Iraq moves to Rus­sian wheat

Warwick Daily News - South West Queensland Rural Weekly - - News - Peter McMeekin Grain Bro­kers Aus­tralia

TALK that Iraq is look­ing at the pos­si­bil­ity of im­port­ing Rus­sian wheat is not great news for Aussie pro­duc­ers.

Iraq may not be our big­gest wheat cus­tomer, none­the­less, it is a sub­stan­tial and vi­tal buyer of Aus­tralian high pro­tein wheat, av­er­ag­ing around 620 thou­sand met­ric tonne (kmt) over the past 10 mar­ket­ing years.

Iraq’s new trade min­is­ter, Mo­hammed Hashim al-Aani, has re­port­edly said it will send a del­e­ga­tion to Rus­sia in De­cem­ber to as­sess the qual­ity and suit­abil­ity of Rus­sian wheat for do­mes­tic use as well as as­sess­ing its lo­gis­tics ca­pa­bil­i­ties.

Whilst ship­ping from Rus­sia’s Black Sea ports tra­di­tion­ally has a freight ad­van­tage, qual­ity is con­sid­ered to be the big­gest hur­dle fac­ing Rus­sian ex­porters com­pared to tra­di­tional sup­pli­ers such as Aus­tralia, Canada and the US.

The lat­est es­ti­mates place Iraq’s pop­u­la­tion at just un­der 40 mil­lion. About 35-40 per cent of Iraqi cit­i­zens live be­low the poverty line and are re­liant on a monthly sub­sidy card sys­tem to sup­ply sub­sidised bread and other es­sen­tial foods.

The Iraqi gov­ern­ment wants to al­low Rus­sia to par­tic­i­pate in the ten­ders to sup­ply this mas­sive ra­tioning pro­gram, pre­sum­ably, in the hope of buy­ing suitable qual­ity wheat but at a lower price com­pared to tra­di­tional sup­pli­ers.

Mr Hashim al-Aani also stated that he was look­ing to se­cure larger state fund­ing for the ra­tioning pro­gram with the aim of main­tain­ing at least a three-month re­serve of grain. This re­serve would in­clude pur­chases from lo­cal farm­ers which he ex­pected to to­tal around 2mmt this year.

Wheat con­sump­tion in Iraq is about 5–6 mil­lion met­ric tonne (mmt) per year.

It usu­ally im­ports around half of its an­nual re­quire­ments and, along with Saudi Ara­bia, is one of the few mar­kets in the re­gion that do not im­port Rus­sian wheat. Do­mes­tic wheat pro­duc­tion has been strug­gling to meet the in­crease in de­mand, pri­mar­ily from the live­stock sec­tor, re­sult­ing in im­ports of al­most 3mmt in the 2017 cal­en­dar year.

About one in five Iraqis is a farmer. Less wa­ter means less land can be farmed, re­sult­ing in less pro­duc­tion and lower farm in­come. This has forced peo­ple to find al­ter­na­tive em­ploy­ment or mi­grate to the larger cities where ser­vices are strug­gling to cope with the in­creased pres­sure and unem­ploy­ment is on the rise.

Like east­ern Aus­tralia, this sea­son’s Iraqi wheat crop was hit by se­vere drought. Ac­cord­ing to Iraq’s Cen­tral Bu­reau of Statis­tics, this cut the coun­try’s soft wheat out­put by 27 per cent to only

2.2mmt, its low­est since

2009. This means that Iraq’s im­port re­quire­ments in the

2018/19 mar­ket­ing year are likely to be higher than in re­cent years.

In the five mar­ket­ing years start­ing in 2008/09, Iraq bought an av­er­age of 900kmt per year from Aus­tralia, with the big­gest be­ing 1.65 mmt in

2012/13. In the five sub­se­quent years, the av­er­age was much lower, with the 2015/16 sea­son see­ing only 52kmt of Aus­tralian wheat make its way to Iraq. The re­cently con­cluded

2017/18 mar­ket­ing year had Iraq im­port around 700kmt of Aus­tralian wheat, mostly from Western Aus­tralia.

No­body is ques­tion­ing Rus­sia’s long-term abil­ity to meet some, or all, of Iraq’s wheat de­mand, so long as it can meet the qual­ity pa­ram­e­ters.

SovE­con agri­cul­ture con­sul­tancy re­cently raised its cur­rent sea­son wheat pro­duc­tion es­ti­mate by 1.3 per cent to 70.7mmt.

Mean­while, the har­vest is ramp­ing up in Western Aus­tralia and ramp­ing down in many parts of east­ern Aus­tralia.

In Queens­land, re­ceivals into the GrainCorp sys­tem are less than 150kmt and un­likely to in­crease sig­nif­i­cantly.

Most of the grain is ei­ther stored on farm or has by­passed the bulk han­dler sys­tem, and the trade, and gone di­rectly to the hun­gry do­mes­tic con­sumer on the Dar­ling Downs.

On the flip side, yield re­ports from the early Western Aus­tralian har­vest have been bet­ter than ex­pected. The con­sumer is pray­ing that this con­tin­ues and gives them a mod­icum of price re­lief un­til the sorghum crop is har­vested. The prob­lem here is that Western Aus­tralian wheat ex­porters are find­ing in­ter­na­tional de­mand at present val­ues.

At cur­rent price spreads, this will most likely lead to an in­crease in do­mes­tic bar­ley de­mand, thereby free­ing up wheat for in­ter­na­tional mar­kets such as In­done­sia, and hope­fully, Iraq.

PHOTO: JOJO NEWBY

SWITCH LOOMS: Iraq may start to im­port Rus­sian wheat, which is sad news for Aus­tralian grow­ers.

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