Grain production in the North African countries of Morocco, Algeria and Tunisia has been severely impacted by one of the worst droughts in the past four decades, leading to an increase in regional imports to meet domestic demand requirements.
And any increase in demand in the Mediterranean Sea region can only be good for Australian growers.
According to the United States Department of Agriculture (USDA), the North African region (which also includes Egypt and Libya) is forecast to overtake the Middle East as the world's biggest importer of wheat in the 2020-21 marketing year (July to June) due to the production decline.
Domestic consumption in the region is expected to remain relatively static at about 47.1 million tonnes, but production is forecast to be about 17.4 million tonnes. This is down about 6 per cent compared to the previous marketing year and 17 per cent lower than in 2018-19.
Consequently, local wheat stocks have been run-down during the past 12 months and total wheat imports for the region are now forecast at a record 29.7 million tonnes in 2020-21. This is up 1.8 million tonnes, or 6.5 per cent, compared to the year ending June 30 2020.
The increase is headlined by Egypt, the world's biggest wheat importer, which is predicted to buy-in about 13 million tonnes in 2020-21 - compared to 13.3 million tonnnes in the current year and 12.3 million tonnnes last year.
Wheat production in Egypt has not been affected by the drought afflicting the rest of North Africa, as a much higher proportion of the planted area is under irrigation.
Its harvest started last month and is expected to yield about 8.9 million tonnes from 1.39 million hectares. This is up 1 per cent and 5 per cent compared to the previous two seasons.
The Egyptian government intends to buy about 3.6 million tonnes of that production for its multi-million dollar food subsidy program.
Egyptian farmers don't like selling all of their crop to the state, preferring to store about half for their own use and selling some in their local souks.
Domestic consumption in Egypt is pegged at 20.8 million tonnes in 2020-21 and the additional imports will go to building-up the country's strategic reserves.
This is a food security measure announced by President Abdel Fattah al-Sisi amid supply concerns due to coronavirus lockdowns.
Morocco is suffering its second successive year of drought, resulting in a sharp decline in the area planted to cereals.
Its total harvested area is estimated to be 3.8 million hectares, which is about 20 per cent below the five-year average and wheat makes up almost three-quarters of the area at 2.7 million hectares.
Harvest started in May and yields are well below the long-term average. Wheat production is expected to fall to 3 million tonnes, down almost 27 per cent compared to last season and 49 per cent lower than the long-term average.
Moroccan wheat imports are set to hit a record 5.8 million tonnes in 2020-21 due to less production, and the government has already taken the unusual step of exempting import taxes through to the end of 2020.
This is on the back of a sharp increase in 2019-20 imports to 5.1 million tonnes, compared to 3.7 million tonnes in 2018-19.
Private importers in Morocco have led a push to double wheat inventories to six months of milling requirements by the end of October.
According to its agriculture ministry, five months' worth of soft wheat and four months' worth of durum wheat had already been stockpiled by the end of last month.
The regional drought has not affected grain production in Algeria as much as Morocco to the west and Tunisia to the east.
Algeria's wheat production is forecast at 3.8 million tonnes, down 5 per cent on last season, but 23 per cent higher than the five-year average.
Despite the relatively good season, Algerian wheat imports are forecast to rise by 1 million tonnes to 7.5 million tonnes, which is about 4 per cent lower than the five-year average of 7.8 million tonnes.
While wheat production of 1 million tonnes in Tunisia is relatively close to the five-year average, it is down more than 31 per cent on last season's bumper harvest.
It relies heavily on imports and is forecast to purchase about 1.9 million tonnes of foreign wheat in the next twelve months. This is about 20 per cent higher than the current season imports, but only 5 per cent above the five-year average.
Environmental constraints limit the development of agriculture in Libya, where cereals are cultivated in the coastal regions where supplementary irrigation is possible.
But wheat production is minimal and the country is almost totally dependent on imports, which are likely to reach about 1.5 million tonnes in the 12 months to the end of June 2021.
Grain tenders from the region have been slow in recent months, but purchases usually pick-up after local harvests are finished and new crop export supplies come online across Europe and the Black Sea.
Egypt has issued two tenders for delivery in the 2020-21 marketing year, buying 120,000 tonnes of Ukrainian wheat on June 2 at an average price of US$220.65/t cost and freight (C&F) and 120,000 tonnes of Russian wheat on June 10 at an average price of US$227.25/t C&F (on 180-day deferred payment terms).
Tunisia bought 25,000 tonnes of soft wheat last week after tendering for as much as 134,000 tonnes. This was purchased at $215.90/t C&F, which was US$7/t higher than its April tender and will most likely come from France.
Last week's USDA report was bearish for wheat due to factors including increased global production (Russian crop was unchanged), slightly lower consumption and record levels of ending stocks.
Any increase in demand in the Mediterranean Sea region can only be good for Australian growers.
This potentially means less wheat will be available to ship out of the Black Sea region into Australia's traditional South East Asian markets late in 2020 and in the first half of next year.
