Australia’s share of important wheat faces growing market is set to shrink as competition from Southeast European suppliers intensifies.

Wheat faces growing consumption in Southeast Asia, Australia’s largest wheat export market, will continue to rise, but the extra demand will increasingly be met by Black Sea countries, particularly Russia and Ukraine.

Australia currently accounts for about 49 percent of Southeast Asia’s wheat faces growing imports, but that is expected to fall to
37 percent – about 7.5 million tonnes – by 2020.

On the other hand, the Black Sea region’s market share is expected to rise from about 8 percent to 18 percent – around three million tonnes.

Australia’s competitive freight advantage into Southeast Asia has been eroded by lower global oil prices and bulk shipping rates, banking company Rabobank said.

“The volume of Australia’s wheat faces growing exports to Southeast Asia will increase over the next five years, however, its market share will shrink as Southeast Asia turns to alternate markets to fulfill growing demand,” Rabobank grains analyst Graydon Chong said.

Black Sea suppliers are low-cost producers, and the quality of their product is improving. They have also benefited from currency weakness, with the Russian rouble and the Ukrainian hryvnia falling more than 50 percent against the US dollar.

Most wheat going from the Black Sea region to Southeast Asia will be used as animal feed, while Australia is expected to remain the main supplier for food, especially in Indonesia, Vietnam, and Malaysia.

Southeast Asia’s demand for wheat is expected to rise by 4.5 percent a year throughout the next five years as incomes rise and consumers adopt western diets.