STRIVING to produce higher quality wheat to counter growing competition from low-cost Black Sea and South American producers may not be the most profitable way for Western Australian grain growers to go.
That was the message delivered by Luke Matthews, general manager of policy and research for GrainGrowers – a representative body with about 17,000 members across Australia – at the recent Grains Research & Development Corporation (GRDC) Grains Research Update, Perth.
“Quality is only one small part of the profit equation,” Mr Matthews pointed out as he introduced GrainGrowers’ Gains In Grains: Is Australia Producing The Most Profitable Quality Of Wheat? report released at the GRDC update.
“For our grains industry to be profitable, not only do we have to produce the most profitable quality of wheat, but that wheat has to be delivered through the supply chain efficiently to the final customer who is paying for it,” he said.
“The highest quality does not mean the most profitable.”
One of four authors of the report, Mr Matthews said research conducted for the report by groIQ, an independent agricultural research consultancy, showed profit determinants for wheat growers differed to those of their customers.
While customers demanded quality at a price, particularly higher protein levels, because their best returns came from being able to use more of their purchased wheat across a wider product range, there was ample evidence growers’ profitability was driven by yield, not quality, he said.
Higher quality was usually achieved as a “trade-off” to lower yield with higher input costs and was often subject to seasonal conditions, he pointed out.
“Growers only see a small reward for quality as yield is their major profit driver,” said Mr Matthews.
“Australian wheat quality has definitely declined in the past decade, but Australian wheat is still relatively sought after and that underpins demand.”
What the research had shown, he said, was that “what we plant is not what we harvest”.
In WA for example, AH (Australian Hard) and APW (Australian Premium White) wheat varieties were predominantly planted but about 20 per cent of what was delivered went into ASW (Australian Standard White) segregations, Mr Matthews said.
“Why is this?” he asked.
“Is it misdeclaration or is it because those varieties in WA simply don’t achieve the classification requirements?”
Mr Matthews said an important part of growers choosing the most profitable variety was considering the “strike rate” – the likelihood a particular variety will harvest grain in the prevailing conditions that matches its Wheat Quality Australia class potential – to avoid downgrading when the wheat is delivered.
Downgrading could impact profitability and there was evidence it occurred more frequently for a number of reasons with higher classification varieties, he said.
“We need to look at strike rate – strike rate information is critical for growers because that is what they get paid for,” Mr Matthews said.
The “balance” between likely delivered quality and yield of different varieties on different farms would determine which was the most profitable in each situation.
On the basis of the research compiled for the report, ASW is currently the most profitable wheat variety for WA growers, provided it yields greater than 3pc more than APW to make up for an $8 per tonne average price difference, he said.
