Wheat farmers in Australia, the world’s fourth-biggest shipper, will face an increasing challenge keeping up with their neighbours’ appetite for bread and noodles.
Demand from Indonesia, the Philippines and three other Southeast Asian nations is set to jump 40 per cent to 13.2 million metric tons by 2020, said Greg Harvey, chief executive officer of Interflour Group Pte. That may outpace the ability of Australia to supply the variety used in soft bread and noodles, he said in an interview in Singapore.
Faster growth and an expanding population are boosting consumption of everything from wheat and sugar to cooking oils in the region, which has more people than the European Union. Indonesia will become the world’s second-largest wheat importer this year and has overtaken India as the top user of palm oil, the US government estimates. The US, Canada and Russia could fill any shortages in Australian supply, he said.
Wheat in Chicago entered a bear market last month as world stockpiles of grains excluding rice head for the highest since mid-1980s, the International Grains Council estimates. Prices fell 13 per cent this year to $5.105 a bushel on Thursday.
Hottest Spring
The states of Western Australia and South Australia, top producers of the low-protein white wheat used in noodles and soft bread, are the country’s main suppliers to Southeast Asia, Harvey said. His projections assume that farmers will have difficulty increasing exports from the 11.1 million-ton annual average in the five years to 2014.
Dry weather and limits on the amount of land suitable for cultivation are already curbing supplies. Total wheat shipments from Australia may drop 7.2 per cent to 16.99 million tons in the 12 months to 30 June, the lowest in five years, after the hottest spring on record, according to the Australian Bureau of Agricultural and Resource Economics and Sciences.
“We have a productivity growth rate at about 1 percent a year and I hope this will continue,” said Simon McNair, chief executive officer at Australian Grain Growers Co-Operative. “There’s a finite amount of farmlands. There’s competition from other agricultural products like cattle, and other crops,” he said by phone from Adelaide.
Growing Usage
Demand for wheat flour will increase at the fastest pace in Indonesia, Vietnam and the Philippines, with the average exceeding 7 per cent a year in the decade through 2020, Harvey said. Consumption per person in the region will climb to 29 kilograms in 2020 from 20 kilograms last year, he said.
Interflour will complete a mill at Subic Bay in the Philippines by mid-2016, the seventh in the region, boosting combined annual capacity by 175,000 tons from 1.5 million tons now, he said. Interflour also owns a mill in Turkey.
Bloomberg News, edited by ESM
