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Australia’s wheat crop troubled

Drought continues, and it’s losing market share in Indonesia and Malaysia

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MarketsFarm – Australia’s wheat crop is not looking good for 2019-20 and it’s more than the ongoing drought that’s to blame.

As production in Australia has declined, it has also lost global market share, said a report from a United States Department of Agriculture attaché.

Why it matters: As Australian wheat production plummets, do does its ability to hold onto market share. This may open markets to Canadians and other global players in the wheat trade.

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Released on Jan. 31, the report stated Australia’s current wheat crop, estimated to be 15 million tonnes, is likely be the smallest since the 2007-08 marketing year. The attaché’s estimate would put this year’s wheat production 2.3 million tonnes below what Australian farmers grew in 2018-19 and 40 per cent under the 10-year average.

Production in the states of New South Wales and Queensland has been hardest hit by severe dry over the last several years. That has resulted in poor yields and with some crops being cut for hay instead. In citing a report from the Grains Industry of Western Australia, the attaché said the state’s wheat production was halved from last year’s bumper crop to less than 5.4 million tonnes.

There has been one glimmer of hope in Victoria, which received enough precipitation for a decent crop. Combined with the drought conditions elsewhere in Australia, the state’s share of the overall production increased to 25 per cent from 13 per cent.

The slide in Australian wheat exports is forecast to continue in 2019-20, but the decline won’t be as severe as the previous year, according to the USDA attaché. In 2018-19 wheat exports plummeted 35 per cent to nine million tonnes and the attaché expects 2019-20 exports to slip by one million tonnes more.

While some of the declining exports can be attributed to decreasing production, other factors are contributing to the situation. One is Indonesia’s shift to better diversify where it acquires wheat. The attaché noted exports to Indonesia fell from 2.45 million tonnes in 2017-18 to 924,586 tonnes in 2018-19.

Also, exports to Malaysia dropped 26 per cent to 544,338 tonnes, while those to Vietnam fell 20 per cent to 881,533 tonnes.

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Glen Hallick - MarketsFarm

Glen Hallick writes for MarketsFarm specializing in grain and commodity market reporting.

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