Russia muscles in on Australia's traditional wheat export markets

05.12.2017

Russia has muscled into Australia's traditional grain markets in South-East-Asia and the Middle East as grain growers face a slide in winter crop production, exporters say.

Australia was unable to get forward contracts sold to Indonesia's mills because Russia's wheat was $100 a tonne cheaper at times throughout our growing season, grain trader Tim Martin said.

Mr Martin, from of Australian Grain Export, said Australia's position as supplier of premium milling wheat for noodles was at risk, with Russian exports undermining a long-standing relationship between Australian wheat farms and Indonesian flour mills.

Indonesia has consistently averaged $1.3 billion a year for Australian wheat exports making it Australia's largest export market, 2016 figures from the Australian Bureau of Statistics showed.

"When I started in this 20 years ago, the former Soviet union imported 15 million tonnes, this year, the Black Sea will be exporting 55 million tonnes," he said.

"Traders [usually] get a big booking for forward selling the wheat before it's harvested but this year, the east coast dryness, and [uncertainty in] Western Australia, we were so uncompetitive on price, no one got a forward book.

"So Australian exporters were about $100 uncompetitive in July, compared to grain from the Black Sea.

"In Indonesia, we were $290 a tonne, delivered, compared to grain delivered from the Black Sea, $190."
Competing with Russian exports

"The Black Sea has improved their quality enormously in the last 10-15 years, and the mill managers in Indonesia have learned how to introduce the lower cost wheat into the grist."

Indonesia's consumption had grown and will soon be the largest wheat importer in the world, taking over from Egypt, Mr Martin said, but global supply was outstripping demand at the moment.

Senior grains analyst with Pro-Farmer Hannah Jansen said Russia had improved its logistics.

"This year they're estimated to produce an 83 million tonne crop, which is 15 per cent higher than last year's previous record," said Ms Jansen.

"Their capacity to produce is growing and the quality of their supply chain is improving.

"So buyers are becoming more comfortable to import Russian and Ukrainian grain, because they're doing a better job at exporting it."
Australia's winter crop falls further

Winter crop production was now tipped to be down 41 per cent on last year's record, with warm, dry conditions damaging crops in NSW and Queensland.

Australia's commodity forecaster ABARES blamed the slide on a failed spring in New South Wales and Queensland.

It now expects grain growers will harvest 35.1 million tonnes in 2017/18, 41 per cent lower than the previous year, and two per cent below the 10-year average.

Western Australia's forecast was the only to receive a boost after a good spring in the wheat belt; in the north, central and eastern parts of the state.

"The favourable spring meant those crops went from the brink of failure to a good result," ABARES said.

"NSW was much hotter and drier than average and a lot of the crops in the central west of NSW failed."

ABARES' main points for 2017/18 harvest:

    Wheat - 20.3 million tonnes, down 42 per cent on last year.
    Barley - 8 m t, down 40 per cent
    Canola - 2.9 m t down 31 per cent
    Chickpea - 1.3 million tonnes, down 37 per cent
    Oats - 1.1 m t, down 44 per cent
    Summer crops plantings up by 13 per cent, lifted by grain sorghum



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