strengthen slightly to 8.7 per cent, in line with an expected improvement in world economic growth.

Japan

Economic activity in Japan expanded at a year-on-year rate of 2.8 per cent in the March quarter 2012, compared with declines of 0.6 per cent in the December quarter and 0.5 per cent in the September quarter 2011. The increased pace of economic activity largely reflects improvements in domestic demand, supported by reconstruction after the earthquakes and tsunami in early 2011.

Private sector demand grew by 3.7 per cent year-on-year in the March quarter 2012, compared with 0.3 per cent in the December quarter and a decline of 0.4 per cent in the September quarter 2011. The increase in private sector demand was supported by a pickup in household spending, as consumer confidence and labour market conditions improved. Public sector investment also contributed to stronger economic activity, with a year-on-year increase of 9.3 per cent in the March quarter driven by reconstruction spending.

Recent trade for China

Exports

US$b

Imports

50

100

150

200

Mar2012

Dec2011

Sep2011

Jun2011

Mar2011

Dec2010

Sep2010

Jun2010

Mar2010

14

Economic overview

ABARES

Partial indicators released recently suggest that exports and industrial production also increased. Exports, in value terms, increased at a year-on-year rate of 8 per cent in April 2012, the fastest pace in 15 months, compared with a rise of 6 per cent in March and a decline of 3 per cent in February. Industrial production increased at a year-on-year rate of 13 per cent in April 2012, following growth of 14 per cent in March and 2 per cent in February. Recent improvements in industrial production and exports largely reflect a pickup in export demand for motor vehicles from the United States.

Despite recent improvements, uncertainty remains in the outlook for Japanese exports and hence factory production. Economic weakness in many European economies and the high value of the Japanese yen could adversely affect demand for Japanese exports, leading to a slowdown in factory production.

Nevertheless, domestic demand is likely to strengthen further in coming quarters as reconstruction continues. For 2012 as a whole, economic growth in Japan is assumed to average around 2 per cent, before easing to 1.6 per cent in 2013, as declines in reconstruction spending moderate growth in domestic demand.

Western Europe

Economic activity in Western Europe weakened in the March quarter 2012, though growth varied significantly among the regional economies. In Germany, economic activity increased at a year-on-year rate of 1.2 per cent in the March quarter, while in Italy, the economy contracted at a year-on-year rate of 1.3 per cent.

The weak pace of economic activity largely reflects decreased private sector demand, while reduced public sector spending also contributed to the decline. In Germany, growth in consumer spending remained weak at 0.8 per cent year-on-year in both the March quarter 2012 and the December quarter 2011. In France, consumer spending declined by 0.3 per cent year-on-year in the March quarter 2012, following a decline of 0.5 per cent in the December quarter 2011.

Japan industrial production and exports

index2005=100

30

60

90

120

150 ExportsIndustrial production

Apr2012

Oct2011

Apr2011

Oct2010

Apr2010

Oct2009

Apr2009

15

Economic overview

ABARES

Unemployment remained relatively high across Western Europe. In France, the unemployment rate was 10.2 per cent in April 2012 compared with 10 per cent in January. In Italy, the unemployment rate increased to 10.2 per cent in April compared with 9.8 per cent in February and 9.5 per cent in January 2012. For the euro area as a whole, the unemployment rate was 11 per cent in April, up from 10.8 per cent in January.

Private consumption and business spending are unlikely to strengthen significantly in the short term. In addition, expected declines in public spending are likely to hold back overall economic growth, as governments reduce public debt levels and implement fiscal consolidation.

In preparing this set of agricultural commodity forecasts, economic activity in Western Europe is assumed to record little growth in 2012. A gradual recovery in regional economic activity is assumed to begin in 2013, with economic growth assumed to average 1.1 per cent for the year as a whole. Considerable uncertainty surrounds implementation of austerity measures in some regional economies, resulting from increased political pressure. On the other hand, financial market concerns about sustainability of public sector debt levels means few alternatives are available to affected governments that would not result in greater hardship for their economies.

Non-OECD Asia

Economic growth in non-OECD Asia (excluding Japan and the Republic of Korea) moderated in early 2012. For example, in Singapore, economic activity expanded at a year-on-year rate of 1.6 per cent in the March quarter 2012, down from 3.6 per cent in the December quarter 2011. In Malaysia, the economy grew by 4.7 per cent year-on-year in the March quarter 2012 following growth of 5.2 per cent in the December quarter 2011.

For many regional economies, the easing of economic growth largely reflects the adverse impacts of slower export growth. Because exports account for a relatively large share of economic activity in many Asian economies, declining export growth can adversely affect general economic activity.

Unemployment rates (seasonally adjusted) in the euro area

%

2

4

6

8

10

12 TotalFranceItalyUnited KingdomGermany

Mar2012

Nov2011

Jul2011

Mar2011

Nov2010

Jul2010

Mar2010

Nov2009

Jul2009

Mar2009

Nov2008

16

Economic overview

ABARES

Reflecting easing economic growth, inflationary pressures also eased in some regional economies. For example, in Malaysia, inflation slowed to a year-on-year rate of 1.9 per cent in April 2012, compared with 2.7 per cent in January. In Thailand, inflation slowed to 2.5 per cent year-on-year in April, compared with 3.4 per cent in January.

Easing of inflationary pressures may allow implementation of more accommodative monetary conditions in regional economies to support domestic demand. For non-OECD Asia as a whole, economic growth is assumed to average 7.2 per cent in 2012 and 7.9 per cent in 2013.

Economic prospects in AustraliaIn Australia, real gross domestic product rose at a year-on-year rate of 4.3 per cent in the March quarter 2012, after expanding by 2.5 per cent in the December quarter 2011. In coming quarters, domestic demand is expected to grow at a relatively solid pace, driven largely by mining related activity. Growth outside the mining sector could remain below trend, largely reflecting the effects of weak retail spending and reduced government expenditure.

Economic growth in Australia is assumed to average 3.25 per cent in 2012–13, following an estimated rise of 3 per cent in 2011–12.

Inflationary pressures in Australia have eased in recent quarters. The consumer price index rose year-on-year by 1.6 per cent in the March quarter 2012, compared with 3.1 per cent in the December quarter and 3.5 per cent in the September quarter 2011.

One factor contributing to the lower inflation rate was lower prices for fruit, which declined by 30 per cent year-on-year in the March quarter. Banana prices, for example, recorded a year-on-year decline of around 60 per cent in the March quarter 2012. This reflected the impact on banana prices of tropical cyclone Yasi in 2011. In contrast, year-on-year increases were recorded in the March quarter for pharmaceutical products, secondary education, automotive fuel, medical and hospital services, tertiary education and rents.

Economic growth in Asia

2013a2012a2011

Chinese Taipei

Korea,Republic of

India

China

Singapore

Vietnam

Philippines

Malaysia

Indonesia

Thailand

%

2

4

6

8

10

a ABARES assumption.

17

Economic overview

ABARES

In 2012–13, the inflation rate is assumed to average 2.5 per cent, largely unchanged from an estimated 2.4 per cent increase in 2011–12.

Australian exchange rate

Over the past few months, there has been some volatility in the movement of the Australian dollar, especially against the US dollar. The Australian dollar depreciated from around US108 cents in late February 2012 to around US96 cents in early June, before appreciating to around US99 cents in mid-June. For 2011–12 as a whole, the Australian dollar is estimated to average around US103 cents, compared with an average of US99 cents in 2010–11.

To a large extent, the recent depreciation of the Australian dollar reflects increased concerns in financial markets about the world economic outlook, and hence, the outlook for commodity demand and prices, especially mineral resources. In particular, increased uncertainty surrounding economic growth in the euro area and an easing of economic growth in China and some other Asian economies poses a downside risk to the outlook for movements in Australia’s terms of trade.

