Hardly any development defines the dynamic nature of world grain trade more dramatically than realizing that the countries comprising the Former Soviet Union (FSU) rank as the world’s leading wheat exporter in 2008-09. Even though projections early in the year had pointed to the likely FSU dominance, this possibility seemed so contrary to historical experience that it was not appreciated. After all, it was only a decade earlier that FSU imports of wheat exceeded the takings of any other buyer to the point that its demand was the most powerful force in grain markets. To have that position transformed to the point that this same group of nations now plays the nearly identical pricedominating role as the top exporter of wheat is to describe an unprecedented turnabout in the global grain business.
According to the Foreign Agricultural Service of the U.S. Department of Agriculture, the nations of the FSU moved 31.8 million tonnes of wheat to foreign markets in 2008-09. That accounted for a quarter of global exports of 127 million tonnes. It was a new record in exports for the FSU, with the past season’s outgo up by slightly more than 50% from the prior year’s 21.9 million. It is interesting to note that the FSU’s record in wheat imports was 21 million tonnes in 1991-92.
While the FSU capturing the number one position is certainly significant, sight must not be lost of the fact that, as a result, 2008-09 is the first year in modern history that the United States (U.S.) does not stand as the wheat leader. The U.S.’s exports of wheat in 2008-09 were 26.5 million tonnes, down 22% from the peak of the prior year and accounting for a 21% share of the total. The latter share was four percentage points behind the FSU. In 2007-08, the U.S. accounted for 30% of world wheat trade, which was more normal.
In considering this race for wheat exporting leadership, it is important to recognize that the FSU is a "former" single nation and that its present-day constituent countries strongly declare independence, especially from Russia, its largest and most assertive member. Except for the central role of Black Sea ports in moving most of these exports, the FSU nations have nothing in common in export marketing. The move into the lead in 2008-09 reflected record shipments by Russia, at 16 million tonnes, and by Ukraine, clearing 10 million. Achieving that record pace followed crop records in both countries, with the 2008 wheat harvest in Russia up 29% and Ukraine’s crop nearly double that of 2007. Kazakhstan, which has been the world’s leading exporter of wheat flour for several years, is the only country in the FSU to experience a decline in wheat exports due to a crop shortfall.
The FSU lead in global wheat exports reflected not just record production, but also large amounts of low-quality grain to fill expanded global feed wheat demand. Very aggressive pricing was pursued by export merchants who allowed the large crop to drive down domestic prices. Low freight costs to nearby markets in the Middle East helped.
It is a mistake, as tempting as it may be in light of many other issues, to believe that Russia’s and the FSU’s emergence as a force in wheat exporting does not have the Kremlin’s attention. With the record of 2008-09 nearing its close, Russian President Dmitry Medvedev issued a directive to create a new government-controlled OAO United Grain Company that would, within three years, account for at least half of the country’s grain exports. Put into the new company are 31 grain storage and processing facilities. In addition, Mr. Medvedev has charged the new company with expanding grain exporting as well as building the needed domestic infrastructure. Having achieved records in the past crop year without this sort of direction, Russia and the FSU loom as powerful aggressors in the future of global grain exporting.
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