19 Jul
For context, approximately 215 million hectares of land are used annually for farming wheat, and about US $50 billion worth of wheat is traded worldwide. Around 2.5 billion people consume wheat in 89 countries, while projections indicate that by 2050, customer demand will increase by 60%.
The Ukraine-Russia War has seen farmers worldwide debating on whether to adjust their agriculture patterns and increase their wheat production, and Australia is not being left behind. Australia has long been among the biggest exporters of wheat in the world. As the Russia-Ukraine War persists and the global demand for wheat rises, Australia will also be required to adjust its farming patterns. How will Australian wheat exports be affected by the conflict, and what is the future for Australian wheat exports? Let’s dive in to find out.
The Global Context
Wheat is a major staple crop grown all over the world, with 778 million tonnes produced globally between 2021 and 2022. The world’s wheat exporters include roughly 167 countries, with only a few that dominate the market. The main exporting countries are Russia (23.92%), Canada (12.44%), USA (12.24%), France (10.30%), Ukraine (8.91%), Australia (6.72%), Argentina (6.38%), Kazakhstan (3.37%), Romania (3.20%), and Germany (2.84%). Together, these ten major exporters account for nearly 90% of global exports. The current top wheat importers are Egypt (10.1%), China (6.75%), Turkey (4.74%), Nigeria (4.17%), and Indonesia (4.04%), together accounting for about 30% of world wheat imports.
Australia’s Position in the World Wheat Trade
Australia experienced its highest wheat production between 2021 and 2022, producing 34.4 million tonnes of wheats. Of this, Australia exported 24.5 million tonnes valued at A$9.3 billion, leaving 8.1 million tonnes for domestic use. For nearly two decades, Australia has been exporting a consistent amount of wheat. But how has the ongoing Russia-Ukraine conflict affected Australian wheat exports?
Russia and Ukraine combined make up around 32.83% of the world’s wheat exports. Australia, which takes a 6% share of the world’s wheat export, will be impacted both positively and negatively by the ongoing crisis. There is an opportunity for Australian wheat exporters if they experience a price increase due to a lack of exports from Russia and Ukraine. These reductions in Russian and Ukrainian exports are mainly due to shipping restrictions and high insurance costs
that prevent Russia and Ukraine from exporting. Also, if penalties are put in place against Russian wheat exports, then long-term structural shifts to wheat supplies would be expected.
Increased Demand for Australian Wheat
Over the past few years, Australia has been the main wheat exporter to several countries such as China, Vietnam, Indonesia, and the Philippines. Even so, Australia has also been facing significant competition from other wheat exporting countries like Russia, Ukraine, Canada, and the USA. However, Australia can look forward to increased wheat exports over the coming year/s as it is among one of the few wheat exporting countries not affected by the 2021 drought. Wheat yields in Canada decreased by approximately 39% in 2021, while Gro Intelligence predicts an 8% year-over-year Winter wheat yields reduction in the US.
China is currently the largest market for Australian wheat, followed by Indonesia, with 1.6 million tonnes exported from October through December 2021 and 0.68 million tonnes respectively. Other Asian consumers have been on edge because of this surge in Chinese demand and for this reason, they’ve resulted in reserving Australian wheat earlier due to fear of experiencing a shortage and increased prices.
What’s Next for Australia?
Wheat growers in Australia are mainly family farmers, just like in Ukraine. However, Australia cannot ensure that wheat continues to flow in the market should the crisis continue. Although Australia has the potential to produce enough wheat to counter the exports from the Black Sea countries, the supply chain could provide a challenge. Australia already has limited exporting capacities. For instance, there are currently a limited number of trains and trucks available for transporting the wheat to ports; therefore, it may cause challenges to export larger quantities. As a result, the massive expected increase in demand by the world’s wheat market may be too much for Australia to handle. Additionally, high production costs, such as increasing fertiliser prices and harsh La Niña weather conditions, continue to create more challenges for Australia to keep up with the expanding market demand.
However, despite the Ukraine-Russia conflict, the wheat trade has also been affected by crop failures in other countries that export wheat. This has provided opportunity for Australia, as countries that import wheat have looked to Australia as an alternative. The interruption of wheat production from Black Sea countries, which typically account for slightly more than a quarter of the global wheat trade, presents a breakthrough for Australian wheat growers despite supply chain challenges.
Wrapping Up
Australia’s wheat exports have a higher probability of benefiting amid Russia-Ukraine tensions and increased global competition in the wheat markets. Understanding the required specifications for various markets is crucial since different countries have varied product consumer behaviour. Australia should aim to increase productivity, improve quality, and diversify wheat products. This can be achieved by using creative methods of decreasing costs and expanding outputs to boost the economic viability of Australian wheat. Even with the increasing cost of energy and fertiliser, there are prospects for Australian farmers to step up and fill the gap caused by Russia and Ukraine’s supply disruptions. Also, if wheat prices continue to increase globally, farmers would be pushed to farm on idle lands, leading to higher yields.
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