June 25, 2004
Russians Rival Aussie Wheat
A new report by the Australian Bureau of Agricultural and Resource Economics (ABARE) warned a resurgence in Russian farming would have a direct consequence for Australian farmers.
Russian wheat production slipped when the Soviet Union disintegrated through the late 1980s and early 1990s.
The country has also suffered from poor infrastructure, with just one major deep water port, on the Black Sea, capable of handling vessels that carry 50,000 tonnes of grain.
But ABARE found that Russian production of grain, both wheat and coarse grains, is likely to increase in coming years as the country increasingly stabilises.
By 2008-09, ABARE believes Russia will be exporting around seven million tonnes of wheat and three million tonnes of coarse grains.
It said the increase in production would not only depress prices by around 2.8 per for wheat and 2.6 per cent for coarse grains, but also hit markets heavily targeted by Australia such as the Middle East.
"World grain prices are likely to decline, relative to what they otherwise would have been, in response to increased grain export availabilities from the Russian Federation."
"For Australian grain exporters, this is likely to lead to increased competition for market share in Middle East grain markets."
Around 60 per cent of Australia's coarse grain exports end up in the Middle East, while Egypt, Iraq and several other Gulf states are key buyers of Australian wheat.
ABARE found Russia had a freight cost advantage over Australia for the Middle East, giving it an important edge.
It said although Australian wheat was of a better quality than that produced by Russian farmers, buyers were now more often blending their wheats.