A number of factors are likely to provide support for the value of the Australian dollar. If the world economy gradually strengthens over the course of 2012–13, as assumed here, this should restore financial market confidence toward world demand for mineral resources and see increases in the value of the Australian dollar. In addition, sizable differences remain in interest rates between Australia and major world economies, which favours international investors’ holdings of Australian dollar denominated assets. Prime lending rates in Australia were around 6 per cent in early June, compared with 3.25 per cent in the United States and 1.5 per cent in Japan.

For 2012–13 as a whole, the Australian dollar is assumed to average around parity against the US dollar. On a trade-weighted basis, the Australian dollar is assumed to average around TWI 74 for the year.

While the value of the Australian dollar in 2012–13 is assumed to remain relatively high against the US dollar, considerable uncertainty remains in the outlook for the Australian exchange rate. Moreover, some volatility in the Australian exchange rate is expected because changes in financial market sentiment can influence movements

Australian economic indicators

Interest rate bInflation rateEconomic growth

2012–13a2011–12a2010–11%

1

2

3

4

5

6

7

8

a ABARES assumption. b Large business weighted average variable rate on credit outstanding.

18

Economic overview

ABARES

in the Australian dollar. For example, when reviewing the past year, the Australian dollar was as low as US95 cents in October 2011 and as high as US110 cents in August 2011. Consequently, it remains important for primary producers and exporters to manage the risks associated with fluctuations in the Australian exchange rate.

forestry exportsThe total volume of farm production is forecast to decline by 0.7 per cent in 2012–13, following an estimated increase of 4.6 per cent in 2011–12, with this mainly reflecting an expected decline in crop production.

The index of crop production is forecast to fall by around 4 per cent in 2012–13, mainly reflecting a forecast decline in winter crop production from a record high in 2011–12.

The volume of livestock production is forecast to increase by 3.4 per cent in 2012–13, mainly reflecting an increase in lamb turn-off rates and increased production of wool and dairy products.

The index of unit export returns for Australian farm commodities, in aggregate, is forecast to decline by 6.9 per cent in 2012–13, after remaining largely unchanged in 2011–12. Lower world prices for wheat, rice, soybeans, cotton, wool, and dairy products are expected to more than offset forecast price rises for beef and veal.

Export earnings from farm commodities are forecast to decline by 4.5 per cent in 2012–13 to around $34.4 billion, following an estimated increase of 11.2 per cent in 2011–12 to $36 billion. Farm commodities for which export earnings are forecast to be lower in 2012–13 include wheat (5 per cent), barley (33 per cent), canola (9 per cent), rice (5 per cent), grain sorghum (14 per cent), raw cotton (10 per cent) and sugar (10 per cent). Partially offsetting these declines is a forecast increase in export earnings for wine (2 per cent), sheep meat (11 per cent) and chickpeas (13 per cent).

Australian exchange rate

US$/A$

0.2

0.4

0.6

0.8

1.0

1.2

a ABARES assumption.

2012–13a

2009–10

2006–07

2003–04

2000–01

1997–98

19

Economic overview

ABARES

Export earnings for crops are forecast to be $19.5 billion in 2012–13, compared with an estimated $21 billion in 2011–12. The export value of livestock and livestock products is forecast to remain largely unchanged at around $15 billion in 2012–13.

For fisheries products, export earnings are forecast to be around $1.3 billion in 2012–13, largely unchanged from the estimated value in 2011–12. Export earnings for forest products are forecast to increase by around 3.4 per cent to $2.4 billion in 2012–13.

In total, the value of Australian agricultural, fisheries and forestry exports is forecast to be around $38.1 billion in 2012–13, a decline of around 4 per cent from an estimated $39.6 billion in 2011–12.

Malaysia–Australia Free Trade Agreement

The Agreement

The Malaysia–Australia Free Trade Agreement (MAFTA) was signed on 22 May 2012 and will come into effect once Australia and Malaysia have completed their domestic ratification procedures. The earliest the agreement could take effect is 1 January 2013.

Malaysia’s agricultural imports

Malaysia’s total agricultural imports were around US$16.5 billion in 2011. Major agricultural imports were sugar (valued at US$970 million in 2011), maize (US$933 million), dairy products (US$801 million) and vegetables (US$735 million). Other main agricultural imports included rice, cotton, oilseeds and wheat, which were each valued at more than US$400 million. Imports of many agricultural commodities, such as sugar, maize, dairy products and vegetables, have risen significantly in recent years, reflecting strong income growth and changing diets.

Malaysia’s major agricultural imports in 2011

US$m

Source: UN Comtrade

200

400

600

800

1000

Live cattle

Sheep meat

Fruits

Beef

Wheat

Oilseeds

Cotton

Rice

Vegetables

Dairy

Maize

Sugar

continued...

20

Economic overview

ABARES

Malaysia–Australia Free Trade Agreement continued

Australia is a major source of food imports

Between 1995 and 2006, Australia was the leading supplier of imported agricultural commodities to Malaysia. Since 2006, Malaysia’s imports of fresh vegetables, maize, rice and dairy products from Thailand, the European Union, China and the United States have increased significantly, causing Australia’s import share to decline.

Key agricultural imports from Australia are wheat (valued at US$247 million in 2011), dairy products (US$92 million), beef (US$70 million) and sugar (US$68 million). Other Malaysian agricultural imports important to Australia included sheep meat and vegetables, each valued at more than US$40 million.

Malaysia’s total agricultural imports, by major sources

201120061995

2011US$m

Source: UN Comtrade

300

600

900

1200

1500

AustraliaUnitedStates

ChinaEuropeanUnion

Thailand

continued...

Malaysia’s total imports of sugar, maize, dairy products and vegetables

2011–12US$/t

Dairy

MaizeRaw sugar, caneVegetables

20112007200319991995

Source: UN Comtrade

200

400

600

800

1000

21

Economic overview

ABARES

Malaysia–Australia Free Trade Agreement continued

Malaysia does not produce wheat and is therefore dependent on imports to meet domestic consumption. In 2011, total Malaysian wheat imports were worth around US$438 million, with more than 55 per cent sourced from Australia. The remaining wheat imports came principally from the United States.

In 2011, New Zealand was the largest supplier of dairy products to Malaysia, followed by the United States and Australia. In 2011, Malaysia imported US$92 million worth of dairy products from Australia. Imports of milk powder and cream totalled US$35 million, while imports of cheese amounted to almost US$30 million and butter imports to around US$18 million.

Malaysia imported around US$390 million of beef in 2011. India was the largest supplier of beef (which can also include buffalo meat) to Malaysia in that year (US$293 million), followed by Australia (US$70 million). Beef imported from Australia, New Zealand and the United States is generally of higher quality than Indian beef, and is therefore used in high-end foodservice outlets and restaurants.

In Malaysia, cultivation of sugar cane is small and almost all of Malaysia’s domestic demand is met by imports. In 2011, Malaysia’s sugar imports totalled US$970 million. Brazilian sugar accounted for over 65 per cent of the import share, while Thailand accounted for 19 per cent and Australia 6 per cent.

Outcomes from MAFTA

MAFTA delivers important improvements to market access for Australia for a range of agricultural portfolio industries. These include:

annual increases in import volumes of liquid milk at zero tariff

elimination of all tariffs on rice from 2026

phase-out of tariffs on tropical fruit (including melons, mangoes, pineapples and longans) by 2016.

continued...

Malaysia’s major agricultural imports sourced from Australia in 2011

US$m

Source: UN Comtrade

50

100

150

200

250

Live cattle

Fruits

Wool

Vegetables

Sheep meat

Sugar

Beef

Dairy

Wheat

22

Economic overview

ABARES

Malaysia–Australia Free Trade Agreement continued

The agreement also provides for improvements in market access for a number of agricultural products, including some meat products (such as pork), through improved quotas.

MAFTA builds on outcomes already achieved under the ASEAN–Australia–New Zealand Free Trade Agreement (AANZFTA), which was signed in 2009. AANZFTA included:

binding of tariff rates at zero for beef, sheep and goat meat

removal of tariffs for a number of dairy products (such as cheese, butter and yoghurt), either on entry into force or by 2011.

