Opinion: How Russia became first in wheat

by Morton Sosland
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As the global leader in exporting wheat and as a major shipper of oil and gas, Russia emerges as a contender for global importance in these two vast commodity markets. 
 
In the many unexpected developments in grain trade this season, hardly anything equals the astounding projection that Russia will end 2016-17 as the No. 1 exporter of wheat. According to the latest forecast by the Foreign Agricultural Service of the U.S. Department of Agriculture, which is also in line with International Grains Council expectations, Russia in 2016-17 is heading to export 30 million tonnes of wheat. This is well ahead of second-place European Union with an outgo of 27 million tonnes. Russia’s position came after prospects for E.U. exports dropped 7 million tonnes on account of a precipitous fall in France’s harvest due to rains this summer.

 

The E.U. ranked first in wheat exports in 2015-16, 2014-15 and 2013-14, clearing a peak 35,418,000 tonnes in the second of those three seasons. Treating the E.U. as a single exporter when its membership is made up of 28 nations, of which France is the major grain exporter, has been done for many years. Prior to these three years, the United States usually led wheat exporting. America’s wheat exports in 2016-17 are forecast at 25,500,000 tonnes, lagging both Russia and the E.U. This is the first year in nearly half a century that U.S. outgo has been less than 1 billion bushels. The U.S. export peak was 47 million tonnes in 1981-82, when Russia imported huge quantities in response to domestic shortages.

Beginning with the 1972-73 crop season, the Soviet Union imported more wheat than any nation had ever taken. In 1984-85, takings were 55.5 million tonnes of both wheat and corn, a record for a single country to take in one year. It was not until the late 1990s that Former Soviet Union (FSU) imports shrunk to single digits. Along with China briefly, but mainly acting alone, the FSU until the new century dominated as the top importer.

Telling the story of Russia’s transformation from massive dependence on grain imports to sustain its basic food needs to rank as the leading wheat exporter signifies something never before witnessed, at least in the current era. Overriding is the way Russia increased its production of wheat and other grains not just to satisfy domestic needs freed from the yoke of disastrous government but by setting up production and marketing in ways not much different from the market economy of the western world. Like other recent aspects of the Russian economy where entrepreneurs have reaped rich returns, much the same has occurred in agriculture, including aggregating vast crop acreage and stimulating capital spending meant to improve domestic marketing and export facilities.

Not to be overlooked in marveling at what has been accomplished in Russia’s wheat production and marketing system is how the government, directed by Vladimir Putin as premier, has been willing to put a brake on exports to guard against run-away domestic prices. It was in a fairly recent period that the government in Moscow imposed a tax on exports of wheat at a level that brought shipments to a near halt. This season’s supply is obviously large enough to allow assurances that no limits are being contemplated on grain exports. After all, Russia has an urgent need to earn foreign exchange to pay for large-scale capital imports, a situation obviously worsened by the oil price collapse.

As the global leader in exporting wheat and as a major shipper of oil and gas, Russia emerges as a contender for global importance in these two vast commodity markets. Even when the FSU bought millions of tonnes of grain due to shortfalls in domestic crops, attention in the West often focused on wondering what was going on in a nation that seemed to have some of the best weather and soil as well as geography for grain crops. After all, prior to World War I and the Revolution, Russia did rank as major wheat shipper. Its re-emergence as the top wheat exporter is an incredible story of the great global grain industry.

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