Black Sea grain continues to gain ground in SE Asia

By: "Farm Tender" News
Cattle News
Jul 29, 2019
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The Black Sea harvest is wrapping up at the end of this month and while dry conditions have been experienced a reported increase in both production and quality will mean further strong competition for Australian grain in key markets.

According to the United States Department of Agriculture (USDA), Russian wheat production for 2019-20 is estimated at 74.2 million tonnes. This is down 5 per cent from last month because of late dry conditions across the Black Sea growing zone, but still up 4 per cent on last year.

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Forecasts from local Russian agricultural consultancies are slightly more optimistic with SovEcon estimating 76.6 million tonnes and IKAR 77.5 million tonnes.

In the Ukraine, wheat production is forecast at 29 million tonnes, down 3 per cent from last month, but up 16 per cent from last year.

While production is up from both countries compared with last year, there are also reports that the dry conditions and hard finish will support strong protein levels in Black Sea grain.

CBH Head of Trading Trevor Lucas said the rise in Black Sea grain quality would strongly challenge Australian grain in key contestable markets in South East Asia.

“Black Sea grain will continue to be sold aggressively into traditional Australian contestable markets – but an additional threat this year is their ability to target and capture the higher protein / quality milling segments,” Mr Lucas said.

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“This combined with improved growing conditions in Australia will lead to a continuation of tough trading conditions internationally for Australian wheat going forward.”

Over the past year demand has shifted with long-term importers of Australian grain now purchasing the bulk of their wheat from other origins.

Indonesia had traditionally been Australia’s biggest wheat customer, buying an average of 4.2 million tonnes of Australian milling wheat each year or about 350,000 tonnes per month.

Over the past twelve months, Indonesia has purchased less than a quarter of this, about 80,000 tonnes per month. Although this result has been extenuated due to the drought in eastern Australia, recapturing this demand will ultimately only be achieved if Australian prices decrease.

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“Australian wheat is competing on multiple fronts – with more grain than ever coming from Argentina, Russia and the Ukraine, and we’re all vying for market share in markets that have traditionally been our own,” he said.

“While CBH continues to maintain strong relationships with customers and makes progress in opening up new markets for WA grain, such as the Philippines for feed wheat, these current trends will see a greater focus on price competition.”

For regular updates on the grain market, read more in CBH’s Market Update email every Wednesday afternoon.

https://www.cbh.com.au/