Australia has already committed to removal of tariffs on imports of agricultural products under AANZFTA.

Dairy

Under MAFTA, Australian dairy exporters will be able to access additional quota volumes for liquid milk. These in-quota exports will be subject to zero tariffs, compared with 20 per cent for out-of-quota exports. Importantly, quota volumes for liquid milk will continue to grow in perpetuity, at annual rates of between 3 per cent and 9 per cent. Malaysia also agreed to significantly liberalise administration of the tariff rate quotas for liquid milk. Malaysia will apply an open licensing system to 35 per cent of the volume of two of the three liquid milk tariff rate quotas. Under MAFTA, restrictions will be removed on who can apply for a license and whether the product is imported in bulk or in retail packs. This more open licensing system will support import of higher value retail products from Australia and is an important improvement on the AANZFTA outcome.

Rice

MAFTA provides open access arrangements for Australian rice from 2023, such that there will be no restriction on who can import rice into Malaysia; import licenses will be issued on a first come, first served basis; and there will be no restriction on whether the product is imported in bulk or in retail packs. From 2026, all tariffs on rice will be eliminated. These results for the rice industry are an improvement on the AANZFTA. Both the tariff and import licensing commitments on rice are important given that Malaysia, like many other Asian countries, normally excludes rice from commitments in free trade agreements.

Wine

While wine is excluded from upfront tariff commitments, MAFTA has secured a commitment from Malaysia that Australian wine exporters will receive any reduction or elimination of tariff that Malaysia provides any other country on wine imports. This is an improvement on the AANZFTA.

23

Economic overview

ABARES

Major indicators of Australia’s agriculture and natural resources based sectors

change from change from 2007 2008 2009 2010 2011 2012 previous year2007 2008 2009 2010 2011 2012 previous year

08 09 10 11 s 12 f 13 f 2011 12 2012 13–08 –09 –10 –11 s –12 f –13 f 2011–12 2012–13% %% %

Exchange rate US$/A$ 0.90 0.75 0.88 0.99 1.03 1.00 4.0 – 2.9Exchange rate US$/A$ 0.90 0.75 0.88 0.99 1.03 1.00 4.0 2.9Unit returns aUnit returns a Farm index 100 0 100 6 88 7 98 2 97 6 90 8 0 6 7 0Farm index 100.0 100.6 88.7 98.2 97.6 90.8 – 0.6 – 7.0

Value of exports A$m 31 384 36 020 32 057 36 129 39 634 38 123 9.7 – 3.8Value of exports A$m 31 384 36 020 32 057 36 129 39 634 38 123 9.7 3.8Farm A$m 27 570 32 148 28 550 32 406 36 034 34 425 11.2 – 4.5Farm A$m 27 570 32 148 28 550 32 406 36 034 34 425 11.2 – 4.5– crops A$m 13 070 17 001 15 231 17 589 21 033 19 474 19 6 – 7 4– crops A$m 13 070 17 001 15 231 17 589 21 033 19 474 19.6 – 7.4

livestock A$m 14 500 15 147 13 318 14 817 15 002 14 951 1 2 0 3– livestock A$m 14 500 15 147 13 318 14 817 15 002 14 951 1.2 – 0.3Forest and fisheries prod cts A$m 3 813 3 872 3 508 3 723 3 600 3 698 3 3 2 7Forest and fisheries products A$m 3 813 3 872 3 508 3 723 3 600 3 698 – 3.3 2.7

forestr A$ 2 2 3 3 2 26 2 2 3 9 2 29 3– forestry A$m 2 471 2 343 2 261 2 474 2 349 2 429 – 5.1 3.4 – fisheries A$m 1 342 1 529 1 247 1 249 1 251 1 270 0.2 1.5 fisheries $

Gross value of production bGross value of production bF A$ 43 752 41 918 39 675 48 139 48 717 47 076 1 2 3 4Farm A$m 43 752 41 918 39 675 48 139 48 717 47 076 1.2 – 3.4

$– crops A$m 24 237 22 769 21 137 27 082 27 565 26 179 1.8 – 5.0p $– livestock A$m 19 516 19 149 18 537 21 057 21 152 20 897 0.5 – 1.2 livestock A$m 19 516 19 149 18 537 21 057 21 152 20 897 0.5 1.2Forestry and fisheries A$m 4 044 3 975 3 973 4 052 3 907 4 069 – 3.6 4.1Forestry and fisheries A$m 4 044 3 975 3 973 4 052 3 907 4 069 3.6 4.1– forestry A$m 1 837 1 759 1 779 1 842 1 671 1 788 – 9 3 7 0 forestry A$m 1 837 1 759 1 779 1 842 1 671 1 788 – 9.3 7.0– fisheries A$m 2 207 2 216 2 194 2 210 2 236 2 281 1 2 2 0– fisheries A$m 2 207 2 216 2 194 2 210 2 236 2 281 1.2 2.0

Volume of productionVolume of productionFarm index 103.9 108.2 107.6 114.2 119.5 118.7 4.6 – 0.7Farm index 103.9 108.2 107.6 114.2 119.5 118.7 4.6 – 0.7– crops index 103 9 113 4 114 4 126 3 136 8 131 5 8 3 – 3 9– crops index 103.9 113.4 114.4 126.3 136.8 131.5 8.3 – 3.9

livestock index 102 3 100 8 98 8 100 6 100 8 104 2 0 2 3 4– livestock index 102.3 100.8 98.8 100.6 100.8 104.2 0.2 3.4Forestry index 133 3 119 5 118 7 122 7 112 3 117 6 8 5 4 7Forestry index 133.3 119.5 118.7 122.7 112.3 117.6 – 8.5 4.7

Production area and livestock numbersProduction area and livestock numbersCrop area (grains and oilseeds) ’000 ha 23 204 24 084 23 793 24 112 24 148 23 673 0 2 – 2 0Crop area (grains and oilseeds) ’000 ha 23 204 24 084 23 793 24 112 24 148 23 673 0.2 – 2.0Forestry plantation area ’000 ha 1 973 2 020 2 009 2 017 na na na naForestry plantation area ’000 ha 1 973 2 020 2 009 2 017 na na na naSheep million 76 9 72 7 68 1 74 3 77 6 81 0 4 4 4 4Sheep million 76.9 72.7 68.1 74.3 77.6 81.0 4.4 4.4C ttl illi 27 3 27 9 26 6 28 8 30 2 31 4 4 9 4 0Cattle million 27.3 27.9 26.6 28.8 30.2 31.4 4.9 4.0

Farm costs A$m 37 137 36 631 34 491 36 801 37 578 37 568 2.1 – 0.0Farm costs A$m 37 137 36 631 34 491 36 801 37 578 37 568 2.1 – 0.0Net cash income c A$m 10 834 5 854 9 978 16 283 16 211 14 718 – 0 4 – 9 2Net cash income c A$m 10 834 5 854 9 978 16 283 16 211 14 718 – 0.4 – 9.2Net value of farm production d A$m 6 615 5 287 5 184 11 338 11 138 9 508 1 8 14 6Net value of farm production d A$m 6 615 5 287 5 184 11 338 11 138 9 508 – 1.8 – 14.6

Farmers’ terms of trade index 91.4 88.9 88.6 98.5 93.7 91.9 – 4.9 – 1.9Farmers terms of trade index 91.4 88.9 88.6 98.5 93.7 91.9 4.9 1.9

EmploymentEmploymentAgriculture forestry and fishing ’000 354 362 369 351Agriculture, forestry and fishing ’000 354 362 369 351 na na na naAustralia ’000 10 684 10 892 11 027 11 355 na na na na

a Base: 2007–08 = 100 b For a definition of the gross value of farm production see Table 13 c Gross value of farm production less increase in assetsa Base: 2007–08 = 100. b For a definition of the gross value of farm production see Table 13. c Gross value of farm production less increase in assets held by marketing authorities and less total cash costs d Gross value of farm production less total farm costs f ABARES forecast s ABARES estimatea Base: 2007–08 = 100. b For a definition of the gross value of farm production see Table 13. c Gross value of farm production less increase in assets held by marketing authorities and less total cash costs. d Gross value of farm production less total farm costs. f ABARES forecast. s ABARES estimate. na Not available.

