Bumper Russian wheat harvest to hit Australian farmers

Russia has become the world’s biggest exporter of wheat, knocking Australia out of global top three ranking and posing a serious threat to the future of Australia’s $12 billion grain industry.

A new report by the Australian Export Grains Innovation Centre released today, analysing the Russian grains industry, predicts grain exports from Russia will surge a further 60 per cent by 2030, resulting in increased low-cost competition in Australia’s key Asian markets.

The report’s lead author, Professor Ross Kingwell, said Russia’s rapidly-growing wheat production, the devalued Russian rouble and its low supply chain costs should be of great concern to Australia

Russia, Ukraine and Kazakhstan, traditionally known as the Black Sea grain producers, have just all enjoyed a bumper harvest, adding further pressure to the global oversupply of grain.

The large volume of cheap Black Sea wheat currently flooding world markets — as well as a big North American harvest — pushed global wheat prices to a new low of $US180 a tonne this week.

At those levels, assuming world prices stay depressed until the forecast big Australian wheat harvest starts in southern Queensland and WA, selling wheat to exporters would not be worthwhile as many local farmers would be losing money.

It is expected more grain will be stored on farms and by the large exporters such as Graincorp, Viterra, Emerald and CBH than for many seasons, with the CBH group currently constructing an additional four million tonnes of bunker storage capacity to cope with the big crop, low prices and low market appetite.

Professor Kingwell said Australia was currently only hanging on to its place as a key wheat supplier to Southeast Asia — where 70 per cent of Australia’s wheat exports are now sold — because of growing demand for flour as Asia’s diet becomes more westernised and its population more urban and affluent.

Russia produces 107 million tonnes of grain annually, dwarfing Australia’s average 30 million tonne winter crop, and produces it at a lower cost than Australia, selling about 20 per cent of its production on world markets.

Professor Kingwell said Australia should not panic about increased Black Sea competition, but needed to ensure that future actions were well-considered, co-ordinated and strategic.