Drought-hit Australia to import wheat for first time in 12 years

2019-05-19 09:03
Australian outback farmer. (iStock)

Australian outback farmer. (iStock)

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A rare bulk shipment of wheat from Canada, due later this year, has added to concerns about the Australian grain industry, which is being hit by a perfect storm of severe drought and difficult trade conditions.

The import is the first of its kind since 2007, and was approved by the Australian government on Tuesday after months of lobbying from grain users desperate for product.

A shipment of high-protein wheat will arrive in the next six to eight weeks to be processed at Manildra Group's Shoalhaven Starches plant in the state of New South Wales.

"Due to the worst drought in 116 years, high-protein wheat is in short supply which is critical to the Shoalhaven Starches wheat-processing plant," the company said in a statement. 

"The permit will secure hundreds of regional jobs and the continuation of wheat processing at the plant."

James Maxwell, a commodities analyst for Australian Crop Forecaster (ACF) estimates the shipment would be around 50 000 to 60 000 tonnes.

Surprise announcement

Until recently, Australia has been better known as a net exporter of grain and had a record crop in 2016-17.

"The reason [the announcement has] garnered so much attention is that it just doesn't happen," Maxwell said.

He told Al Jazeera that the drought on Australia's east coast had led to a severe shortage of high-protein wheat as well as badly needed stock feed.

As a result, eastern states are buying wheat from the country's west, pushing up prices and damaging exports.

Demonstrating the dilemma, the country's largest listed agribusiness, GrainCorp, on May 9 posted a statutory net loss after tax for the half year of Aus$59m ($41m).

Its chief executive officer, Mark Palmquist, said the results reflected a "particularly challenging period" including "severe drought conditions in eastern Australia" and grain flows that had been "disrupted by grain trade conditions".

'Rain means grain'

ACF's Maxwell said Australia currently was unable to compete with cheaper wheat from Russia and the Ukraine where production had "gone through the roof".

"The sheer volume they can produce and the price they can grow it, means it's just cheaper to buy it from there."

It adds up to a headache for the Australian economy as the drop in farm production and the loss of exports to large customers such as Indonesia has been projected to subtract 0.2 percentage points from real GDP growth in 2018/19.

All eyes are on the next wheat crop which is being planted now for harvest from September onwards.

"Rain means grain," said Maxwell. "We need things to go pretty well to get a decent crop, but the future is probably going to be more extreme as the climate becomes more extreme."

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