OPINION: US-Indonesia negotiations suggest politics may begin reshaping Australia’s relationship with a longstanding market.
TWO million tonnes per annum; that’s how much Indonesian wheat demand may now be reserved for the US.
Indonesia sits alongside Egypt as one of the world’s largest wheat importers and has long been one of Australia’s most important grain customers. In many seasons, it is our largest single export destination, regularly taking between 4 million tonnes and 5mt when Australian production is strong.
With Indonesia importing between 10mt and 11.5mt of wheat each year, Australian shipments can account for as much as 40 to 50 per cent of the market in big crop years.
That relationship has been built on quality, reliability and geography. Australian wheat, particularly from Western Australia, has a natural freight advantage into South-East Asia, and Indonesian millers have worked with Australian grain for decades.
However, recent negotiations between the US and Indonesia suggest that politics may now begin reshaping that market.
Indonesia has signed a memorandum of understanding indicating it will preference around 2mt of wheat imports from the US each year. The commitment forms part of broader efforts to maintain favourable trade relations with Washington and avoid potential tariffs on Indonesian exports to the US.
Two million tonnes might not sound like a large number, but it becomes significant when placed in the context of Indonesia’s overall wheat demand.
Indonesia imported around 11.6mt of wheat in 2025. If 2mt of that total is effectively reserved for US wheat, then close to 17 per cent of the market would no longer be determined by normal commercial competition.
Australia’s exports to Indonesia have always fluctuated with the size of the domestic crop.
In 2017, Australia shipped 5.1mt into the market. In 2025, shipments again surged to around 4.7mt.
In drought years, however, volumes collapse. In 2019, Australian exports to Indonesia fell to less than 900,000 tonnes as domestic production declined sharply.
Indonesia is also a highly price-sensitive buyer. When Australian supply tightens or prices rise, other exporters step in quickly. Ukraine emerged as a major supplier after 2016 and shipped nearly 3mt to Indonesia in both 2019 and 2021. Canada is another consistent supplier, typically exporting between 1.3mt and 2.4mt each year.
The US has historically played a smaller role, with shipments usually ranging between about 400,000t tonnes and 1.2mt annually.
The MoU therefore represents a structural shift in how the market operates. Instead of US wheat competing directly with other origins on price and freight, part of Indonesia’s wheat demand would effectively become politically allocated.
That should raise concern for Australian farmers. If 2mt of imports are committed to US suppliers, the share of Indonesia’s market open to competition falls to around 9mt.
That matters because Australia’s grain industry relies heavily on export markets. Around 70 per cent of Australian wheat production is exported each year. In large seasons, Australia can produce more than 35mt of wheat, leaving international buyers to absorb a substantial surplus.
Indonesia plays a crucial role in that system. Its size, consistent demand and proximity to Australian ports make it a natural outlet for Australian grain, particularly from WA, where shipping distances to Indonesian flour mills are relatively short.
The broader risk is that Indonesia may not be the only market where politics begins influencing agricultural trade. South-East Asia collectively imports more than 35mt of wheat each year. Major buyers include Vietnam, the Philippines, Thailand and Indonesia.
If governments begin to increase purchases of US agricultural products to maintain favourable trade relationships, similar arrangements could emerge across multiple markets.
At the same time, Australia already faces stiff competition from the Black Sea region. Russia has become the world’s largest wheat exporter, and Ukraine has dramatically expanded its presence in Asian markets over the past decade, even during war. These exporters often produce wheat at a lower cost and compete aggressively on price.
The real risk is not losing Indonesia entirely but seeing a growing portion of global grain trade shift away from open commercial competition and toward political negotiation.
Australian wheat has traditionally thrived in markets where buyers make decisions based on price, quality, freight and reliability.
If governments increasingly direct purchases for geopolitical reasons, the rules of global grain trade begin to change. For Australian farmers who rely on open and competitive export markets, that is a shift worth paying attention to.
• Andrew Whitelaw is co-founder and director of Episode 3 (EP3)
