What does Asia want from Australian wheat in an increasingly competitive market

Australian Export Grains Innovation Centre

Key messages

1. Australian wheat is well regarded in many South East Asian (SEA) markets for its quality and suitability for a wide range of noodles however texture attributes and targets could be more targeted.
2. At present, Australia has less opportunity to supply wheat with suitable quality for the growing SEA bread and confectionary markets.
3. Ukrainian and Russian wheat are currently a modest threat to Australia’s key wheat export markets in SEA, however it is recognised that the potential threat is large. We need to use our “window of opportunity” effectively.

Background

South East Asia (SEA) is the largest and fastest growing market for Australian wheat, importing 42.9 mmt over the past 5 years valued at A$2.6 billion per annum. This accounts for over half of the Australian total wheat export revenue. The historically dominant and growing market share held by Australian wheat in SEA has traditionally been underpinned by factors including proximity to Australian grain ports, which means shorter voyage times, as well as the quality attributes Australian wheat.

These SEA markets are critical to supporting demand and prices for Australian wheat and therefore, extremely important for Australian growers. Within these markets, Australian exports are experiencing intense competition from wheat supplied from the Ukraine, Russia and Argentina at lower prices, as well as strong competition from North American wheat based on functional performance for baking applications. To remain competitive in SEA and maintain or improve our price differential relative to the alternative suppliers, it is essential that we understand SEA market requirements for wheat.

A better understanding of SEA requirements will better align the Australian industry to supply these markets and translate to an improved value proposition, making us more competitive. With improved competitiveness, the value returned to growers from these markets will be stronger than the scenario where we compete purely on a price basis with low cost origins such as the Black Sea and Argentina.

Aims

To identify the quality attributes and their preferred levels most valued by key SEA wheat end-users for noodle and bread products that can enhance the demand and value of Australian wheat.

To assess the competitive threat of wheat supplied from Ukraine and Russia.

Method

Wheat technical and purchasing staff from twenty flour milling companies across Malaysia, Singapore, Indonesia and the Philippines participated in the research project aimed at identifying their preferences and target levels of wheat quality characteristics for a range of fresh noodles and breads and their technical service requirements. The product range included Malaysian style Hokkien noodles, Indonesian fresh noodles (mie basah), Philippines fresh wet noodles, Malaysian loaf bread, Indonesian sweet buns and loaf bread, and Philippines Pan de Sal and sandwich bread.

The project applied choice analysis methodology to collect objective information on wheat preference of grain end-users. This is a technique derived from paired comparisons and adapted by Louviere and Woodworth (1983) to deliver an experimental framework that provides a coherent way to study “stated preferences’ using a small sample set.

The executive interview was the initial contact with flour mills, designed to introduce the research project to management, confirm participation, collate company background and select end-products for the study.

The comparative importance of 31 wheat quality, functional and technical service attributes for the selection of wheat for SEA fresh noodle and bread products was ranked from most to least importance by mill technicians and wheat purchasers from each company using a best-worst scaling (BWS) survey method as described by Louviere et al (2013).

The BWS for mill technicians consisted of 31 choice sets of six attributes per set, with the six attributes being drawn from a pool of 31 attributes. The experimental design ensured that each attribute was equally represented in 31 choice sets and all attributes were evaluated against each other. When faced with a particular choice set, each mill technician would choose the most and least important of the presented attributes based on their need to select grain for a particular end-use. For wheat purchasers, the survey consisted of 30 choice sets of five attributes per set, with those five attributes being drawn from a pool of 25 attributes.

By presenting each participant with a series of subsets, and then undertaking appropriate analysis, it is possible to create a ranking of the full list of attributes. Experimental design was provided by Professor Jordan Louviere, University of Adelaide and utilises a Balanced Incomplete Block Design (BIBD) being an orthogonal function of the full factorial.

Each of the BWS surveys was presented to project participants in the form of a customised macro-enabled excel sheet on touch screen tablets. At the mid-point of each survey, participants completed a question set to define the minimum, maximum and preferred values for a set of quality attributes for noodle and bread products.

Results

For wheat purchasers, perhaps unsurprisingly, price and wheat protein content, overwhelmingly dominate their selection of wheat to buy for fresh noodles and breads in the studied markets. More interesting and less well-known was mill technician’s preferences for different attributes when making noodle or bread products.

Fresh noodles

Noodle texture (firmness and elasticity) and noodle colour (brightness and colour stability) were the quality attributes of most importance when selecting wheat for fresh noodles. Australian wheat has the advantage over alternate origin wheats for noodle brightness, colour stability and yellowness; and is considered the most suitable wheat for fresh noodles in these markets. It is imperative that these advantages be maintained within Australia’s wheat classification process to ensure the value of Australian wheat for noodles can be differentiated and remain attractive in the market place.

However, as noted by the project’s researchers, texture attributes and targets for SEA noodles need to be better understood by the Australian industry along with standardised objective assessment methods to ensure Australian wheat can consistently meet the textural firmness required for premium quality yellow alkaline noodles.

