Russia’s invasion of Ukraine and poor seasonal conditions in North America in 2022 have created spikes in world prices for grain and oilseed (See Figure 1).
However, 2 long-term factors are likely to increase global demand for grains and oilseeds over the next decade. These are:
Figure 1: International Grain Council Oilseeds Index, January 2000 to August 2022
Dietary preferences are closely linked to income levels. Meat consumption tends to increase as people and countries become wealthier. (ABARES 2019)
Figure 2 shows per capita meat consumption and GDP per capita for China, India, Indonesia and Vietnam between 1990 and 2021.
Figure 2: Meat consumption and GDP per person, selected countries, 1990 to 2021
Over the last three decades, rising incomes in China and Vietnam have resulted in substantial rises in meat consumption. In contrast, slower income growth in India and Indonesia has resulted in lower rates of meat consumption.
Growing demand for beef in lower- and middle- income countries will likely outpace any potential easing of demand in wealthy countries. (OECD-FAO 2022).
While some livestock animals only feed on grass, much of the world’s livestock is fed on grain.
As demand for meat increases, demand for animal feed will also increase. The grain-intensive nature of livestock production means that relatively more grain is required when people consume calories through meat, as opposed to consuming grains directly.
Growing demand for meat and grain will help support the value of Australian exports and will continue to create opportunities, particularly for feed grains, beef and lamb.
Over the last three decades, biofuels have become an increasingly important source of energy (See Figure 4).
Figure 3: Global oil and biofuel production, 1990 to 2021
Transportation is the largest consumer of biofuels, predominately through blending with petrol and diesel. There are two main types of biofuels:
Biofuel production creates demand for grains and oilseeds that is independent of demand for food or animal feed.
Biofuel mandates increase price volatility. This is because buyers must continue to purchase grains and oilseeds to meet the biofuel mandate, regardless of current grain prices or availability (McPahil and Babcock 2012).
Figure 4: Global use of grains, 2019 to 2031f
More than 60 countries have biofuel mixing requirements. Policies in the US and the EU are the most impactful.
As of September 2022, high grain and oilseed prices are leading some countries to reduce biofuel mixing requirement or temporarily suspend mixing requirements. This includes Finland and Latvia. However, most major biofuel mandates remain unaltered.
Biofuel demand is forecast to rise from 146 billion litres in 2020 to 186–342 billion litres in 2026. Future biofuel-related demand for grains and oilseeds will depend on four factors:
Australia is already a major supplier of canola to the EU for use in biofuels. If implemented, the European Parliament’s plan to reduce the use of palm oil and soya in European biofuel production will support increased demand for Australian canola seeds in the coming years (ABARES 2022).
The Australian Government’s network of Agriculture Counsellors provided information for this article. More information about the Agriculture Counsellor network, including contact details, is available on the Department of Agriculture, Fisheries and Forestry website.