AUSTRALIA’S wheat exports to South East Asia are tipped to see challenges for market share from the Black Sea region (BSR), according to a recent report from Rabobank.
The report, The Brass Tacks of the Black Sea Wheat Challenge, said the presence of Black Sea wheat in South East Asia (and all markets) is not a short term phenomenon and urges Australian wheat suppliers to focus on their value proposition.
Report author Rabobank senior grains and oilseeds analyst Cheryl Kalisch Gordon said it was timely to assess if this was “a blip or the basis for long-term battles”.
“Our research found that while some of the drivers behind the growing dominance of BSR wheat in markets will wax and wane, others are set to persist, especially in light of growing investment in the region,” she said.
“And, it is the volume and price of Black Sea-origin wheat in Australia’s traditional and major markets in SEA [South East Asia] that is cause for concern.”
Ms Kalisch Gordon said Australia had already lost market share, from supplying almost 60% of SEA’s wheat requirements in 2011/12 to less than 40% in 2016/17.
“While Australia is well placed to share markets and maintain its growth path in global trade, much will hinge on how the industry responds by proactively assessing and improving its position in the new world wheat order,” she said.
The report said over recent years, the BSR has been a significant contributor to the “world being awash with wheat”, with Black Sea-origin wheat having grown from comprising less than 10% of global grains markets in the early 2000s to 25% today.
“This growth in supply – together with the competitive price at which the BSR is able to reach world markets – has protracted the glut, as even at the current low prices, Black Sea Region wheat production is still profitable,” Dr Kalisch Gordon said.
The report said Australian suppliers need to recognise that Black Sea wheat would present a “sustained test of their positioning over the long-term”.
Dr Kalisch Gordon said there needed to be a focus on capturing the value of Australian grains by delivering a product that is superior in terms of milling, baking and manufacturing.
“While consumers currently have low, to no visibility, in terms of the provenance of their wheat, over time they will be increasingly concerned by where their flour comes from, and Australian suppliers need to ensure their product is positioned as high quality, reliable and safe,” she said.
In the report, the BSR incorporates Russia, Ukraine, Kazakhstan and the Danube River countries.