Both protein and wet gluten are important measures of flour quality in SEA (related to the firmness of noodle products) with marginally different requirements between the countries studied. Market feedback suggests that the relationship between protein and wet gluten content for Australian wheat has been changing. This needs to be urgently investigated by the Australian industry.

Bread

Achieving the ideal loaf volume is the single most important valued attribute for mill technicians when selecting wheat for bread. Other bread attributes, such as crumb softness and brightness, are secondary to loaf volume.

The most important dough rheology characteristics were: water absorption, dough stability time, development time and strength (Rmax), dough and fermentation tolerance, and wet gluten content. Many of these characteristics are associated with water holding capacity and retaining bread volume and shape. This study indicates that Australia has less opportunity to supply wheat with quality targets for baking performance in longer fermentation or sponge and dough processes and formulations high in sugar and fat, as practised in SEA. The volume of the total bread segment in SEA is approximately 4.5 mmt, while also one of the fastest growing. Compared to Australian Hard (AH), North American wheat with quality suited to such baking systems commands a premium ranging between US$5 and $100/t.

It is clear that the Australian industry must position itself for both immediate research and quality improvement as well as a long term approach to altering market perceptions and understanding of how to best exploit Australian wheats functional characteristics in baking applications The objective market intelligence data from our current study will be a primary resource for informing the Australian industry of the necessary improvements needed in baking quality of Australian wheat classes thus enabling wheat producers to capture opportunities to supply wheat into the premium-priced wheat segment.

Biscuit, cracker and cake

While this segment was not a focus for this study, many SEA processers expressed a keen interest in the supply of wheat from Australia, including soft wheat, to supply biscuits, crackers and cakes as there was significant demand for these growing market segments. However, this is a challenge that cannot be addressed simply by changes to classification. As the market has previously indicated, ASFT wheat is suitable for certain end-products in this segment. The greater challenge will be to ensure that suitable wheat varieties are yield-competitive with current wheats. In addition, a commercially viable mechanism for growing production to the point where economies of scale kick in is also critical. We, therefore, recommend that an industry review be initiated to explore opportunities in this segment, as well as ways in which these opportunities can be realised.

Supply of wheat from Ukraine and Russia

Wheat production in the Ukraine is predicted to stabilise due to competition for land from other crops including maize, sunflower and soy. In contrast, Russian production is predicted to rise 60% by 2030, driven by yield gains, significant investment in R&D and infrastructure. Production and supply costs in both countries are significantly lower than for Australia making them highly competitive on price. Whilst grain quality has been a concern from these origins, there has been reported improvement in the consistency of their supply.

Conclusion

This study documents and reinforces the advantages of Australian wheat for SEA noodles in a fresh noodle market of a total volume of 2.5 mmt (6.5 mmt inclusive of instant noodles). This single largest market for Australian Premium White (APW) wheat, is experiencing pressure from Black Sea wheat which sells at a significant discount to APW. The lower price accounts for poor noodle colour, texture and milling performance. More recently, this situation has been compounded by the entry of cheap wheat from Argentina and India in the lower-tier SEA markets. Thus, Australian wheat has become increasingly boxed in, wedged between cheap wheat produced by countries with a lower cost base and premium hard wheat from North America with suitable baking applications. Recognising this threat and achieving improvement in quality attributes for both noodle and bakery products identified through this study will help Australia maintain its competitive advantage and price position.

Results from this study of quality preferences and specifications for the preferred and acceptable levels of key wheat quality and functional characteristics for SEA noodles and breads can inform Australia’s wheat variety classification process of quality requirements for wheat classes. User target levels can guide the selection of benchmark varieties for current wheat classes and quality parameters for amended or new classes. Moreover, identifying target levels and value attributed by users can improve the efficiency and effectiveness of investment decisions regarding wheat quality research by highlighting attributes of most value.

Australian wheat producers can ultimately benefit from this study through better targeted wheat breeding and more effective varietal classification to ensure Australian wheat better suits end-user needs. Market shares in key SEA markets are then more confidently be defended or increased in the face of greater price and functionality based competition.

References

Louviere J., Lings I., Islam T., Gudergan S., Flynn T., (2013) An Introduction to the application of (case 1) best-worst scaling in marketing research International Journal of Research in Marketing Vol 30, pp 292-303

Louviere J., Woodworth G., (1983) Design and analysis of simulated consumer choice or allocation experiments: and approach based on aggregate data Journal of Marketing Research Vol 20 November, pp 350-367

Acknowledgments

The AEGIC project team thanks the following for their valuable contributions: GRDC provided significant cash investment for project operations; AEGIC provided cash investment and expert personnel to conduct the in-market research, support and project review; GrainGrowers Ltd whom backed this project from its initiation; and most importantly all of the SEA milling companies that agreed to participate and individuals within companies that gave up their time. For these companies, it is a big leap of trust to make their staff available and without exception the companies have given fantastic support over the five market visits.

Contact

Ken Quail
Email: ken.quail@aegic.org.au
Ph: 02 8025 3200