Global Markets: Wheat – Record Australian Exports Amid Bumper Crop, Strong Demand

    Photo: Texas AgriLife Extension

    A second consecutive record wheat crop, strong global demand, and reduced competition are set to propel Australia’s wheat exports to record volumes. It is set to be the third-largest exporter, eclipsing the United States and Canada, which both have smaller crops, tighter stocks, and high prices.

    After 3 years of drought, Australia benefited from improved precipitation in 2020/21 and 2021/22 with near-record yields, resulting in this year’s crop estimated at a record 34.0 million tons. Despite large volumes, the good precipitation throughout the growing season led to lower protein levels in some regions, and untimely rains at harvest in eastern Australia have raised concerns about quality.

    With highprotein wheat scarce amid dismal U.S. and Canadian crops, some importers are scrambling to purchase what is needed for bread and pasta. With a large crop and relatively robust beginning stocks, Australia will be able to supply its core Asian markets with both milling and feed-quality wheat. However, due to expected quality issues, a significant share of Australia wheat exports may be low protein.

    Strong global demand for wheat has been a key factor sustaining Australia exports. Global trade for 2021/22 is up nearly 5 percent to over 205 million tons. Global consumption is up, but global production is relatively flat. The third- and fourth-largest importers, Indonesia and China, are set to remain very strong buyers this year and are heavily dependent upon Australia.

    Indonesia will likely purchase both milling and feed-quality wheat from Australia. Southeast Asian buyers and South Korea will rely more heavily on Australia for feed-quality wheat.

    While Australia faces less competition from the United States and Canada in markets such as China, it will face some increased competition from India and Argentina in other markets.

    India exports have continued to soar, offering an attractively priced alternative for Asian markets as major wheat exporter quotes continue to climb. Argentina is expected to have a bumper crop that it will seek to export not only to the Western Hemisphere but also to Asia.

    Algeria Shifting Away from French Wheat

    Algeria is the fifth-largest importer and its state buying entity OAIC regularly tenders for wheat, which serves as a useful indicator of global wheat prices. Despite tenders typically being open to optional origins, the country’s imports have been overwhelmingly dependent on two major suppliers: France (milling wheat for bread) and Canada (durum wheat for couscous and pasta).

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    As Algeria faces lower domestic production in MY 2021/22 (July-June), other exporters have been eyeing the market.

    France supplies most of the country’s milling wheat used to make bread, accounting for nearly two-thirds of Algeria’s milling wheat imports over the past decade. Other EU suppliers such as Germany, Poland, and Baltic states also supply Algeria, albeit to a lesser extent. The characteristics of French wheat have generally been well suited to the Algerian specifications.

    This, combined with its proximity that enables prompt delivery and relatively lower freight costs, have historically ensured French dominance in this large market. U.S. and Argentina exports to Algeria have been sporadic and both have been residual suppliers.

    Over the past decade, Russia and Ukraine have emerged as major producers and exporters but have yet to secure sizeable exports to Algeria, despite their geographic proximity, based in part on the tender specifications and wheat quality characteristics.

    But recent developments have threatened to squeeze France’s dominance of the market. In 2020/21, Algeria shifted away from France and toward Germany as the dominant EU supplier. There were some issues with French wheat quality this year, so Germany has continued to seize the majority market share so far in 2021/22.

    In June, Russia sent its first shipment in a few years. The Russian Union of Grain Exporters claimed that exports to Algeria in the range of 1 million tons could be feasible this year. Later in August, the test weight criteria were updated, and Ukraine requested further adjustments to the tender specifications that would enable its wheat to qualify.

    Ukrainian wheat has yet to make significant inroads, lagging behind recent sales of Russian wheat. In November, Russian government officials announced that 250,000 tons had been sold to Algeria for shipment in December.

    Meanwhile, Algeria faces a challenging situation with durum, which typically accounts for about 20 percent of its total wheat imports. While France has supplied some durum in the past, the market is dominated by North American exporters. Canada historically accounts for 60 percent of total Algeria durum imports.

    But this year Canada durum production is only 2.7 million tons, compared to 6.6 million tons last year. U.S. durum production is only 1.0 million tons, compared to 1.9 million tons last year. With decimated durum crops in both Canada and the United States, supplies are tight and prices high. In the first few months of this year, Algeria has purchased some from Canada but may increasingly turn to Mexico or reduce its durum imports overall.

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