Indonesia to remain key market for Ukrainian wheat

Australia's wheat exports to Indonesia are expected to significantly increase this marketing year thanks to a boost in the country's production. But this appears unlikely to reduce Ukraine's share of the Indonesian market for the time being.

The grain harvest is progressing in Australia, and the country is on track to produce its largest wheat crop since the 2016-17 marketing year. The USDA forecasts that Australian wheat production could reach 28mn t, while the Australian Bureau of Agricultural and Resource Economics and Sciences estimates national wheat crop at 29mn t, up by 90pc year on year.

As a result, wheat exports from Australia could rise to 19mn t this year, with at least 2.5mn t expected to reach Indonesia.

Indonesia historically has been Australia's largest export market for wheat, with shipments reaching a high of 4.5mn t in 2016-17, but this slipped to only about 1mn t in 2019-20, allowing Ukraine to gain market share in Indonesia, shipping some 3mn t there last year, compared with just 1.6mn t in 2016-17.

Australia can win back share in the Indonesian wheat market this year though, not only owing to higher export potential, but also because of more competitive prices compared with other origins, including Ukrainian wheat. Spot prices for Australian premium wheat have been seen at about $255/t fob Adelaide this week, up by only 5pc from last year, while the Ukrainian wheat 11.5pc-protein grade price has risen by about a quarter over the same period, with Argus assessing this contract at $254.50/t fob Odessa yesterday, compared with levels of only about $203/t last year.

Australian wheat exporters could also benefit from the Indonesia–Australia Comprehensive Economic Partnership Agreement, which came into effect in early July and offers a zero import tax for 500,000t of Australian feed grains, including wheat, for the first year of the agreement.

But although Ukraine's share of the Indonesian wheat export market may be reduced by the greater competition from Australia over the medium term, the pace of exports seen out of Ukraine in the first few months of the current marketing year to 30 June signals that they have not so far been affected this year.

The country exported 2.1mn t of wheat to Indonesia from July-October this year, which was virtually unchanged from the 2mn t shipped over the same period last year. But the pace of Ukrainian exports could slow in the coming months owing to expectations of a seasonal dip in shipments beyond December and as the country has already exported about 65pc of the 17.5mn t total volume permitted to be shipped this year under the government's 2020-21 export quota.

By Alexey Yeromin

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