Geopolitical shifts make governments nervous, and when the shift is underpinned by a Trump tariff tsunami that changes more often than the tide, governments start prepping the doomsday bunker. What do bunkers need? Food for one.
Think of the rungs of Maslow’s hierarchy. In times of surplus driven opulence, governments focus on self-actualising stuff for voters like racetracks and rugby teams (at least here in WA). But when sustaining trade gets pole-axed via prohibitive unilateral terms, and overlaid with the portent of military conflict, then things get serious and it's prepper time – focus on the bottom by keeping the populace fed!
Three countries that are ground zero of geopolitics – Russia, China and India – just happen to be the world’s three largest wheat producers and are aiming to fill their bunkers' larders with more – much more.
Russia (80 million tonnes) – As Russia is the world’s largest wheat exporter, stuffing around 50 million tonnes into vessels per annum, their need is less food than cash, as their increasingly bellicose war machine chews through billions as it invades its neighbours. Accordingly, Putin has ordered the government to boost agriculture exports by 50% by 2030, with reported support from the likes of Saudi Arabia's agricultural and livestock investment firm, SALIC, to finance the expansion (they incidentally sold out of Merredin farms recently).
China (140 million tonnes) – Ever since Trump’s first presidency, China has been beavering to decouple from US food supply. This has included not only alternative sourcing (primarily Brazil) but also increasing their domestic production through innovation and technology – last harvest they cracked a record 700 million tonnes for all grains.
As Chinese farms are small, there is a large step up possible with proven tech like precision seeding, but the big gains are likely to be in breeding. Last year, China approved the first gene edited wheat variety, developed internally from a subsidiary of Syngenta - a strategic purchase by State Owned ChemChina in 2017. It takes around 8 to 10 years to develop new varieties – expect many more to come.
India (110 million tonnes) - In addition to regular border fracas with Pakistan and China, India perennially straddles a border between exporting and importing wheat. In big years, they are known to send wheat to their near neighbours and, in short years, they tap into supply from exporters such as Australia. India has stated they want to stay on the export side of the ledger and, as economic pressure is bearing on India via tariffs, the need to broaden their trade portfolio is heightened.
India is pushing to close the yield gap through the usual plant physiological pathways, but they also have an issue with post-harvest waste. Storage is sometimes little more than the side of the road after all. Studies have shown the loss to be around 5% (volume, not quality) but compare that to CBH where shrink is 0.5%. There is a 5 million tonne upside through the simplest of tech - tarps and steel.
Why does this all matter? Simple maths. As the song goes – "It's all about the Base" (poetic homophone licence employed). Increasing 330 million tonnes of wheat crop by just 10% = 33mt, which is more than twice WA’s wheat crop in an excellent year.
Ponder for a moment what would happen if these nations succeeded in upping their game to this level.
Firstly, China won’t import any of the 10 million tonnes of wheat that they have in recent times (with 3-4 million coming from Australia) and secondly, the extra tonnages will likely be shipped to other WA grain customers – such as Vietnam and the Philippines.
India already is a known exporter when seasons are good. Another 11 mt will easily fill the boots of nearby countries like the UAE and Yemen, also customers of Australia.
Russia is fierce competitor into places like Indonesia already – traditionally WA’s single biggest customer and Russian wheat is cheaper than ours. No further encouragement required to displace another few million tonnes of APW and AWW.
If we expect swelling domestic populations to gobble up additional tonnes, those hopes are unfounded. China and Russia have declining populations and India’s growth rate is less than 1% per annum. Australia’s wheat will have to compete harder, and travel further, to find the market.
All major wheat producing countries are generally improving yields (including Australia), but the saying - "necessity is the mother of invention"- is apt. The countries under extreme geopolitical pressure just HAVE to produce more and are motivated to do so fast. As they are mostly coming from a low innovation base they are likely to succeed.
Meanwhile, Western Australian growers can enjoy watching the Perth Bears and some V8s!
