Indonesia clears Russia for greater wheat imports

Henry Wells, August 22, 2016

Competition for Australian wheat in its biggest export market is set to increase after three Russian laboratories were approved to certify wheat for export to Indonesia last Friday.

Black Sea wheat exports to Indonesia have been increasing in recent years, with prices around $20-$30 a tonne lower than Indonesia has been paying for Australian wheat.

Indonesian wheat imports by origin:

2014-15 2015-16 2016-17
Australia 5113 3648 4216
Canada 1588 1500 1500
Russian Federation 228 300 800
Ukraine 220 1435 1050
USA 562 656 750
Total Indonesian imports: 7765 9463 9066

Source: Lachstock Consulting

Australia has supplied around 50-60 per cent of Indonesia’s annual wheat requirements for more than a decade, but Black Sea wheat imports grew to account for 16pc of Indonesia’s total imports last year, according to Rabobank.

It seems likely more Black Sea wheat will be heading for Indonesia after the Indonesian Ministry of Agriculture approved three laboratories in Moscow to conduct phytosanitary tests and provide certification to allow Indonesian importers to buy Russian wheat.

Under the new regulations for the import of fresh food of plant origin (FFPO) introduced by Indonesia in February, countries wishing to export grain to Indonesia must first apply for food safety recognition of individual laboratories.

Since then a laboratory in Odessa, Ukraine, was registered and approved for FFPO, with 51 pesticides residues to be tested for Ukrainian wheat.

Russia’s phytosanitary authority, Rosselkhoznadzor, confirmed on Friday that three laboratories in Moscow have received approval from the Indonesian Ministry of Agriculture.

“Taking into account Russia’s potential for increasing grain exports to Indonesia, the acknowledgement of the Russian laboratories will facilitate further development and improvement of the Russian-Indonesian trade and economic cooperation,” a Rosselkhoznadzor statement said.

Testing on 83 pesticides will be conducted, in addition to tests on limits of heavy metals and mycotoxin, according to international commodity news agency, Platts.

“With Russia expected to export a record 30 million metric tonnes of wheat amid bountiful harvest in 2016-2017, a new sales outlet could be an opportunity for both sellers of Black Sea wheat and Indonesian millers seeking to cut costs,” Platts reported.

Competition into Indonesia from Black Sea wheats has been developing for some time, as Nidera trading manager Matthew Pattison explained to Grain Central this morning.

“The Australian wheats being displaced are typically ASW grade, against which competitor wheats such as equivalent grade of Ukrainian wheat is coming to market perhaps $US20/mt cheaper at origin, as well as facing smaller freight differential today”, he said.

“Global bulk freight rates have become cheaper and Australia’s advantage to markets like Indonesia has eroded from around $US25/mt to around $12/mt now.”

Russia grows wheat from crops planted in winter and spring. The winter wheat crop, accounting for around two-thirds of its total wheat production, has experienced excellent growing conditions and has been harvested with very high yields.

The United States Department of Agriculture (USDA) last week estimated the total Russian wheat crop in 2016/17 to be 72mt, at least 10mt greater than either of the past two years.

The winter wheat crop in Russia is all harvested and stored now, and is in good condition.

The significance of this year’s big Russian wheat harvest, according to Mr Pattison, is that Australian wheat exports will endure price pressure from Black Sea origin wheat for the entire year ahead.

The spring wheat harvest in the region is underway.



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