THE Australian Export Grains Innovation Centre (AEGIC) has released its report on the Russian wheat industry, which has concerning implications for Australia.
The report, Russia's wheat industry: Implications for Australia, found grain exports from Russia will surge 60 per cent by 2030, resulting in increased competition in Australia's key markets in Asia.
The report's lead author, AEGIC economics and business analysis manager Ross Kingwell said Russia's rapidly-growing export grains industry and relatively low supply chain costs were of concern to Australia.
"With such a strong export focus, Russia is looking at new markets in Asia which are held by Australia which will put pressure on our grain," Professor Kingwell said.
"We are already seeing Russian wheat find its way into Indonesia.
"The two advantages Australia has in that market is proximity and that demand for wheat in Asia is growing, even if our market share is shrinking."
In 2015/16, Russia exported 25.2 million tonnes of wheat, which made it the largest exporter last year.
The United States exported it smallest wheat crop in 44 years of 21.1mt, while Australia exported 17mt in the same period.
He said Australia has a "concerning future" if it was unable to compete with Russia.
A focus in research and development, marketing and a reduction in the cost of Australia's supply chain could help stem the tide of Russian wheat into Australia's traditional Asian market.
"There is no single silver bullet of response to the competitive challenges Australia's wheat industry faces," Professor Kingwell said.
"A series of actions is required.
"To remain competitive, it is crucial to keep innovating to ensure higher productivity and efficiencies occur on-farm and throughout the Australian supply chain.
"We need to keep committing to research and development that lifts industry profitability."
Professor Kingwell said according to the report, Australia had a total supply chain cost of $84t compared to Russia's $55t.
He said Russia benefitted from cheaper labour on farm and in the transportation of grain to port, cheaper fuel and trucks and a "big investment" by the Russian government and multinationals into Russian ports and roads.
"They are constantly upgrading their infrastructure whereas Australia is missing out - we are no way near the same level of investment in the supply chain," he said.
Professor Kingwell said Australian wheat exporters will face more intense competition from North American organisations funded to service their Asian customers.
"Australia needs to sustainably fund and co-ordinate intelligence about the requirements end-users have for Australian wheat in order to provide a product they value more," he said.
"Australia's North American competitors are already better at funding and co-ordinating their servicing of Asian customers and we need to address this.
"If we know what our customers want and value, we can better serve their needs."
Professor Kingwell said Australia should not panic about increased Black Sea competition, rather it should ensure that future actions were well-considered, co-ordinated and strategic.
"Although the situation with Black Sea wheat flooding traditional Australian markets is of mounting concern, Australian wheat remains well-placed to retain its market share, particularly in South East Asia, where the demand for wheat is growing," he said.
"The Australian grains industry is endowed with an enviable R&D and crop breeding funding system.
"By contrast, wheat variety improvement and grains R&D in the Black Sea is less well-funded, less organised and less focused on efficient outcomes.
"Knowing more about what wheat quality traits are most valued by end-users in key Asian markets will help better target wheat breeding in Australia.
"Australia faces a tide of Black Sea grain, not an immediate tidal wave.
"In that sense, Australia has time to respond and so should not panic. But a status quo response will not best serve Australia's wheat industry."
Professor Kingwell said most Australian grain growers, unlike many Black Sea grain growers, need not be forced or panicked into selling their wheat.
He said Australian farmers benefit from effective grain storage, complemented by a range of price risk management options, so they could be more strategic about selling grain.
The country report is the second from AEGIC and follows its report into Ukraine which was released in April this year.
