AUSTRALIAN grain growers could receive a $150 million windfall due to increased access to markets as a result of the newly inked Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) free trade agreement (FTA).
The gains are likely to be made in the area of feed grain, with a key plank of the FTA that Australia be able to export 500,000 tonnes of feed grain, including wheat, barley, sorghum and oats, without incurring any tariffs.
Australian grain industry figures believe feed wheat producers will likely be key beneficiaries from the deal, which is expected to be formalised in time for the 2019-20 winter crop harvest.
Grain Producers Australia chairman Andrew Weidemann said the ability to export feed wheat to Indonesia was a big win for the Australian wheat industry.
In spite of being Indonesia’s largest supplier of milling wheat and exporting up to 25pc of its total annual wheat exports to its northern neighbor, Australia currently does not supply any of Indonesia’s 2-3 million tonnes a year of feed wheat imports.
Mr Weidemann said he expected the majority of the 500,000 tonnes of quota-free exports to be wheat.
This would equate to around $150 million in value for the Australian industry, based on a price of $300 a tonne should exporters be able to supply the whole quota.
Another big winner from the IA-CEPA will be Western Australia.
Western Australian growers lack the domestic feed wheat market available to their counterparts on the east coast.
Mr Weidemann said opening up the Indonesian feed market would mean WA growers could happily plant high yielding feed wheat varieties rather than rely solely on milling lines.
“High rainfall parts of Western Australia would be well suited to growing feed wheat but there hasn’t been the market for it prior to now - this deal might change it.”
GrainGrowers chief executive David McKeon said the deal would have massive implications into the medium term given the projected growth in the Indonesian economy.
“Indonesia is a country with 263 million people and is forecast to grow to 295 million by 2030,” Mr McKeon said.
“Indonesia is already Australia’s largest wheat market, valued at roughly $1.3 billion with trade volumes around 4.2 million tonnes per year, and wheat is already Australia’s single largest export to Indonesia,” he said.
The Australian Export Grains Innovation Centre (AEGIC) also highlighted the growth potential in our northern neighbour.
AEGIC chief economist Ross Kingwell said Indonesia was evolving into one of the largest economies in the world and that grain consumption was soaring.
“By 2030 it will be the world’s fifth largest economy,” Prof Kingwell said.
“Indonesians will become wealthier and will be increasingly urban and their diets will evolve to incorporate more wheat products and less rice,” he said.
Mr Weidemann said Indonesia currently sources much of its feed wheat from the Black Sea region, which is a cheaper producer than Australia.
However, he said the FTA, combined with Australia’s natural freight advantage, meant Australian wheat would be able to compete with other origins into the Indonesian market.
He said the FTA could put a further 15-25pc onto the total annual value of Australia wheat exports to Indonesia.
But it is not just wheat growers expected to benefit.
“We also expect there to be some upside for barley and pulse growers,” Mr Weidemann said.
“Indonesia is not a large pulse consumer in the manner of the subcontinental nations but it is growing and with this deal Australian growers will have preferred access over key competitors.”
Mr McKeon said he was excited at the opportunities the deal presented for the Australian grain sector to service growing feeder industries in Indonesia such as livestock, poultry and aquaculture.
And he raised the possibility of further trade deals being brokered to specifically address grain, giving a heads-up there was grain specific trade work in the pipeline between the two nations.
“GrainGrowers is pleased that Indonesia and Australia will start to work on a grains-specific economic cooperation initiative, dubbed the Indonesia-Australia Strategic Grains Partnership,” he said.