Former Soviet Union May Become the Largest Wheat Exporter
It is projected by 2019 that Russia may become the world’s largest wheat exporter and Russian, Ukranian and Kazakhstan (RUK) wheat exports collectively may double the United States wheat exports according to the June 2010 issue of Amber Waves. This growth in wheat exports may help mitigate global food security concerns and help offset the the shift in US acreage to corn, soybeans and other more profitable crops.
USDA is projecting that wheat exports by there three counties could increase by about 50 percent to over 50 million metric tons by 2019 or about 1.9 billion bushels. The region may account for over half of the increase in wheat exports and could supplant the US as the “wheat breadbasket of the world”.
The US has been in second place since World War II but could easily slip to second place especially if the trend to more corn and bean acres at the expense of wheat production continues.
The US share of wheat exports may drop from the current 24 percent range for 2001-09 to an estimated 16 percent by 2019. The European Union, Canada and Argentina will also lose market share while Australia is expected to remain flat. The three former Soviet Union counties should see their market share go less than 20 percent to over 33 percent by 2019.
There are two main reasons why RUK have become larger wheat exporters.
- The region’s transition from planned to market-orientated economies that began with collapse of the former USSR in the early 1990s. During the late Soviet period of 1987-91, the USSR imported 35 mmt of grain, while in 2009, the former USSR nations exported nearly 55 mmt. This is a turnaround of over 90 mmt or about 3 billion bushels of grain. Also, the large contraction in the livestock sectors led to market driven importation of meat and exports of grain.
- The region’s yield has risen steadily during the 2000s. During the 1990s, wheat yields actually decreased primarily due to bad weather and a lack of inputs, especially fertilizer. However, during the 2000s, wheat yields have risen about 32 percent in Russia and about 25 percent in Kazakhstan. A lot of this increase is due to the large vertically integrated enterprises that are in charge of the crop from the very beginning to the final wheat sale.
If the world market for grain was expected to remain steady, this increase in Soviet production could lead to much lower prices, however, the world will add another 750,000 or so people over the next 10 years and they will eat a lot of wheat so wheat prices may actually rise over this period.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
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