a Base: 2007–08 = 100. b For a definition of the gross value of farm production see Table 13. c Gross value of farm production less increase in assets held by marketing authorities and less total cash costs. d Gross value of farm production less total farm costs. f ABARES forecast. s ABARES estimate. na Not available.Note: ABARE revised the method for calculating farm price and production indexes in October 1999. The indexes for the different groups of

held by marketing authorities and less total cash costs. d Gross value of farm production less total farm costs. f ABARES forecast. s ABARES estimate. na Not available.Note: ABARE revised the method for calculating farm price and production indexes in October 1999. The indexes for the different groups of commodities are calculated on a chain weight basis using Fishers’ ideal index with a reference year of 1997–98 = 100.

na Not available.Note: ABARE revised the method for calculating farm price and production indexes in October 1999. The indexes for the different groups of commodities are calculated on a chain weight basis using Fishers’ ideal index with a reference year of 1997–98 = 100. Sources: ABARES; Australian Bureau of Statistics

Note: ABARE revised the method for calculating farm price and production indexes in October 1999. The indexes for the different groups of commodities are calculated on a chain weight basis using Fishers’ ideal index with a reference year of 1997–98 = 100. Sources: ABARES; Australian Bureau of Statisticscommodities are calculated on a chain weight basis using Fishers ideal index with a reference year of 1997 98 100. Sources: ABARES; Australian Bureau of Statistics

24

Economic overview

ABARES

Major Australian agricultural, fisheries and forestry commodity exports

$5.62b$5.92b

$4.47b$4.45b

$2.70b$3.00b

$1.88b$1.84b

$2.20b$2.29b

$1.51b$1.68b

$2.29b$2.56b

$1.22b$1.83b

$1.20b$1.34b

$1.12b$1.05b

$0.83b$0.77b

$0.44b$0.36b

$0.41b$0.39b

worldpricevalue valuevolume

–1% –13%

Wheat, cotton, sugar and oilseeds are world indicator prices in US$. All other commodities are export unit returnsor domestic prices in A$. For export value, annual forecasts are the sum of quarterly forecasts. As a result, annual export values do not necessarily reflect variations in export volumes, world prices and exchange rates.

2012–13

2011–12 f

2012–13 f

$b

+12%

+6%

–27%

+5%

+7%

+21%

+1%

–5%

–10%–11%

–10%

–33%–8%

+3%

+3%

+6%

+7%

+24%

+5%

+2%

+2%

+12%

–3%

–3%

0%

–17%

–11%

–10%

–4%

0%

0%

+2%

–10%

–11%

–4%

+2%

+2%

1 2 3 4 5 6 7

f ABARES forecast.

Rock lobster

Mutton

Woodchips

Lamb

Oilseeds

Barley

Sugar

Cotton

Wine

Dairy

Wool

Beef and veal

Wheat

AgricultureCrops

26 ABARES

WheatJames Fell

The world wheat indicator price (US no. 2 hard red winter, fob Gulf) is forecast to fall by 13 per cent in 2012–13 to average around US$260 a tonne. This forecast price fall reflects expected higher availability (opening stocks plus production) of wheat and an expected increase in world production of higher protein milling wheats. US hard red winter wheat is a high protein milling wheat.

A downside risk to this price forecast is the potential for a significant amount of wheat to be exported from India, following increased harvest in recent years and policy changes by the Indian Government to allow wheat to be exported.

World wheat indicator price and production

Mt 2011–12US$/t

Other

ArgentinaAustraliaCanada

United StatesBlack Sea exportersIndia

ChinaEuropean UnionUS no. 2 HRW fob Gulf(right axis)

2012–13f

2011–12f

2010–11

2009–10

2008–09

2007–08

f ABARES forecast.

100

200

300

400

500

600

700

100

200

300

400

500

600

700

27

Wheat

ABARES

Production to remain high in 2012–13Following record production in the previous season, world wheat production is forecast to fall by around 3 per cent in 2012–13 to around 678 million tonnes, mainly because of a fall in production in the Black Sea exporting countries.

Wheat production in the three major Black Sea exporting countries (the Russian Federation, Ukraine and Kazakhstan) is forecast to fall by 16 per cent in 2012–13 to around 85 million tonnes. The forecast fall is the result of drought in Ukraine and an assumption of a return to average yields in Kazakhstan following above average yields in 2011–12. In Ukraine, significant areas of winter wheat have reportedly been abandoned as a result of the drought and replanted with spring wheat and other crops. At the opening of the spring planting window in May 2012, rainfall and soil moisture remained relatively low in parts of Ukraine, Kazakhstan and southern areas of the Russian Federation.

While world production is forecast to fall as a result of expected lower production in the Black Sea countries, production in some other major producing and exporting regions has either increased or remained largely unchanged. Consequently, the availability of milling wheat, particularly from North America, is forecast to increase, which is expected to place downward pressure on the world indicator price.

In the United States, wheat production is forecast to rise by 13 per cent in 2012–13 to around 61 million tonnes. Before the start of the winter wheat harvest in June, a majority of crops were in good to excellent condition and winter wheat production is forecast to be 13 per cent higher in 2012–13, particularly in the southern hard red winter wheat areas. Spring wheat production is forecast to rise by 11 per cent, largely as a result of improved planting conditions compared with the previous season.

In Canada, production is forecast to increase by 5 per cent in 2012–13 to around 27 million tonnes. This reflects an assumed 12 per cent increase in harvested area, with official estimates of growers’ planting intentions indicating a significant increase in planted area. However, spring production may fall significantly if seasonal conditions on the Prairies prove to be unfavourable.

In the European Union, wheat production is forecast to fall by around 3 per cent in 2012–13 to around 135 million tonnes. The area harvested is expected to fall by 3 per cent to around 25 million hectares. Winterkill increased following a cold spell in February with significant losses in eastern France, western Germany and Poland. In contrast, conditions in the United Kingdom and western France were warmer, with lower than normal winterkill. Average yields in France, Germany and the United Kingdom, the three largest EU producers, are expected to be around average.

In Argentina, wheat production is forecast to fall by 2 per cent in 2012–13 to around 13 million tonnes. This largely reflects a forecast fall in planted area with growers expected to plant larger areas of other crops, such as barley. Rainfall at the beginning of the planting window in May was generally below average and sufficient in-crop rainfall will be needed for forecast yields to be realised.

While China and India are not major exporters of wheat, they are major wheat producers and consumers. Chinese wheat production is forecast to remain largely unchanged in 2012–13 at around 116 million tonnes. In India, harvest of the 2012–13 wheat crop is complete, with production estimated to have increased by 4 per cent to around 90 million tonnes.

28

Wheat

ABARES

Use of wheat for food to riseWorld wheat consumption is forecast to fall by 1 per cent in 2012–13 to around 679 million tonnes. World food use is forecast to rise by 1 per cent to around 464 million tonnes, reflecting population growth. Human consumption of wheat for food accounts for a little less than 70 per cent of world wheat consumption.

World feed use of wheat is forecast to fall by around 10 per cent in 2012–13 to around 127 million tonnes in response to an expected fall in world supplies of feed wheat. While feed use accounts for only around 18 per cent of world wheat consumption, its fluctuations can have a significant effect on overall consumption because human and industrial wheat consumption do not change significantly in the short term.

Trade to remain highWorld trade in wheat is forecast to fall by 5 per cent in 2012–13 to around 136 million tonnes; an anticipated increase in exports of milling wheat is expected to be more than offset by a fall in exports of feed wheat.

