The 2021 wheat picture: self raising or a bit grainy…
The Shipfix Wheat Index tracks Global seaborne order volumes of wheat since 2015. The graph below shows the relationship between the price of wheat over the past 12 months and wheat volumes.
Global wheat prices jumped after Russia (largest global supplier) proposed in January to raise export taxes on wheat. This week the Russian Government effectively doubled the export tax on wheat from €25 (set for 1st Feb - 1st March) to €50 per tonne (from 1st March to 30th June) “in another push to curb a rise in domestic food prices triggered by the COVID-19 crisis” (Source: Reuters, 26 January 2021).
Ukrainian milling wheat export prices have also continued to rally, hitting a six-year high at $300 per tonne, supported by an upward trend on the Russian market and an expected decrease in global wheat output (Source: SF, 21 January 2021).
These developments have led to significant changes in the supply chain. Shipfix observes the consequential 75% drop of seaborne wheat orders from the Black Sea to South East Asia & Far East this January vs. January 2020. The below graph illustrates the trend and summarises the fastest growing & declining wheat exporters to Asian Markets.
How will the wheat price rally and decreasing competitiveness of wheat from the Black Sea affect the global supply chain? Spotlight on Australia...
Shipfix has proven to be a reliable indicator of market sentiment and an early predictor of directional trends in physical imports and exports, covering more than 450 bulk commodities and products. The graph below compares seaborne orders of wheat to Asia from the Black Sea and Australia, versus all global wheat exports to Asia. We observe the growing competitiveness of Australian wheat exports to Asia against the declining position of Black Sea exports.
Australian wheat production is expected to reach ca. 31 million tonnes in 2020–2021 thanks to a favourable rainfall this season, when wheat exports are forecasted to more than double ca. 21 million tonnes in 2020–2021. (Source: ABARES, Australian Government, Department of Agriculture, Water and the Environment, December 2020).
Shipfix measured the significant increase of seaborne orders of Australian wheat in January this year:
- 3x times the volume of January 2020
- 90% of the ships are discharging in Asia
- Half of the demand driven by Vietnam
See below the breakdown of the largest importers of Australian wheat in January 2021 (vs. the same period last year), based on orders overseen by Shipfix.
These insights present a number of questions to those in the maritime and trade sectors:
To what extent will the shift away from the Black Sea towards Australian wheat exports impact on tonne-mile demand, in particular for the Panamax and Kamsarmax sectors? Will the projected 21 million tons of exports from Australia be sufficient to compensate for any reduction?
Eyes will no doubt be on China in the coming months. The selective nature of its commodity purchases from Australia has been well documented, however for the time being there seems to have been a more accommodating approach on wheat; an important source of nutrition for the nation, especially in the context of Covid-19.