Australia's position in the global wheat market is under pressure. In recent years, the country's share of the world market has fallen significantly. The point that Australia as a wheat exporter is considered 'irrelevant' seems close.
Malcolm Bartholomaeus, analyst regarding the grain market, reports that not long ago Australia ranked third as a global wheat exporter (behind the United States and Canada). If Canada had a bad harvest, Australia would even rise to 2nd place. Now the country has to settle for sixth place.
According to the latest figures, Australia accounts for 2,7% of the global wheat harvest and 6,8% of world trade. “We are almost irrelevant to the global wheat market at this point,” reports Bartholomaeus. Drought on the East Coast has increased domestic demand for wheat at the expense of exports. That gap has been filled by Australia's main competitors: the Black Sea region and increasingly Argentina. They have now claimed a large share of the sales markets in Asia.
Russia and Ukraine on the rise
The countries around the Black Sea are booming when it comes to wheat production. For example, Russia, Ukraine and Kazakhstan now represent 33% of the wheat trade. About 6 years ago, Russia's production was 52 million tons and exports were 18 million tons. The US Department of Agriculture (USDA) has estimated this year's Russian harvest at 74 million tonnes, half of which is expected to be exported.
Ukraine also doubled its wheat exports in the same period. The country's harvest this season is estimated at 29 million tons, with exports of 19 million tons. By comparison, Australia exports between 10 and 18 million tons of wheat annually, depending on the weather. Due to the drought, exports this year are estimated at only 9 million tons.
Indonesia is Australia's most important export market, accounting for approximately 4 million tonnes per year. However, Russia and Ukraine are gaining ground here. Russia tripled its exports to Indonesia three years ago to more than 3 million tons. Ukraine exported 1 and 2 million tons to Indonesia in the past 1,9 years.
Nevertheless, Bartholomaeus does not label Russia and Ukraine, but Argentina, as the greatest threat. "Argentina and Australia are currently the major producers of wheat in the Southern Hemisphere. We have wheat available at a time of year when the Northern Hemisphere is hardly on the market. Now Argentina is suddenly emerging as a competitor."
Argentina doubles down
According to Ross Kingwell of the Australian Export Grains Innovation Centre, wheat production in Argentina is growing faster than in Australia. He thinks this trend will continue. Argentina is on track to double its wheat exports to 10 to 14 million tons over the next 15 years, according to Kingwell. That production mainly goes to Southeast Asia.
Wheat exports from Argentina to Indonesia were only about 2 tons 150.000 years ago. In the first 5 months of this year this was already 1,6 million tons, while Australian exports are declining, Franciscus Welirang, chairman of the Indonesian producers' organization Aptindo, said earlier.
Change in direction of Australian grain industry
Other experts say there are also opportunities for Australia in the global grain market. The increased freight rates (due to stricter regulations for shipping fuels as of January 1) make Australia, which is relatively close to Indonesia, more interesting than more distant grain suppliers.
According to Bartholomaeus, the Australian grains industry needs to change course rather than continue to compete in the bulk export market. He is referring, among other things, to expanding trade in smaller volumes. According to Andrew Whitelaw, market analyst at Mecardo, there should be more focus on the stable domestic market by increasing sales to animal feed companies. “We need to convert kilos of grain into kilos of protein.”