Australia's place in the global wheat market has slipped significantly over recent years and has reached a point where it is almost "irrelevant" on the world stage.

Key points: Australia is now ranked number six on the list of global exporters

Australia is now ranked number six on the list of global exporters Russia, Ukraine, and Kazakhstan have increased their grain production very rapidly

Russia, Ukraine, and Kazakhstan have increased their grain production very rapidly Black Sea nations are taking market share and threatening exporting nations

Grain market analyst Malcolm Bartholomaeus said it was not that long ago that Australia was ranked third behind the United States and Canada on the list of global exporters.

He said Australia occasionally vied for the number two spot when Canada had a poor crop but now Australia had slumped to number six.

"On those global figures, we produce 2.7 per cent of the global crop and account for 6.8 per cent of the global trade," Mr Bartholomaeus said.

"We are almost irrelevant at this particular point in time in terms of that global wheat market."

The drought, particularly on the east coast, has increased the domestic demand for grain and reduced Australia's exportable surplus.

At the same time, Australia's major competitors — the Black Sea region and increasingly, Argentina — have stepped in to fill the void and claim a large slice of the key market share in Asia.

Black Sea nations increased grain production

The Black Sea region's rise to prominence in grain production has been extraordinary.

Russia, Ukraine, and Kazakhstan are the biggest grain producers in the region and account for one third of the global wheat trade.

Six years ago, Russia produced 52 million tonnes of wheat and exported 18 million tonnes.

Australia's variable season makes it difficult to consistently supply global customers ( ABC Esperance: Emma Field )

This year the US Department of Agriculture estimates Russia will harvest 74 million tonnes of wheat, half of which will be exported.

According to a 2016 Australian Export Grains Innovation Centre (AEGIC) report about Russia, the sudden increase in grain production in the former Soviet state was a directive from the Russian government.

It came after western sanctions over Russia's annexation of Crimea in 2014 caused a downturn in the Russian economy, and the government put an emphasis on food security.

Ukraine has also managed to double its wheat export sales in the last six years — it is tipped to produce 29 million tonnes this season and export 19 million tonnes.

Australia grows a dryland wheat crop which varies with weather conditions, so its exportable surplus can vary from 10 to 18 million tonnes.

After last season's drought-affected crop, it is estimated only 9 million tonnes of wheat will be sold overseas.

Russia, Ukraine increase exports to Indonesia

With abundant crops coming out of the Black Sea, both Russia and Ukraine have gained market share in Indonesia.

Malcolm Bartholomaeus says Australia should move to providing niche wheat consignments

Indonesia is Australia's largest wheat customer, buying about 4 million tonnes a year, or one quarter of Australia's wheat exports but in the last two seasons Russia sold over 1 million tonnes to the South-East Asian nation, a figure which tripled from three years prior.

And Ukraine is also getting a foothold — in the last two years it has exported 1.9 million tonnes and 2.4 million tonnes.

Grain Growers Limited policy and research manager Luke Matthews said the Black Sea was a threat to all exporting nations.

"They are also taking market share in other markets — from other traditional exporting regions such as Canada and the US," he said.

Argentina is competitor to watch

Mr Bartholomaeus said the rise of the Black Sea region, especially Ukraine, was no surprise and Australia had seen it coming a long time ago.

He said the real sleeper nation was Argentina.

Argentinian Buratovich Hnos is one of many farms that has lifted its wheat yields ( Supplied: Buratovich Hnos )

"Argentina and Australia are the major southern hemisphere producers," he said.

"So we have an availability, a supply of wheat at a time of the year when the northern hemisphere is stretching their limits in terms of how far they are away from their previous harvest.

"That's always been a nice spot for Australia to be in, where we can push our new crop into a global market which is probably at its lowest level of supply in a calendar year.

"Now suddenly we've got Argentina."

Australian Export Grains Innovation Centre chief economist Ross Kingwell, said Argentina was increasing wheat yields at a faster rate than Australia, and this trend would continue.

He said the South American nation was on track to double its wheat available for sale on the international market to about 14 to 15 million tonnes in a decade.

"As their wheat yields [increase] there is a greater volume of grain that needs to find a home and unfortunately, that's increasingly in South East Asia," Professor Kingwell said.

Last month Indonesian Flour Mills Association (APTINDO) chairman Franciscus Welirang told the Australian Grains Industry Conference in Melbourne that two years ago, Indonesia bought 5.1 million tonnes of Australian wheat and about 150,000 tonnes from Argentina.

However, in the first five months of this year, Argentina shipped 1.6 million tonnes to Indonesia, while Australian exports plummeted 68 per cent year on the year to 390,226 tonnes.

Increased freight rates will work in Australia's favour

Jason Craig is general manager of marketing and trading with Western Australian-based grain handler the CBH Group.

He said changes to the sulphur cap on bunker oil, the primary fuel for marine vessels, was set to change.

Major exporters such as WA's CBH Group are facing competition in their South East Asian markets. ( ABC Rural: Jo Prendergast )

On January 1, 2020 the International Maritime Organisation (IMO) will implement a new regulation for global sulphur cap for marine fuels.

Under the new global cap, ships will have to use marine fuels with a sulphur content of no more than 0.50 per cent S against the current limit of 3.50 per cent S in an effort to reduce the amount of sulphur oxide.

Mr Craig said these changes would make Australia more competitive on the global grain market.

"I think this is very, very significant," he said.

"Freight rates on vessels are going to go up, there's no doubt about that; we've actually started to see that [and] to add to that, we've also seen the daily hire rates on vessels start to increase on vessels.

"About 12 or 18 months ago they were about $US10,000 (AU$14,870) per day, today they're about $US28,000 to $US30,000 per day."

Mr Craig said higher fuel costs and higher daily hire rates impacted on shipping and days at sea.

"When you're putting that over a journey of 30 days, from the Black Sea to Indonesia, and you compare that to Geraldton to Jakarta, which is about seven days, the cost of freighting goods from the Black Sea to Indonesia is getting far more expensive than it is for Australia," he said.

New grain market opportunities

Mr Bartholomaeus said Australia's grain industry needed to change tack.

"There are many end users, businesses, and traders in Asia that can not cope with 60 to 70,000 tonne of grain being dumped on their doorstep in one hit," he said.

"[They] can't cope with even 5,000 tonne of grain being tipped onto the wharf that they have to handle.

"They're more suited to getting small parcels of grain, and potentially in containers where they can logistically handle it."

Wheat being loaded at Port Kembla, NSW, bound for the Philippines ( ABC Rural: Sarina Locke )

He said while Australia did this already, it needed to be in a position to expand this trade.

"Do we have enough containers coming in and out of the country to cope with it," Mr Bartholamaeus said.

"Do we have the containerising facilities in the right locations around our grain belt, how do we move containers from where they may be filled to where they might be put onto a vessel, do we really have the systems?

"I think they're really underdeveloped to really exploit it, but it may be a better way for Australia to go than to keep trying to compete in this bulk export market."

Mecardo market analyst Andrew Whitelaw believes the focus needs to be closer to home and we should be building domestic demand for livestock feedlots.

"[We need to be] turning kilograms of grain into kilograms of protein," he said.

"So potentially, over time the domestic market becomes more important than the export market, and the grain market becomes a meat market.

"This would remove you from the export market variances."