For the second season in a row, the stars are aligned favorably for Australian wheat growers: a bumper harvest, a shortage of one of the world’s most important foods, and global prices nearing nine-year highs.
Australia will ship 24.5 million tonnes next season, Rabobank says, or close to the highest quantity ever. And another southern hemisphere country, Argentina, is on track to remove 13.5 million tons, also close to an all-time high, according to data from the United States Department of Agriculture. Together, these two nations are likely to account for nearly 20% of world exports this season.
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Shipments are sorely needed in a world devoid of the grain used in everything from bread and cakes to cookies and bagels. Droughts, frosts and heavy rains in major northern hemisphere exporters this year have slowed supplies and sparked a buying frenzy in the Middle East. Rising prices have helped drive global food costs to the highest level in a decade, adding to inflationary pressures.
Australia’s large clients mainly include Indonesia, Vietnam, China, and other countries in the Asia-Pacific region. In fact, China has shown a greater appetite for Australia’s wheat this year, despite imposing a series of trade restrictions on other products from the country, and its purchases were up 55% in the first nine months of 2021 compared to the year. previous.
“The Australian shipping program, as a result of strong demand, continues to sell aggressively,” said CBH Group, the country’s largest grain exporter, adding that bulk shipping rates have fallen 10% in recent years. weeks. Southeast Asian flour millers are looking to meet Q1 requirements.
Still, there may be a couple of caveats for Australian grain. While most of the country’s wheat leaves ports relatively smoothly in bulk carriers, about 10% is shipped in containers, including to Southeast Asia. Containers these days are rarely in the places where they are needed most and costs have skyrocketed.
Shipping lines are prioritizing “East-West” routes serving larger markets between Asia and West, a challenge for Australian producers on “North-South” routes trying to block containers for grain, according to Neil. Chambers, Director of Container Transport. Alliance Australia. Some containers in Australia are shipped empty to Asia. “The biggest export product from the Port of Melbourne is the fresh air inside the containers,” he said.
The second caveat is the impact of rain on the quality of some of the Australian grain. There is a “material risk” of degradation in the quality of the domestic crop, especially in the southern regions of the East Coast, according to Rabobank Senior Commodity Analyst Cheryl Kalisch Gordon.
Producing regions along the east and west coasts have been drenched with heavy downpours, and the expected arrival of another La Niña will likely keep things wetter than normal. Growers may need to invest more in additional logistics to speed up the harvest, Kalisch Gordon said.
© 2021 Bloomberg