With the increased availability of milling wheat in North America, exports of wheat from the United States and Canada are forecast to increase by 15 per cent and 8 per cent in 2012–13 to around 32 million tonnes and 19 million tonnes, respectively. In 2012–13, western Canada’s wheat export marketing arrangements will change and the Canadian Wheat Board will cease to be a single desk marketer of wheat from western Canada (Alberta, Saskatchewan, Manitoba and a part of British Columbia).

Exports from the European Union are forecast to fall by around 14 per cent to around 16 million tonnes, reflecting lower production in 2012–13. The Russian Federation and Ukraine are typically large exporters of feed wheat and a fall in exports from Ukraine is expected to contribute to lower feed wheat exports in 2012–13. Total wheat exports from the Russian Federation, Ukraine and Kazakhstan are forecast to fall by 11 per cent in 2012–13 to around 32 million tonnes, largely reflecting the forecast lower availability of wheat in this region.

Change in world feed consumption and total consumption

Mt

Change in feed component of consumption

Change in total consumption

f ABARES forecast.

–20

–10

10

20

30

40

50

2012–13f

2010–11

2008–09

2006–07

2004–05

2002–03

29

Wheat

ABARES

Exports from Argentina are forecast to fall by 17 per cent in 2012–13 to around 9 million tonnes, reflecting an expected decline in production. In early 2012, the Argentinian Government announced that it will switch from authorising export volumes to regulating domestic consumption. Under the proposed plan, around 7 million tonnes would be reserved for domestic consumption and the surplus production would be available for export.

India is not typically a major exporter of wheat but its wheat exports are forecast to more than double in 2012–13 to around 3 million tonnes. Indian production has exceeded domestic consumption in each year since 2006–07 resulting in the build-up of a large stock of exportable wheat. Previously, regulation prevented the export of this grain but, in September 2011, India officially removed its ban on wheat exports.

Stocks to fallWorld closing stocks of wheat are forecast to fall by around 1 per cent in 2012–13 to around 201 million tonnes but to remain at high levels. While closing stocks in most major exporting countries are forecast to be largely unchanged, stocks in India, which holds around 9 per cent of world wheat stocks, are forecast to rise by 26 per cent to around 26 million tonnes. This reflects consecutive years of Indian production exceeding domestic consumption. However, stocks in Ukraine are forecast to fall by around 70 per cent to around 2 million tonnes.

World wheat closing stocks

Mt

Other

ArgentinaAustraliaCanada

European UnionKazakhstanRussian FederationUkraineUnited States

IndiaChina

2012–13f

2011–12f

2010–11

2009–10

2008–09

2007–08

f ABARES forecast.

40

80

120

160

200

30

Wheat

ABARES

Australian wheat production to fallAustralian wheat production is forecast to fall by 18 per cent in 2012–13 to around 24 million tonnes. This reflects a forecast fall in planted area and an assumed return of yields to historical averages from the highs of last season. The area planted to wheat is forecast to fall by 5 per cent in 2012–13, reflecting the effect on growers of an expected fall in farmgate wheat prices and a dry start of the season. Sowing of wheat is largely complete across most states, with growers in some southern regions yet to complete planting.

Rainfall and soil moisture in Western Australia, typically the largest producing state, have been below average throughout the planting window. Because soils in the Western Australian wheat belt are sandy with low water-holding capacity, crops generally rely on in-crop rainfall for development and growth. Production in Western Australia is forecast to fall by 26 per cent to around 9 million tonnes in 2012–13, as a result of an estimated 6 per cent fall in area sown to wheat and an assumed decline of yields to historical averages.

Water-holding capacity (available water content) (mm)

NorthernTerritory

Queensland

New SouthWales

AustralianCapital

TerritoryVictoria

Tasmania

South Australia

WesternAustralia

High > 200175 to 200150 to 175125 to 150100 to 125

75 to 10050 to 7525 to 50Low < 25No data

31

Wheat

ABARES

Average to above average rainfall has been received in eastern Australia’s northern cropping areas since early 2012, which has supplemented soil moisture reserves. In southern cropping areas of the eastern states, rainfall has been average to below average since the beginning of the planting window, but generally sufficient for sowing with timely rainfall in the latter parts of both April and May.

The seasonal outlook issued by the Bureau of Meteorology on 23 May 2012 points to an increase in the probability of a dry winter across southern Australia; in contrast, a wetter than average season is likely to occur in Queensland and northern New South Wales. Temperatures are likely to exceed average across almost all major cropping areas.

Export earnings to declineAustralian wheat exports are forecast to be largely unchanged in 2012–13 at around 21 million tonnes. This reflects a forecast drawdown in existing stocks and the large harvest of 2011–12, which will contribute to export shipments in the first six months of the July to June year.

Reflecting a forecast fall in world wheat prices, the value of Australian wheat exports is forecast to fall by 5 per cent in 2012–13, to be around $5.6 billion.

Australian wheat export volumes

Mt

Eastern states (incl. SA)

f ABARES forecast.

Western Australia

5

10

15

20

25

2012–13f

2010–11

2008–09

2006–07

2004–05

2002–03

32

Wheat

ABARES

Outlook for wheat

2010 2011 2012 %2010 2011 2012 %–11 –12 f –13 f change11 12 f 13 f change

WorldWorld Production Mt 653 695 678 – 2 5Production Mt 653 695 678 – 2.5– China Mt 115 118 116 – 1 6– China Mt 115 118 116 – 1.6– European Union 27 Mt 137 138 135 – 2 6– European Union 27 Mt 137 138 135 – 2.6

India Mt 81 87 90 3 9– India Mt 81 87 90 3.9Russian Federation Mt 42 56 57 1 4– Russian Federation Mt 42 56 57 1.4United States Mt 60 54 61 12 7– United States Mt 60 54 61 12.7

Consumption Mt 657 688 679 – 1.3Consumption Mt 657 688 679 1.3– human Mt 456 460 464 0.8– human Mt 456 460 464 0.8– feed Mt 118 142 127 – 10 4– feed Mt 118 142 127 – 10.4

Closing stocks Mt 195 202 201 – 0.5gStocks-to-use ratio % 30 29 30 0.8Stocks to use ratio % 30 29 30 0.8Trade Mt 126 143 136 – 5.2Trade Mt 126 143 136 – 5.2ExportsExports

A i M 9 10 9 17 3– Argentina Mt 9 10 9 – 17.3– Australia a Mt 18 21 21 – 0.9ust a a a– Canada Mt 16 17 19 8.1– European Union 27 Mt 24 19 16 – 14.0 European Union 27 Mt 24 19 16 14.0– Kazakhstan Mt 6 9 9 4.4 Kazakhstan Mt 6 9 9 4.4– Russian Federation Mt 4 22 18 – 14.4– Russian Federation Mt 4 22 18 – 14.4– Ukraine Mt 4 5 4 – 26 4– Ukraine Mt 4 5 4 – 26.4

United States Mt 35 28 32 15 1– United States Mt 35 28 32 15.1

Price b US$/t 317 298 260 – 12.8AustraliaAustraliaArea ’000 ha 13 645 14 058 13 353 – 5 0Area 000 ha 13 645 14 058 13 353 – 5.0Production kt 27 891 29 515 24 124 – 18 3Production kt 27 891 29 515 24 124 – 18.3Exports a kt 18 431 21 200 21 000 – 0 9Exports a kt 18 431 21 200 21 000 – 0.9

value A$m 5 516 5 922 5 621 5 1– value A$m 5 516 5 922 5 621 – 5.1APW 10 net pool return A$/t 346 259 250 3 5APW 10 net pool return A$/t 346 259 250 – 3.5

a July June years b US no 2 hard red winter wheat fob Gulf July June f ABARES forecasta July–June years. b US no. 2 hard red winter wheat fob Gulf, July–June. f ABARES forecast.Sources: ABARES; Australian Bureau of Statistics; International Grains Councila July–June years. b US no. 2 hard red winter wheat fob Gulf, July–June. f ABARES forecast.

