Drought has been identified as a disruptor for Australia’s wheat export market share in South-East Asia, according to grains expert Oscar Tjakra.
Tjakra, a research analyst with Rabobank’s Asian operations, said while South-East Asia poses strong growth prospects for wheat demand, it is firmly in the sights of Russian, Ukrainian and Kazakhstani wheat exporters who have ramped up their export programs to the region.
“Indonesia, which usually takes around four to five million tonnes of Australia’s wheat, has booked in a large wheat shipment from Argentina of about one million tonnes for delivery in the first half of 2019, which will be their largest volume on record for this period,” he said.
“However, the Black Sea region poses as the biggest threat to Australia’s market share in South-East Asia, with Australia’s share of South-East Asian wheat imports falling from 50 per cent in 2011, to around 40 per cent in recent years. And this year it could drop to 30 to 35 per cent, with drought-reduced volumes,” he said.
Wheat demand in South-East Asia is expected to be strong, forecast to rise by three per cent per year, representing an increase of around four million tonnes by 2023.
Related stories:
- Landmark trade deal to benefit Australian farmers, manufacturers
- Winter wheats could boost Aus economy by $1.8B
- Two junior wheat exporters win wheat code exemptions
One of the driving factors behind this is the region’s young demographic and the increase in household food expenditure.
Tjakra said the region is home to 650 million people, with a combined GDP of $US2.8 trillion (3.95 trillion) and on track to become the fourth-largest economy in the world by 2030.
“As incomes rise, packaged and processed foods start to replace some of the basic food products and this is driving the rise in demand for biscuits, cakes, bread and pastries,” Tjakra said.
“Meanwhile, noodles – which have traditionally been made from Australian-grown wheat – are not expected to exhibit strong demand growth, as consumers instead look for more convenient food to snack on. Albeit, this market will continue to grow in absolute volume terms.
“The signing of the trade deal with Indonesia, Australia’s largest wheat export market, will see Australia have a 500,000 tonnes per annum feed grain quota, which will increase by five per cent per annum to include wheat, barley and sorghum,” he said.
Tjakra said while the backdrop for wheat demand growth in South-East Asia is positive, there are challenges for the Australian sector supplying to the region.
“The Australian industry is really at a crossroads, as to whether it increases its quantity – by increasing yields, including increasing the supply of feed wheat – or maintains its value proposition as a high-quality producer,” he said.
“To do this, intelligence needs to be gathered around the characteristics of Australian wheat that are either highly valued or that are required by a different users, and this needs to be communicated between growers and the market.”