World wheat trade turning topsy-turvy

by Morton Sosland
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Even though world trade in wheat in 2001-02 showed relatively small change from the pace of recent years, very significant shifts occurred in the pattern of trade that could be interpreted as heralding long-term adjustments in trading. So far as total trade in wheat is concerned, the volume reached 106.6 million tonnes, up 5% from 101.1 million in the preceding year but still below the record 108.5 million in 1999-00. Much the same ruled in coarse grains, where global exports reached 106.8 million tonnes, against 108.5 million in the previous year. Trade in both wheat and coarse grains has fluctuated minimally below and above 100 million tonnes for several decades.

The most important change noted in 2001-02 is the sudden emergence of the Commonwealth of Independent States, notably the republics of Russia and the Ukraine, as significant exporters of wheat. Russia in the year now ending will export 3 million tonnes of wheat, its largest shipments in years, contrasted with 1.1 million in 2000-01 and 600,000 in 1999-00. Not only have Russia’s wheat exports surged, but its imports dropped to 600,000 tonnes — the smallest in many years. As a result, Russia has returned to being a net exporter, in stark contrast to the 1970s and 1980s when it was the world’s largest importer.

Coincident with Russia’s rising role as an exporter, the Ukraine turned in an even more impressive performance, shipping 5.3 million tonnes in 2001-02, contrasted with just 100,000 tonnes in the previous season and its recent peak of 4.3 million in 1998-99. Much of the wheat that Ukraine moved into world trade this season was feed grade. But this should not be interpreted as meaning that neither this republic nor Russia doesn’t envision itself as being a significant provider of milling wheat. When the Berlin Wall fell at the start of the 1990s and Communism collapsed in the Former Soviet Union, the observation was often made that these countries — freed from the yoke of central controls — could return, as they were early in the 20th century, to being major exporters of wheat. For a long time, amidst the chaos caused by swift changes in the economy and political structure, it appeared that these countries might fail in realizing their potential as significant grain exporters. Of course, one year’s success in exporting does not make for a permanent shift in Russia’s role in the world grain trade, but barring a weather-related setback, most commentators now see a good chance for this to be realized. The prospect is that both Russia and the Ukraine will be aggressive competitors.

Russia’s intentions are underscored by its plans to build new grain exporting facilities that would produce a fourfold expansion in its capacity to move grain abroad. Currently, Russia has facilities with an annual shipping capacity of 5 million tonnes, a healthy margin over this year’s outgo of 3 million tonnes. Obviously, though, that’s not enough for the export optimists. Plans have been announced for building an additional 15.5 million tonnes of exporting capacity, including new export terminals with the capacity to ship another 7.5 million tonnes from the Baltic Sea, 5 million out of the Black Sea and 3 million tonnes more from Far Eastern ports.

Needless to say, such an expansion would represent the greatest increase in a single country’s grain exporting capacity ever witnessed. It reminds of efforts recently undertaken in China to expand its domestic grain storage capacity to accommodate a domestic production policy that now has been changed to rely less on domestic output.

And Russia and the Ukraine are not the only new players on the world market. India, exporting a record 3.5 million tonnes of wheat in 2001-02, has had its government commit to an aggressive exporting policy, aimed for the moment at reducing burdensome stocks. But as countries like Russia and India, which once were in the lead as importers, suddenly loom as major exporters, there are those who say the wheat trade is on the verge of turning topsy-turvy.


Morton I. Sosland