Shifting wheat trade presents opportunity

Southeast Asia and sub-Sarahan Africa have become major wheat buyers; an analyst says this is good news for Canada

Southeast Asia will become the world’s leading wheat importing region in 2018-19 for the first time.

The Middle East and North Africa alternated as the top buyers over the last 10 years before being supplanted by Southeast Asia, according to a recent report by the United States Department of Agriculture.

Southeast Asia is expected to remain the top buyer in 2019-20, increasing the gap over North Africa, where sales have been flat.

Sub-Saharan Africa is the other region that has been on a tear, with consumption growing steadily over the last decade. Population growth is the main driver of demand in that region.

Sub-Saharan Africa has surpassed the Middle East and is rapidly catching up to North Africa to become the second biggest importing region.

Neil Townsend, senior market analyst with FarmLink Marketing Solutions, said the shifting wheat importing pattern is a good development because Canada is already a big player in the two big growth regions.

“The more they buy that’s excellent for us,” he said.

Indonesia has been the top market for Canadian wheat in 2018-19, buying two million tonnes of the crop in the first nine months of the year, according to the Canadian Grain Commission.

“There’s no reason we can’t carve out a bit more market share in that market,” said Townsend.

Black Sea and European Union wheat have a distinct freight advantage over North American wheat in the Middle East and North Africa.

That isn’t the case in Southeast Asia. The only exporter with a big freight advantage in that region is Australia.

But the type of wheat that competes with Canadian spring wheat is grown in eastern Australia, which lessens that freight advantage. Plus, Australia has struggled with successive droughts.

Other markets in the big growth regions that buy a lot of Canadian wheat are Nigeria, Ghana, South Korea and Thailand.

By contrast, North Africa and the Middle East are not big buyers of Canadian spring wheat.

Townsend said Canada isn’t allowed to apply for tenders in Saudi Arabia, there are security issues shipping wheat to Iraq and Egypt isn’t interested in high gluten wheat because its citizens mostly consume flatbreads.

Meanwhile, wheat consumption is on the rise in Southeast Asia.

“They are starting to consume way more western style foods, things they didn’t eat much before like burgers and pizzas and things like that,” he said.

The proliferation of ramen noodles is also helping to increase wheat consumption all over the world.

One reason wheat imports are rising in Southeast Asia and sub-Saharan Africa is that the regions do not produce enough of their own to meet consumption, according to the USDA report.

“Southeast Asia is the most extreme example as domestic production is almost nonexistent, meeting less than one percent of demand requirements. For this region, growth in consumption leads directly to higher import demand,” stated the report.

Indonesia and the Philippines both have more than doubled their wheat imports during the last decade.

Indonesia has become the world’s second biggest wheat importer behind Egypt. Demand in the Philippines surged in 2018-19 because typhoons cut domestic corn and rice production that year.

The USDA said wheat demand in Southeast Asia is also benefiting from a long-term shift in consumption from rice to wheat due to changing diets.

“Additionally, with global wheat supplies projected to be more abundant, relatively lower prices are expected to provide further stimulus to demand for both food and feed uses,” stated the report.

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