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New Delhi — Australia's wheat exports to the Southeast Asian market is likely to regain strength this year on improved output prospects, taking some market share from its major competitor — Ukraine — which is expected to see shrinking output on weather related issues, said Victoria Sinitsyna, grains analyst with S&P Global Platts Analytics.

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Ukraine and Australia, along with Argentina, generally vie for Southeast Asian wheat market, especially Indonesia, which is the world's second-largest wheat importer. Australia has lost its top position as a wheat supplier to Indonesia to Ukraine and Argentina in recent years.

Australia's wheat production is expected to jump 75.9% year on year to 26.7 million mt in the 2020-21 crop year (April-March), led by favorable weather conditions seen after three consecutive years of dry weather that depressed the grain output, the country's Department of Agriculture said in early June.

Meanwhile, production of wheat in Ukraine this year is likely to take a hit due to unfavorable weather conditions and smaller acreage, Sinitsyna said.

Last year, dry weather conditions in Russia and Ukraine before crucial harvesting period lifted protein content in wheat supplied from the Black Sea region.

Dry weather speeds up wheat ripening, while protein concentration tends to rise with heat stress. However, persistent high temperatures during late stages of grain ripening and maturity can result in lower average grain weight during harvest.

"This year, on one hand we saw a heat wave...across the region which can support or help to increase the protein content, however, the weather forecast shows some rains as well, which can result in a more sprouted grains or bring some other issues to the grain quality," Sinitsyna said.

Platts Analytics estimates wheat production in Ukraine to decline to 26.9 million mt in 2020-21 (July-June), from 29 million mt last year.

Following curtailed production, and a decline in Ukrainian wheat exports eventually, the Black Sea supplier won't be able to fulfill the demand in Southeast Asia, Sinitsyna said.

A significant rebound in Australian wheat production after years of drought could help regain its market share in Southeast Asia, but wheat price environment and transportation cost will also play their roles, the analyst said.

Eyes on Russia

The black swan of global markets—COVID-19, and Russian politics on their grain exports are also likely to shape the outlook for wheat trade in the upcoming marketing year, said Sinitsyna.

Russia, the world's largest wheat exporter, is expected to produce 76 million mt of wheat in 2020-21 (July-June), up from 72 million mt last year, according to Platts Analytics.

Export prospects in Russia in the new season look bright, but markets will be closely watching the government's move after the country placed export restrictions on grains in April, in an aim to stabilize domestic market prices amid growing pandemic concerns.

"There is also this question about whether or not Russian government will impose grain export restrictions again. The agriculture minister had said that in the first half of the marketing year, Russia probably will not impose any export quota or restrictions, but we have to see what happens in the second half," Sinitsyna said.

Platts Analytics expects Russian wheat exports in the 2020-21 to increase to 37 million mt from 34.2 million mt in 2019-20 estimated earlier.

EU wheat losing sheen

Wheat output in the EU, the world's largest wheat producer and second-largest exporter, is expected to decline significantly on reduced wheat crop, representing the largest year-to-year decline for any region in the upcoming new season.

According to Platts Analytics, the EU's wheat production is expected to decline 8.3% year on year to 142 million mt in 2020-21 (July-June).

"The planted area [in the EU] this season is the lowest since 2007. In the UK and France, during the planting of winter crops, inclement weather at some places disrupted planting and farmers were not able to complete the intended acreage for winter wheat. Later, drier weather conditions resulted in lower yields," Sinitsyna said.

In places like Poland, northern Germany, and in the UK, crops are still developing so there are chances of some yield improvement, but in Romania, since crops are already pretty matured, rains are not going to improve the outlook, the analyst said.

"In our current estimates Romania will produce around 8.5 million mt of wheat," Sinitsyna said.

Romania is EU's second-largest wheat exporter after France, and a major supplier to North Africa and MENA regions.

Meanwhile, EU's 2020-21 wheat exports are expected to fall 24.3% year on year to 24 million mt, according to Platts Analytics estimates.

Lower EU exports in 2020-21 could mean losing some market share in major markets like Egypt and Turkey, which will benefit Russian exports.

However, this will depend on the final crop production and normal export flow from Russia, Sinitsyna said, adding that if Russia indicates of any grain exports ban or restrictions again, then obviously it will change the exports landscape.

As major exporters like Russia and Ukraine adopted export restriction policies due to pandemic concerns, importers like Egypt also bought aggressively to shore up reserves and secure food supplies. Markets still remain wary of supply constraints in the midst of the pandemic.

"The situation going forward will largely depend on whether or not we see new waves of the pandemic, and how successfully local governments deal with it. All the countries would want to make sure that their food security is in good condition," Sinitsyna said.

"So I'm sure that Russia will make sure that they have good amount of wheat in case of new lockdowns, and Egypt will also try to make sure that they have enough of grain so I believe it will all definitely depend on how the situation of COVID 19 progresses," the analyst said.