Sources: ABARES; Australian Bureau of Statistics; International Grains Councila July–June years. b US no. 2 hard red winter wheat fob Gulf, July–June. f ABARES forecast.

Sources: ABARES; Australian Bureau of Statistics; International Grains CouncilSources: ABARES; Australian Bureau of Statistics; International Grains CouncilSources: ABARES; Australian Bureau of Statistics; International Grains Council

33ABARES

Prices to fall in 2012–13The world coarse grains indicator price (US corn, fob Gulf) is forecast to fall by 10 per cent in 2012–13 to $244 a tonne in response to a forecast increase in production. This follows the indicator price averaging a forecast $271 a tonne in 2011–12 because of low world stocks. The world indicator price for barley (French Rouen feed) is forecast to fall by 8 per cent in 2012–13 to US$248 a tonne.

Record US corn production drives global production to record levelsWorld coarse grain production is forecast to rise by 5 per cent in 2012–13 to a record 1.2 billion tonnes with production increases forecast for barley and corn.

World coarse grains prices

2011–12US$/t

French Rouen feed barley

US corn fob Gulf ports

f ABARES forecast.

50

100

150

200

250

300

350

2012–13f

2010–11

2008–09

2006–07

2004–05

2002–03

Coarse grainsDavid Mobsby

34

Coarse grains

ABARES

Barley

World barley production is forecast to increase by 4 per cent in 2012–13 to 139 million tonnes, reflecting an expected increase in harvested area in major producing nations and replanting of failed 2012–13 winter crops with spring barley in the European Union and Ukraine.

In the European Union, barley production is forecast to increase by 2 per cent in 2012–13 to 53 million tonnes. Winterkill during 2012–13 led to higher than expected abandonment of winter grains (including winter barley) and these areas are expected to be resown with spring barley and corn.

Barley production in the Black Sea region (Kazakhstan, the Russian Federation and Ukraine) is forecast to decrease by 3 per cent in 2012–13 to 27.5 million tonnes. A forecast increase in the harvested area in Ukraine is expected to be offset by a return to average yields from the above average yields achieved in 2011–12. Large areas of winter grains, including winter barley that accounts for roughly 30 per cent of total barley area annually, were damaged by winterkill and are expected to be resown with spring barley and corn. Consequently, production in Ukraine is forecast to remain largely unchanged at around 9 million tonnes. In the Russian Federation, barley production is forecast to decrease by 2 per cent to 16.5 million tonnes, reflecting a return to average yields from the above average yields achieved in 2011–12.

In Canada, the harvested area for barley is forecast to rise by 21 per cent in 2012–13 to 2.9 million hectares as producers respond to low domestic supplies and favourable prices by increasing the planted area. Assuming average yields, production is forecast to rise by 21 per cent to 9.4 million tonnes.

In Argentina, the area planted to barley is forecast to rise by 22 per cent to 1.4 million hectares. This reflects the expectation that producers will switch to barley from wheat, which is subject to government policy, as barley is an attractive alternative for producers. Producers are free to sell all barley to the market that gives them the highest return. Assuming average yields, barley production is forecast to increase by 29 per cent to 5.2 million tonnes in 2012–13.

Black sea region barley production

Mt

f ABARES forecast.

Kazakhstan

Ukraine Russian Federation

5

10

15

20

25

30

35

40

2012–13f

2009–10

2006–07

2003–04

2000–01

1997–98

35

Coarse grains

ABARES

Corn

World corn production is forecast to increase by 6 per cent in 2012–13 to a record 925 million tonnes, reflecting an expected increase in harvested area in major producing nations, most notably in the United States and China. Together these two nations are forecast to account for 60 per cent of world production.

In the United States, corn production is forecast to increase by 16 per cent in 2012–13 to 363 million tonnes, largely as a result of a forecast 5 per cent rise in the harvested area. The area planted to corn is estimated to have increased because of expected favourable returns to corn relative to production alternatives. However, the increase is less than early expectations as a result of the price of soybeans rising during the planting period for corn.

In China, the world’s second largest producer of corn, the harvested area for corn is forecast to rise by 4 per cent to 34 million hectares in 2012–13. This forecast increase is supported by high domestic prices, strong domestic demand and government assistance to producers. Assuming favourable seasonal conditions, corn production in China is forecast to rise by 1 per cent to 194 million tonnes.

US corn planting progress

%

2012–13

2006–07 to 2010–11 average

20

40

60

80

100

Week 11Week 9Week 7Week 5Week 3Week 1

World corn production

Mt

f ABARES forecast.

Other

Latin America

China

United States

2012–13f

2009–10

2006–07

2003–04

2000–01

1997–98

200

400

600

800

1000

36

Coarse grains

ABARES

With the world price of corn forecast to fall in 2012–13, the area planted to corn in Latin America (Argentina and Brazil) is forecast to fall as producers switch to more profitable production alternatives, such as soybeans. Consequently, the harvested areas in Argentina and Brazil are each forecast to contract by 3 per cent. However, despite the reduction in harvested area, corn production in Argentina and Brazil is forecast to increase by 20 per cent and 1 per cent to 26 million tonnes and 67 million tonnes, respectively. In Argentina, the forecast increase reflects a return to average yields from the below average yields recorded in 2011–12.

Across Europe, the forecast for corn production is mixed. In the European Union, corn production is forecast to remain largely unchanged in 2012–13 at 65 million tonnes. While the area planted to corn is estimated to have increased by 6 per cent, it has been assumed there will be a return to average yields following the above average yields in 2011–12. In Ukraine, corn production is forecast to increase by 4 per cent in 2012–13 to 22 million tonnes, with the increase in harvested area forecast to more than offset a return to average yields following above average yields in 2011–12.

Feed use of coarse grains drives consumption for 2012–13World consumption of coarse grains is forecast to increase by around 4 per cent in 2012–13 to 1.2 billion tonnes, reflecting forecast lower prices. Feed use of coarse grains is expected to be the main driver of consumption growth. However, industrial and food use is also forecast to grow, albeit at a slower rate than over recent years, with growth in ethanol production expected to slow.

World feed use of coarse grains is forecast to rise by 4 per cent in 2012–13 to 690 million tonnes, reflecting an increase in available supplies, lower prices and growing world demand for feed grains. Increases in consumption are forecast for the fast growing economies of Asia, where meat consumption is expected to increase in line with growing incomes and population growth. Pig meat consumption in China, for example, has grown at an average annual rate of 4.7 per cent since 1982–83 and use of corn for feed has grown at an annual average rate of 4.9 per cent over the same period. These trends are expected to continue and use of corn for feed is forecast to increase by 6 per cent in 2012–13 to 138 million tonnes.

China corn for feed and pig meat consumption

Mt Mt

Corn for feed

Pig meat consumption (right axis)

f ABARES forecast.

30

60

90

120

150

2012–13f

2008–09

2004–05

2000–01

1996–97

1992–93

1988–89

1984–85

15

30

45

60

75

37

Coarse grains

ABARES

In the United States, use of corn for feed is forecast to increase by 10 per cent in 2012–13 to 127 million tonnes as a result of the combined effects of plentiful supplies of domestically produced corn, falling prices and an expected rise in pig and poultry populations.

World barley consumption for feed is forecast to increase by 2 per cent in 2012–13 to 92 million tonnes, reflecting an expected substitution away from feed wheat into feed barley. The substitution of feed barley for feed wheat is expected to occur because of lower world feed wheat supplies. Increases in feed consumption of barley are expected in most major consuming countries.

World industrial and food use of coarse grains is forecast to increase by 2 per cent in 2012–13 to 494 million tonnes, which is lower than the average rate of growth over the five years to 2011–12 of around 6 per cent. The forecast slowing of consumption for industrial and food use reflects the forecast slowing of ethanol production in the United States. The drivers of growth in industrial and food use in 2012–13 are expected to be from non-biofuel uses such as corn-based sweeteners and starch and beer.

