Ukrainian wheat challenges WA market

Australian Export Grains Innovation Centre (AEGIC) chief economist Ross Kingwell, in his paper "Ukraine: An emerging challenge for Australian wheat exports", this week highlighted Ukrainian wheat as having the potential to undermine Australia's competitiveness in key Asian markets.

He said a strategic response to prevent this is needed.

"Ukrainian wheat is already making inroads into some of Australia's key Asian markets," Professor Kingwell said.

"The profitability of grain production in Australia will be affected by how well Australia strategically responds to the challenge posed by Ukraine, as well as other emerging Black Sea producers such as Russia and Kazakhstan."

Department of Agriculture and Food (DAFWA) figures identify wheat as the major grain crop produced in WA making up 70 per cent of annual grain production and generating $2-3 billion each year towards the State economy.

It says WA generates about 50pc of Australia's total wheat production with more than 95pc of this exported predominantly to Asia and the Middle East.

This wheat is typically used as a high grade flour milling product and is recognised for its high quality.

More recently Ukrainian wheat has been blended with Australian wheat, bulking the product while retaining the sought-after Australian properties such as its bright white colour.

This has coincided with the massive devaluation of the Ukrainian hryvnia and Professor Kingwell identified this in his report as a trend which is expected to continue, along with the growing competitiveness this has brought for Ukraine in the world market.

Professor Kingwell said Ukraine boasted 32 million hectares of arable land - more than 12pc of Europe's total arable land area.

"Ukraine has highly fertile soil and a favourable climate for grain production," he said.

"In addition, Ukraine's supply chain costs are relatively low, and there is significant scope to improve infrastructure, which would increase efficiency and drive supply chain costs even lower.

"There is also the likelihood that Ukrainian growers will continue to embrace modern farming methods, which should lift on-farm productivity and help end-product functionality.

"It is clear that the potential exists for Ukraine to greatly increase its wheat exports."

A majority of Australia's wheat production growth since the 1990s has come from increasing plantings.

In WA, the need to increase productivity in the grains sector has been the focus of the Grains Industry Association of WA (GIWA) strategy report for 2025.

The strategy was launched last year and called for actions under a least cost pathway to port development, the improvement of grain handling infrastructure at Kwinana and streamlining export clearance and chemical registration.

It also highlighted that support is needed for market choice for growers to produce genetically modified (GM) crops and address skills shortages.

The goal of the report is to drive the annual WA grain crop towards 20m tonnes and a value of about $10b.

Professor Kingwell said despite potential for the Ukraine to pose a threat to Australia's market share, there were challenges for the country.

These include political instability, financial problems and corruption.

He also identified the increased military expenditure due to conflict as a limitation to developing the country's ageing infrastructure to get grain efficiently to port.

He said Australia should not rest on this knowledge and should strive to make local changes.

He argued the industry should investigate why or whether Australian wheat is preferred in its major markets and why Ukrainian wheat is or is not preferred in the same markets.

"If we know what customers value we can better serve their needs," he wrote.

"Ukraine wheat exports to Asia are a tide, not a tidal wave, and Australia has time to take proactive steps to meet this challenge," he said.

"However proactive is the operative word here.

"If we simply react to the loss of market share in the future, these markets may be difficult to claw back, as strategic actions can take time to bear fruit."

The report on the Ukrainian wheat industry will be followed by similar reports on Russia and Kazakhstan later this year.

This series, which ties with AEGIC's report on the Canadian grain supply chain, aims to provide in-depth analysis on a range of competitive threats facing Australian wheat exports over the coming years.