Australia has been one of the world’s largest wheat exporters for decades. As global demand skyrockets due to the Ukraine conflict, Australian agriculture will have to adapt.

Wheat is an important staple crop that is grown widely around the world. Global production in 2017–2018 was 763 million tonnes from 221 million hectares. Nearly US$50 billion worth of wheat is traded globally each year. Wheat is consumed by 2.5 billion people in 89 countries.

There are about 167 wheat exporters in the world, with a few countries dominating the market. In the five years from 2013 to 2017, these countries were the US (16.8 percent of total exports), Canada (14 percent), Australia (11.4 percent), the Russian Federation (10.8 percent), and France (10.5 percent). The share of the ten major wheat exporters was more than 82 percent of global wheat exports, with negligible      exports by the rest of the world. Similarly, Indonesia, Egypt, Algeria, Italy, and Japan are the major wheat importing countries. Together they account for about 23 percent of global wheat imports. Among wheat importers, Indonesia was the leading importing country — six percent of world wheat imports — during 2013–2017, and its most significant import partner was Australia.

In 2016-17 Australia produced 34,369 kilo tonnes (kt) of wheat using 12,634 thousand hectares. Of that, 22,057 kt were exported, leaving about 12,000 kt for domestic use. In Australia, wheat export ranked tenth among total exportable commodities, second among agricultural products, and first among grains — wheat accounts for 63 percent of Australian grains exports. The quantity of wheat exported from Australia over the last 18 years has been almost constant. However, there have been shifts in importing countries with fluctuations in quantity over time. In recent years, countries like Indonesia, Vietnam, the Philippines, and China have become the primary destinations of Australian wheat. Australian wheat faces competition primarily from the US, Canada, and the Black Sea countries, such as the Russian Federation and Ukraine.

The Ukrainian Crisis’ Effect on Wheat Trade

Given Australia’s position in the global wheat trade, the current Ukraine-Russia conflict could be a cause for concern for Australia’s share of wheat exports (11 percent) in the short-term if not otherwise, since together the Russian Federation and Ukraine account for 16 percent of world wheat exports. Due to the Russian invasion of Ukraine, wheat growers in Australia could experience an increase in price if supplies become unavailable from these countries. For example, Rabobank predicts Australian wheat prices could rise from the current $367 per tonne to $425 per tonne in the near term. Shipping blockages and the high cost of insurance should halt exports from the Black Sea countries. Further, long-term structural changes to wheat flows could occur if sanctions are implemented on Russian wheat exports.

Ukrainian farmers are mostly family farmers like in Australia, but Australia does not have the opportunity to make sure those markets are still supplied with grain should the disruption caused by the Russian invasion continue. The limiting factor for Australia is its supply chain. Though Australia can physically have a good wheat harvest to cover up the exports from the Black Sea region, logistics may be an issue — there are only so many trains and trucks to transport grain to the ports. Australia’s exporting facilities are already constrained and could face difficulty exporting huge volumes. Thus Australia’s wheat market may be unable to keep up with the huge rise in demand that the global wheat market should experience.

Notably, the flow-on effects of the conflict in Ukraine will drive up grain prices in the Global South. Many countries in the Middle East and Africa are already experiencing rampant food inflation. It will be tough for these countries, as food prices are directly correlated with the price of wheat. However, this impact on the grain market will depend on the length and severity of the Ukraine crisis. It is also possible that the medium-to-long-term effect on global wheat markets will not be that significant if agricultural production continues despite the Russian invasion of Ukraine.

However, there have been other recent crop failures in other wheat-exporting countries that have had a severe impact on the grain market, which had already driven wheat-importing countries to find markets like Australia. The loss of grains from the Black Sea countries, which normally account for about a quarter of the world’s annual wheat trade, is an opportunity for Australian farmers to step up amid supply chain issues. However, on the production side, rising fertiliser prices and tougher growing conditions linked to climate change will pose continuing challenges to Australian farmers.

The Australian Bureau of Agricultural and Resources Economics (ABARES) forecasted a wheat crop output of 36.3 million tonnes for 2021–2022, which is about five percent more than the previous year, possibly due to above average rainfall. The Australian share of wheat exports is 10-15 percent of the global wheat trade, and it is one of the major grain-producing nations unaffected by last year’s drought. Other major wheat exporting countries — like the US, the world’s number two producer — expect a fall in yield by ten percent this year, according to Gro Intelligence. Canada, the third largest producer, has experienced a fall in yield of 39 percent in 2021, according to Statistics Canada. These shortfalls in global wheat production will make wheat prices hit a 14-year high. Therefore, Australia is in a unique position to respond to meet the growing demand in the global wheat market.

The above trends will have significant impacts given the economic fallout of the pandemic has already affected many wheat-importing countries. Low-income, food-importing countries like Egypt and Lebanon buy 70-80 percent of their imported wheat from Russia and Ukraine. However, if the global price of wheat continues to rise, it will stimulate growers to sow more marginal lands and hopefully deliver a bigger crop. And when we consider the supply disturbances from Russia and Ukraine, it also provides opportunities for farmers in Australia or elsewhere to fill this gap, even with higher fertiliser and energy prices.

Australia can therefore consider an increase of wheat exports to countries affected by the Russian and Ukraine conflict and should target their requirements. Quality wheat production and food safety issues are an advantage for Australian wheat exports, should it become more competitive in the world market. Different countries have different product consumption patterns which require different product quality. Therefore, it is essential to understand the quality requirements for different market segments. Thus, Australia should focus collectively on productivity increments, quality enhancements, and wheat crop product diversification through innovative ways of reducing costs and increasing yields to make Australian wheat more competitive.

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Dr Richard Culas is a Senior Lecturer in Agricultural Economics / Agribusiness at Charles Sturt University. His areas of research include agriproducts trade, groundwater management, food security, agricultural land use, and deforestation from Australian and international context. The views presented in this article are of the author. For contact:  rculas@csu.edu.au

This article is published under a Creative Commons License and may be republished with attribution.