Singapore — A free trade agreement between Australia and Indonesia announced on Thursday, that will officially come into force on July 5, could potentially improve new crop exports for Australian wheat, market sources said.
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Under the bilateral agreement, wheat growers are granted duty-free exports of up to 500,000 mt of feed grains to Indonesia -- including wheat, sorghum and barley.
According to trade sources, the duty-free export quantity for feed grains would be increased by 5% annually.
Trade sources, however, noted that the FTA would help facilitate exports for new crop with shipment periods between December to January, due to the limited availability of wheat supply in the current marketing year. The current 2019-20 marketing year runs from October 2019 to September 2020
"We might see more business from Indonesia for new crop as there is really nothing much to export for the current season," an Australia-based trader told S&P Global Platts.
Indonesian wheat buyers have mostly sourced their requirements from Black Sea and Argentinian origins this year, as persistent dry weather condition in Australia has turned prices extremely uncompetitive, another trader said.
However, the trader added that the new trade agreement coupled with a stronger wheat production forecast next year is likely to make prices more attractive to destination buyers, thus improving the country's wheat export situation.
According to the US Department of Agriculture, wheat production for the 2020-2021 marketing year is estimated 50% higher year on year at 23 million mt.
Similarly, wheat exports for 2020-2021 are expected to 77% higher year on year at 14.5 million mt.