Asia market ripe for Black Sea grain

10.08.2018

A RISING Asian middle class with increasing appetites and incomes could be a viable source of revenue for Australian grain growers in the future, but not if Black Sea grain suppliers get in first.

That was the message from industry professionals at last week’s Australian Grains Industry Conference in Melbourne last week, with several speakers touching on the significance of the expanding South-East Asian grain market.

Grains Bunge Asia Pty Ltd distribution director William Syers said by 2030 the Asian middle class would make up more than the rest of the world’s middle class put together.

“The axis of the world economy is shifting towards Asia,” Mr Syers said.

“What this means is as this income grows in Asia, you have an increase in calorific growth.

“It’s a game-changing landscape.”

Mr Syers said effectively Asia would have to source an additional 20 million tonnes of wheat during the next decade.

“That’s excluding feed wheat, wheat for energy.

“The world is going to have to find more grain for Asia.”

Additional wheat supplies for South-East Asia may be sourced from the Black Sea nations of Ukraine and Russia, if Australia can’t stump up the supplies.

“Based off current prices, that would all be Black Sea and Argentina. But they’re not going to be able to make up for that production deficit,” Mr Syers said.

“There’s also going to be an increased demand for Australia, if more grain can be produced.”

S & P Global Platts agriculture manager Andrei Agapi said while Australia was a close geographical neighbour to South-East Asia, the Black Sea was encroaching as a key grain supplier for the Asian market.

Mr Agapi said Black Sea supply of cheaper wheat into Indonesia was putting pressure on the Australian grain market.

“Indonesia probably has been the most efficient market in South-East Asia to switch from Australia to the Black Sea, when pricing makes sense,” Mr Agapi said.

“The spread between Australian Standard White and Black Sea Wheat is about $9, so the Black Sea is about $9 cheaper.

“This is why (Indonesian) millers are switching to the Black Sea. It’s going to be quite difficult to reverse that, even if Australia becomes competitive again.”


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