Growth in ethanol production in the United States slowed considerably over 2010 and 2011 and is forecast to remain largely unchanged in 2012 and 2013. The United States Energy Information Administration is forecasting a slight fall in demand for motor gasoline in 2012 and 2013, which will flow through to a slight reduction in the aggregate consumption of ethanol. Production of corn-based ethanol is expected to increase slightly in line with a small increase in the mandated levels of ethanol that can be produced from corn. In 2012 and 2013 these mandated levels of production will increase by 2.3 billion litres each year.

In China, industrial and food use of coarse grains is forecast to rise by 9 per cent in 2012–13 to 62 million tonnes. Use of corn for ethanol production is expected to slow as the government lowers subsidies for producing corn-based ethanol. However, demand for other industrial and food products derived from corn is expected to grow, more than offsetting slowing ethanol production.

US ethanol demand and supply

BL BL

Production

Consumption

Stocks (right axis)

f ABARES forecast.

10

20

30

40

50

60

0.6

1.2

1.8

2.4

3.0

3.6

2012f20092006200320001997

38

Coarse grains

ABARES

Record corn production to increase world trade in 2012–13World trade in coarse grains is forecast to increase by 10 per cent in 2012–13 to 128 million tonnes. While the trade in barley is forecast to fall, trade in corn is expected to rise as a result of forecast increases in corn production in the major exporting countries.

World barley trade is forecast to fall by 5 per cent in 2012–13 to 18.8 million tonnes with decreases in tradable supplies in the Russian Federation and the European Union more than offsetting increases in tradable supplies in Argentina and Ukraine.

Exports of barley from Argentina are forecast to rise by 39 per cent in 2012–13 to 4.1 million tonnes, driven by higher domestic production. Argentina has become increasingly prominent in world barley trade with exports rising from 102 000 tonnes in 2002–03 to over 3 million tonnes in 2011–12. This largely resulted from rising production outpacing growth in domestic Argentine consumption.

Changes in exports from the Black Sea region are forecast to be mixed. Drawing on an increased tradable supply, Ukraine is forecast to increase barley exports by 9 per cent in 2012–13 to 2.5 million tonnes. However, in the Russian Federation, an expected decrease in production is forecast to drive a 28 per cent decrease in exports to 2.3 million tonnes.

On the imports side, Saudi Arabia, the world’s largest importer of barley, is forecast to decrease its imports by 3 per cent to 7.3 million tonnes. The forecast fall assumes that measures taken by the government of Saudi Arabia to diversify animal feed imports will start to have an effect on the relative quantities of feed barley and other animal feed imports during 2012–13. In July 2011, the Saudi Arabian Government announced an expanded list of animal feeds to be eligible for import subsidies and doubled most existing subsidies.

Argentina barley market

Mt

f ABARES forecast.

Exports

Domestic consumption

2012–13f

2010–11

2008–09

2006–07

2004–05

2002–03

1

2

3

4

5

39

Coarse grains

ABARES

World trade in corn is forecast to increase by 14 per cent in 2012–13 to 101 million tonnes, driven by a high tradable surplus in the United States and growing international demand for feed grains. The United States is forecast to increase corn exports by 16 per cent to 50 million tonnes. Ukraine is forecast to increase corn exports by 4 per cent in 2012–13 to 12.5 million tonnes, driven by an increase in tradable supply.

China is expected to increase corn imports by 36 per cent in 2012–13 to 6.8 million tonnes with consumption expected to outpace domestic production in 2012–13.

Coarse grains stocks to rise in 2012–13World closing stocks of coarse grains are forecast to fall by 2 per cent in 2011–12 but increase by 11 per cent in 2012–13 to 184 million tonnes. Forecast record production of coarse grains outpacing consumption will drive the increase in stocks. If realised, the forecast level of stocks would be the highest since 2009–10.

World closing stocks of barley are forecast to increase by 3 per cent in 2012–13 to 28.3 million tonnes with world production forecast to exceed consumption. Closing stocks are forecast to increase in Ukraine and Canada but decrease in the European Union and the Russian Federation.

World closing stocks of corn are forecast to increase by 14 per cent in 2012–13 to 145 million tonnes, reflecting forecast record production in the United States where corn stocks are forecast to double to 45 million tonnes. In China, closing stocks of corn are expected to remain largely unchanged at around 58 million tonnes with shortfalls in domestic production expected to be filled by imports.

World corn stocks

Mt

f ABARES forecast.

Other

ChinaUnited States

50

100

150

200

2012–13f

2010–11

2008–09

2006–07

2004–05

2002–03

2000–01

40

Coarse grains

ABARES

Lower Australian production in 2012–13For Australia, the area planted to coarse grains is forecast to decrease by 5 per cent in 2012–13 to 5.8 million hectares as producers respond to expected lower prices. Total coarse grains production is forecast to decline by 14 per cent to 11.8 million tonnes in 2012–13, reflecting the combined effect of a reduction in planted area and a return to average yields, following above average yields in 2011–12.

Planted area for barley is expected to fall by 4 per cent in 2012–13 to 3.9 million hectares as producers reduce planted area to barley and switch to alternative crops, such as canola, offering higher expected returns. Barley production is forecast to decrease by 15 per cent in 2012–13 to 7.3 million tonnes.

Grain sorghum production is estimated to have increased by 13 per cent in 2011–12 to 2.3 million tonnes. This production increase mainly reflects an increase in yields as a result of favourable seasonal conditions. Assuming a return to more average yields in 2012–13, grain sorghum production is forecast to decrease by 13 per cent to 2 million tonnes.

Lower export earnings in 2012–13Export shipments of coarse grains are forecast to decline by 25 per cent in 2012–13 to 5.8 million tonnes. Export earnings from coarse grains are forecast to fall by 26 per cent to $1.5 billion in 2012–13, reflecting both reduced export shipments and forecast lower export prices.

For major coarse grains, barley export shipments are forecast to decline by 27 per cent in 2012–13 to 4.7 million tonnes, after a forecast increase of 39 per cent to 6.4 million tonnes in 2011–12. Lower export shipments and export prices are forecast to result in export earnings from barley falling by 33 per cent in 2012–13 to $1.2 billion.

Grain sorghum export shipments are forecast to nearly double in 2011–12 to 1 million tonnes, reflecting an increase in tradable supplies. Grain sorghum exports are forecast to decline by 18 per cent in 2012–13 to around 862 000 tonnes in line with forecast lower production. Export earnings from grain sorghum are forecast to fall by 14 per cent to $247 million in 2012–13.

41

Coarse grains

ABARES

Outlook for coarse grains

2010 2011 2012 %2010 2011 2012 %–11 –12 f –13 f change11 12 f 13 f change

WorldWorldProduction Mt 1 091 1 141 1 202 5 3Production Mt 1 091 1 141 1 202 5.3

barley Mt 124 134 139 3 7– barley Mt 124 134 139 3.7Mt 825 870 925 6 3– corn Mt 825 870 925 6.3

Consumption Mt 1 131 1 144 1 184 3.5Consumption Mt 1 131 1 144 1 184 3.5Trade Mt 114 116 128 10.3Trade Mt 114 116 128 10.3Closing stocks Mt 169 166 184 10 8Closing stocks Mt 169 166 184 10.8Stocks to use ratio % 15 15 16 6 7Stocks-to-use ratio % 15 15 16 6.7CCorn pricep (fob Gulf, Sep–Aug) US$/t 277 271 244 – 10.0 (fob Gulf, Sep Aug) US$/t 277 271 244 10.0Barley priceBarley price(fob Rouen Jul–Jun) US$/t 265 270 248 – 8 1 (fob Rouen, Jul–Jun) US$/t 265 270 248 – 8.1

lAustraliaArea ’000 ha 5 637 6 080 5 799 – 4.6– barley ’000 ha 3 740 4 038 3 875 – 4.0 barley 000 ha 3 740 4 038 3 875 4.0– grain sorghum ’000 ha 674 632 600 – 5 1– grain sorghum 000 ha 674 632 600 – 5.1

