What do our SE Asia customers want from Australian wheat?

By July 2, 2019Uncategorized

Words by Julia Hausler

Over the past few months I have had the privilege of travelling with an Australian wheat industry delegation led by Australia Export Grains Innovation Centre (AEGIC) to meet and present to many our customers in SE Asia. In March we visited Indonesia and timed the trip perfectly with the announcement of the Australia – Indonesia free trade agreement (IA-CEPA). In April the delegation visited the Philippines and Thailand and last week we visited Thailand. Members of the delegation also visited Malaysia but I was unable to accompany them on this leg.

The format of the visit started with a wheat quality technical seminar in each capital city. A line up of Australian industry speakers covered topics such as noodle specificity (AEGIC), our wheat grading system (WQA), dietary changes (GNLC) and maintaining laboratory integrity (Chopin). I was tasked with demonstrating how we grow quality wheat within our farm system, how we maintain hygiene through our season including storage and the challenges posed to consistently deliver year in year out.

The second day the delegation went out to visit the customers in their operating environments. This included flour millers, noodle manufacturers, port facilities and other baked manufacturing lines such as biscuits and cakes. Whilst each country has their own nuance in manufacturing Australian wheat, there were three consistent themes that came through all the locations.

Functionality vs Price

Most of the customers we spoke to were in agreeance that Australian hard and premium wheat grades performed with excellent functionality and consistently through their various manufacturing processes. Some of the functionality traits the South East Asian (SEA) markets desire include colour, noodle elasticity and firmness, texture stability in hot soup style foods and milling yield. The white seed coat wheat varieties grown in Australia gave us a favourable advantage in meeting these attributes.

However, the customers were also very quick to point out that whilst achieving these product performance parameters was important, they bemoaned supply consistency and the price of Australian wheat. Our ongoing drought across wheat production areas, compacting their supply and price concerns. Black sea wheat is trading about $US25/MT cheaper than Australian wheat. In non-drought pricing seasons, WA does have a freight advantage to ship into Indonesia, only taking 8 days.

Price is very important when manufacturing instant noodles and selling them for 26c AUD a packet (Thailand), 50c a packet (Indonesia) or 52c a packet (Philippines). To compare, similar noodles are sold in Australia for 65c-80c.

Substitute wheat suppliers

Due to Australia’s drought conditions and higher pricing, SEA markets have had to turn to alternative countries to source their wheat. For Thailand, Indonesia, Vietnam and Malaysia this has been largely filled from Russia and the Ukraine.  The Philippines is the exception to the rule with a very strong US / Canada focus for sourcing their wheat. Australian wheat orders in some cases shifted to containers rather than bulk vessels to help contain costs.

Following on from the earlier discussion about Australian wheat being preferred, our SEA customers have been experimenting in blending to achieve a consistent product at the right price. Blends included any combination of Canadian red spring wheat (CRSW), Russian milling wheat (RMW) and Black Sea feed wheat (BFW) with Australian AH, APW and ASW.

My observation of Australian wheat marketing at present it is like a perfect storm. Australian growers still have stocks on farm or in storage to sell are still factoring in drought pricing strategies and are waiting for higher prices being committing stocks.  Our SEA customers who acknowledge and prefer Australian quality are forced to buy cheaper grain to offset their margin squeeze and satisfy their customers demand.

Marketing and promotion

The third theme was a frustration by our SEA customers, on who they should talk to about Australian wheat. The model most favoured is a US wheat associates who drive export market development of US wheat through functions such as crop forecasts, marketing information and grade assistance. Australia needs to identify how it can have a more uniformed voice that represents all of Australian wheat not just port biases. AEGIC are assisting with projects identifying customer needs, identifying best market fit and putting Australian wheat discussions in front of our customers.