Drought vaporizes Australia’s share of global wheat exports

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    A view of cracked earth due to drought at a small water reservoir in Armidale, Sept. 24, 2019. (Reuters photo)
    A view of cracked earth due to drought at a small water reservoir in Armidale, Sept. 24, 2019. (Reuters photo)

    By KAREN BRAUN

    FORT COLLINS, Colo. – Drought has plagued Australia’s wheat crop for the third year in a row, and the sharp production losses have caused the traditionally major wheat supplier to slip into its most insignificant state ever on the global export scene.

    This has opened the door for other suppliers to take advantage, but global wheat supply is still comfortable and exports competitive even as Australia has been largely lacking from the equation for two years now.

    Last week, the US Department of Agriculture reduced Australia’s 2019-20 wheat harvest to 18 million tons from the previous estimate of 19 million. That would top last year’s 17.3 million tons, an 11-year low, but it is paltry compared with the country’s record 2016-17 crop of 31.8 million tons.

    The harvest could shrink, however, as the dryness is more evenly distributed across the country than a year ago, and hot temperatures have made things even worse. Late last month, the Australian government pledged an additional $68 million in aid for its crippled agriculture sector after previously committing about $4.7 billion to the cause.

    So far this year, wheat regions in leading producer Western Australia have received a third less rainfall than is normal. Out east in New South Wales, only half of the typical year-to-date precipitation has fallen.

    For eastern and southern areas, this is the third year in a row of dryness. Precipitation in the crop-heavy areas of South Australia was 75 percent below normal in the full calendar years of 2017 and 2018, and so far 2019 is slightly worse.

    As of Wednesday, forecasts suggested a wetter pattern could move in to parts of Western and South Australia toward the end of the month, but other regions are set to remain largely dry, and in some cases, it may be too late.

    Australian farmers start planting wheat in April and May. Heading, which is the start of reproduction, begins in August and runs through September, and harvest is most prominent in November and December.

    Many key growing regions were especially dry as reproduction began, and this could further stress the harvest volume. One year ago, USDA had predicted the 2018-19 harvest at 18.5 million tons, some 1.2 million more than the actual.

    Australia produces white winter wheat, which is ideal for its predominantly Asian buyers as the variety is great for making noodles, dumplings and flat breads.

    In 2018-19, Australia’s wheat exports fell to 9 million tons, an 11-year low, and dramatically less than the 22.6 million from two years earlier.

    Australia’s contribution to global wheat exports was just 5.2 percent last year, an all-time low in nearly 60 years of records. That replaced the previous low of 6.4 percent set in 2007-08. In 2016-17, Australia accounted for 12 percent of world wheat exports, taking the No. 3 spot.

    USDA predicts that Australia’s wheat export share will rise slightly in 2019-20 to 5.3 percent, leaving other prominent exporters to pick up the slack for yet another year.

    Prior to last year, Indonesia had been Australia’s top wheat destination for more than 15 consecutive years, but the drought-stricken country has been unable to keep up with the demand. Often Indonesia’s No. 2 supplier, Canada has been able to capitalize on the Aussie shortfall. Additionally, the United States exported a record 1.38 million tons of wheat to Indonesia in 2018-19. – Reuters