P d ti k 12 391 13 651 11 753 13 9Production kt 12 391 13 651 11 753 – 13.9b l– barley kt 8 145 8 572 7 302 – 14.8y

– grain sorghum kt 2 068 2 343 2 035 – 13.1 grain sorghum kt 2 068 2 343 2 035 13.1

Exports a kt 5 337 7 709 5 780 25 0Exports a kt 5 337 7 709 5 780 – 25.0value A$m 1 493 2 095 1 545 26 3– value A$m 1 493 2 095 1 545 – 26.3

F d b l i A$/ 217 195 178 8 7Feed barley price A$/t 217 195 178 – 8.7Malting barley price A$/t 257 200 195 – 2.5a t g ba ey p ce $ 5 00 95 .5

a July–June years. f ABARES forecast.a July–June years. f ABARES forecast.Sources: ABARES; Australian Bureau of Statistics; United States Department of Agriculture. a July–June years. f ABARES forecast.Sources: ABARES; Australian Bureau of Statistics; United States Department of Agriculture. a July June years. f ABARES forecast.Sources: ABARES; Australian Bureau of Statistics; United States Department of Agriculture.

42 ABARES

The world oilseeds indicator price (soybeans, cif, Rotterdam) is forecast to decline by 4 per cent in 2012–13 to US$515 a tonne. This decline reflects a forecast increase in soybean production in the three main producing countries, the United States, Brazil and Argentina.

The world canola indicator price (cif, Hamburg) is forecast to decline by 7 per cent in 2012–13 to US$580 a tonne. The prospect of a record Canadian crop for 2012–13 is a primary factor driving this forecast price decline.

Record oilseeds production in 2012–13World oilseeds production is forecast to increase by 9 per cent in 2012–13 to a record 473 million tonnes. World production of all major oilseeds is forecast to rise in 2012–13, with the most significant increases being forecast for soybeans and canola.

World oilseeds indicator prices

2011–12US$/t

Canola

Soybean

f ABARES forecast.

2012–13f

2009–10

2006–07

2003–04

100

200

300

400

500

600

700

800

OilseedsBeth Deards and Fiona Crawford

43

Oilseeds

ABARES

Canola

World production of canola is forecast to rise by 3 per cent in 2012–13 to 62 million tonnes. In Canada, canola production is forecast to rise by 10 per cent in 2012–13 to 15.8 million tonnes. Relatively favourable world prices have encouraged canola plantings and the total area planted is estimated to rise by 9 per cent to just over 8 million hectares. Although seasonal conditions have been generally favourable for planting, low temperatures and wet conditions have caused delays in central Manitoba and other parts of the Prairies. Assuming favourable seasonal conditions in the remainder of the season, yields are expected to be around historical averages.

Rapeseed (canola) production in the European Union is estimated to decline by 6 per cent to 18.2 million tonnes in 2012–13, the lowest production since 2006–07. This forecast decline mainly reflects the adverse effects of winterkill and reduced yields. Yields in the major producing countries were lower because of dry conditions at the beginning of the season resulting in poor crop germination. Later in the season, crops in several parts of Germany were damaged by winter frosts, disease and lack of rainfall.

Soybeans

World production of soybeans is forecast to rise by 15 per cent in 2012–13 to 272 million tonnes. This forecast increase in production reflects expected higher production in the United States and some Latin American producers following the drought affected crop of 2011–12.

In the United States, soybean production is forecast to rise by 7 per cent in 2012–13 to 89 million tonnes, reflecting the combined effect of expected average to above average yields and a marginal increase in area planted. The area planted to soybeans is estimated to rise by 3 per cent to just under 31 million hectares. Favourable conditions during March encouraged an earlier than usual start to planting with 46 per cent of soybeans planted by mid-May, compared with a five-year average to 2011 of 24 per cent.

Despite an increase in area planted, soybean production in Brazil is estimated to have declined by 13 per cent in 2011–12 to 65 million tonnes, the lowest production since 2008–09. The fall in production reflects the adverse effects on yields of severe drought, pests and diseases. With a favourable world price and a poor crop in 2011–12, producers are expected to increase the area planted to soybeans by 8 per cent in 2012–13 to around 27 million hectares. Assuming a return to average yields, soybean production in Brazil is forecast to increase by 19 per cent to around 78 million tonnes in 2012–13.

Soybean production in Argentina is estimated to have declined by 19 per cent in 2011–12 to 39.6 million tonnes. Very dry conditions during critical growing periods resulted in significant crop losses, and crops in Buenos Aires and La Pampa were damaged by frosts and hailstorms during April. In 2012–13 the area planted to soybeans is forecast to rise by 6 per cent to 19.7 million hectares. Assuming a return to average yields, production is forecast to increase by 39 per cent to 55 million tonnes in 2012–13.

World sunflower seed production is forecast to rise by 1 per cent in 2012–13 to 37 million tonnes, driven by expected increases in production in the Black Sea region and Argentina.

44

Oilseeds

ABARES

In the Black Sea region, sunflower seed production is forecast to rise by 1 per cent in 2012–13 to a record 17.8 million tonnes. Strong returns in the previous season encouraged producers in Ukraine to increase the area sown to sunflowers by 8 per cent to 5.6 million hectares. While the area planted to sunflowers in the Russian Federation is forecast to decline by 1 per cent to 7.2 million hectares; if achieved, this will be the second largest on record. Assuming favourable seasonal conditions, sunflower seed production in Ukraine is forecast to rise by 4 per cent in 2012–13 to 9.1 million tonnes. In contrast, sunflower seed production in the Russian Federation is forecast to decline by 1 per cent to 8.6 million tonnes, as a result of the lower area planted.

In Argentina, harvest of the 2011–12 sunflower crop is complete and seed production is estimated to have risen by 1 per cent to 3.6 million tonnes. Although there was an estimated 5 per cent increase in planted area, the average yield fell by 4 per cent compared with the previous seasons because of heavy rainfall in the main sunflower producing area of Buenos Aires. In 2012–13, the area planted to sunflowers is forecast to increase by 8 per cent. Assuming a return to average yields, sunflower seed production is forecast to rise by 7 per cent in 2012–13 to 3.8 million tonnes.

Record crush driven by higher productionWorld oilseeds crush is forecast to rise by 3 per cent in 2012–13 to around 396 million tonnes, driven by increased production in all major oilseeds (soybeans, canola and sunflower). Sunflower seed crush in 2012–13 is forecast to achieve growth of 5 per cent to 33.4 million tonnes, followed by soybean and canola, both of which are forecast to rise by 3 per cent to 232 million tonnes and 60 million tonnes, respectively.

In Brazil, soybean crush is forecast to rise by 4 per cent in 2012–13 to 37.4 million tonnes. Supporting this forecast growth is the expected recovery in soybean production, which will more than offset the effect on crushing of low carryover stocks from the previous year.

Rapeseed crush in the European Union is forecast to increase by 3 per cent in 2012–13 to 21.6 million tonnes, despite expected lower production. This forecast increase reflects steady growth in demand for rapeseed oil from the European biodiesel sector. Given the forecast lower production in the European Union, it is expected that increased imports of canola seed will help meet higher crush demand.

World oilseeds production

Mt

Other

SunflowerCanolaSoybean

f ABARES forecast.

100

200

300

400

500

2012–13f

2009–10

2006–07

2003–04

45

Oilseeds

ABARES

In the Black Sea region, sunflower crush is forecast to rise by 9 per cent in 2012–13 to 15.6 million tonnes, driven by an expected increase in supply of sunflower seed and attractive crush margins. Both the Russian Federation and Ukraine have high export duties on sunflower seeds designed to stimulate domestic crushing.

Palm oil

Palm oil represented 33 per cent of world vegetable oil production in 2010–11; more than any other vegetab