If there ever was a truly topsy-turvy development in world grain marketing, it is the emergence in the past two crop seasons of Russia, the Ukraine and Kazakhstan, all part of the Former Soviet Union, as major shippers of wheat. Increasingly apparent is that this is not an aberration that will go away once some of the forces that heightened the situation this year return to "normal." The reference here is to how the shortfalls this season in wheat production in Australia, Canada and the United States, as well as the sharp advance in global prices, have provided these eastern European nations with an opening for aggressive marketing, not just on price, but also on the basis of meeting the quality needs of leading importers of milling wheat.
The latter is a much different scenario from the previous several years when these countries, first Kazakhstan, and then Russia and the Ukraine, had export surpluses. For this initial period, marketing was mainly on the basis of price, sometimes at huge discounts to comparable offerings from North America. Indeed, most of this early movement was to the European Union where grain of these origins was treated as feed wheat, and was used to supplement domestic feed grain production. But these discounts have narrowed appreciably, particularly as countries like Kazakhstan have segregated desirable milling wheat for sale specifically to meet those requirements.
According to the latest projections, the three countries in the 2002-03 season will export a total of 16.5 million tonnes of wheat, compared with 13.5 million in the previous year and only 4.9 million in 2000-01. It was only several years earlier when Russia was seeking aid imports to meet domestic needs. Of course, good growing conditions account for the F.S.U. countries combined harvest of a record 94.8 million tonnes of wheat in 2002 — rivaling the E.U.’s 13-nation outturn of 102.4 million and exceeding, for the first time, China’s crop of 90 million. Russia, the leading F.S.U. producer with a 2002 crop of 48.5 million tonnes, for the first time surpassed the U.S. outturn of 44.5 million.
In exporting 16.5 million tonnes of wheat this year, these three F.S.U. nations will account for 16.5% of the total 100 million tonnes of expected global exports. Only the United States, with shipments predicted at 26.5 million tonnes, will export more wheat this season. Infrastructure limits, mainly inadequate roads, rail and port facilities, put a cap on exports from these countries, absent major investments designed not just to maintain, but to expand, their shares of the export wheat trade. Much of this investment will be required of the countries themselves, and approaches already have been made to the World Bank, the European Bank for Reconstruction and Development and other institutions for funds to finance these projects.
Major international grain merchants that have looked to these countries as new and important suppliers as well as the entrepreneurs in these countries — the so-called "new barons of Russian agriculture" — also appear ready to arrange the investments required to create long-term players in global grain marketing. New ports are being considered for development. A new deepwater terminal at Novorossisk on the Black Sea appears closest to eventual building. Baltic ports are especially taxed by the outflow that is currently under way. Yet, no one doubts the commitment of the grain shippers in these countries to fulfill their contracts.
The prospective level of investment, as much as any factor, would almost assure that these former communist countries have every intention of being serious, continuing competitors for export business. Two years of good crops do not necessarily promise an adequate supply, but this year’s crop setbacks in other countries have not so much created a shortfall in supply as they have prompted a new level of competition among wheat exporting nations.
Morton I. Sosland