Australia’s Bumper Wheat Crop Faces Export Constraints


SYDNEY—Australia forecast another bumper wheat crop following above-average rainfall on its east coast, but supply chain bottlenecks could limit its ability to export more and ease concerns about global food security.

Russia’s invasion of Ukraine pushed up wheat prices to record levels earlier this year and led some big producers, including India, to ban exports. Higher wheat prices have added to inflationary pressures, threatening the global economic recovery from the Covid-19 pandemic.

Global wheat buyers are depending on other producers to make up for shortfalls from Ukraine, despite its recent agreement with Russia to resume grain exports via the Black Sea. Australia, one of the world’s largest wheat exporters, has benefited from two consecutive La Niña weather events that brought greater rainfall and improved growing conditions.

On Tuesday, Australia’s agricultural commodities forecaster projected a wheat harvest of 32.2 million metric tons in the 12 months through June 2023, which would be the country’s second-largest on record, and 30% above the 10-year average. Harvests have recovered significantly since 2019-2020 when the country’s eastern states experienced a severe drought that culminated in deadly wildfires.

Higher wheat output and elevated prices of agricultural commodities are driving a revenue windfall for Australian farmers. The Australian Bureau of Agricultural and Resource Economics and Sciences, which generates crop forecasts for the government, estimated the annual value of agricultural exports would rise by about 5% to a record 70.3 billion Australian dollars, equivalent to around $48.4 billion.

Russia’s Ukraine invasion has shaken confidence in the reliability of grain-supply routes, which had been strained by the pandemic. The two nations combined shipped more than 50 million tons of wheat in 2021, according to data from the U.S. Department of Agriculture.

Wheat is loaded onto a bulk carrier at the Port of Geelong in Australia earlier this year.



Photo:

Carla Gottgens/Bloomberg News

In March, Chicago Board of Trade wheat futures soared to record highs, with the continuous contract climbing to $12.94 per bushel on March 7. Futures have since shed more than 35%, with global recession fears pressuring agricultural prices and easing fears about the war’s effect on the world’s food supply.

Australia has been exporting more than 75% of its grain due to the outsize harvests of the past two years, but the industry is now bumping against capacity constraints that could limit its ability to ship more overseas, said Dave McKeon, chief executive of GrainGrowers Australia, an industry group.

Many silos are full, ports have been operating at capacity and exporters have struggled to find ships to carry their crops. Officials say infrastructure operators are reluctant to invest in greater processing and export capacity in a country where extreme weather can result in huge swings in harvest volumes.

“The accumulation of big seasons means that there will be some carryover of stock from the previous year and a range of bottlenecks, through from getting the grain from farm to port and then also from port onwards,” said Mr. McKeon.

Container shortages and potential shipping delays mean that each ton of Australian wheat has typically fetched less than the global average over the past 12 months, he said.

Jared Greenville, executive director of the Australian Bureau of Agricultural and Resource Economics and Sciences, the government forecaster, said heavy rain in eastern Australia had also delayed planting in some areas. That could affect quality and mean some grain only ends up being used as animal feed, he said.

Write to Stuart Condie at stuart.condie@wsj.com

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