"Considerable transport problems", prompted by a scramble to
exploit strong demand for pulses and canola, will deny Australia a record in
wheat exports this season, and prompt a far bigger drop in 2017-18 than has
The US Department of Agriculture's Canberra bureau cut its
forecast for Australian wheat exports for 2016-17, on a July-to-June basis, to
22.0m tonnes, below expectations from other commentators – including the USDA
And the bureau pegged wheat shipments next year from Australia,
the southern hemisphere's largest exporter, at 18.0m tonnes – 2.9m tonnes below
the estimate from Abares, Australia's official commodities bureau.
Wheat vs canola
The bureau said its forecasts reflected in part expectations
of a "continued strong Australian dollar", which undermines the competitiveness
of the country's exports, besides the prospect of a retreat in production from
this year's record high.
The 2017-18 harvest was seen tumbling by more than 30%, to
24m tonnes, from the current season's record high, undermined by "projections
for lower average rainfall", besides the dent to sowings prospects from weak
Estimates for Australia wheat output 2017-18 and (figure for 2016-17)
Abares: 23.979m tonnes, (35.134m tonnes)
IGC: 25.6m tonnes, (35.1m tonnes)
USDA bureau: 24.0m tonnes, (35.0m tonnes)
USDA: n/a, (35.0m tonnes)
"Farmers have been influenced by the continuing fall in
wheat prices on world markets, and alternative crops such as canola are
expected to become more popular," the USDA said.
The comments echoed those earlier in the week from Rabobank,
which said that "total area planted to wheat is expected down on average, on
the back of price relatives with alternative crops.
"Increased planting of canola and pulses is expected."
However, the bureau also flagged "ongoing port and
logistical problems" stemming from a shortfall in shipping containers, which merchants
rely on to a large part for carrying wheat exports.
Forecasts for Australia's wheat exports, 2017-18 and (estimate for 2016-17)
Abares: 20.872m tonnes, (22.784m tonnes)
IGC: 19.5m tonnes, (23.0m tonnes)
USDA bureau: 18.0m tonnes, (22.0m tonnes)
USDA: n/a, (23.0m tonnes)
Data for July-to-June marketing years
The problems, "which have continually hampered wheat exports
and could continue for the rest of the year", began in the second half of 2016,
when shippers reportedly diverted containers for carrying pulses and oilseeds.
"These… exports have higher unit values and were given priority
by shipping companies," the bureau said, adding that the shippers "also
introduced higher fees during peak periods".
"As a result, there were considerable logistical and
transport problems in exporting the wheat crop from the second half of 2016,
particularly for traditional exports of milling wheat into South East Asia."
The comments follow a warning from the Australian office of
grain trader Nidera that the "reputation of the
Australian exporter is being jeopardised by the lack of accountability of global
container freight providers".
It backed the idea that shipping
lines had "prioritised the higher paying pulse cargos to the detriment of
traditional milling wheat shipments into South East Asia.
"To add insult to injury
the shipping lines have substantially increased their second quarter freight
rates and imposed 'peak season' surcharges" even on delayed container cargos.
"So product that was
originally intended to be shipped in February, but now not going out until
April in many cases, is incurring an additional freight cost."
Combined with charges from importers
for late delivery of wheat, "all of these penalties far outweigh the original
margin the exporter hoped to achieve when they originally negotiated the
business", said Peter McMeekin, Nidera Australia origination manager.
The container shortfall has been exacerbated by other
factors, including last year's collapse of South Korea-based Hanjin Shipping, one
of the world's top container shippers, carrying more than 100m tonnes a year.
Furthermore, subsided pre-Christmas imports left Australia
with fewer containers to re-export than has been typical.
And what containers there were are of the larger 40-foot length
difficult for the Australian logistics chain to handle.
"Not many domestic packers can handle 40-foot containers,
road weight restrictions means that they can only be half filled and a lot of
destinations throughout Asia don't have the infrastructure to manage the larger
boxes," Mr McMeekin said.