ARLINGTON, VIRGINIA, U.S. — There’s no denying the growing importance of Russian wheat, nor the effects of that shift in the world wheat market on U.S. wheat exports, a U.S. Department of Agriculture economist told a breakout session on Driving Forces in Global Trade on Feb. 21 in Washington, D.C.
Russian wheat production had been slowing for decades until it turned higher in 2000-01. In the past 18 years, the country’s wheat production has doubled, agricultural economist Andrew Sowell with the USDA’s Foreign Agricultural Service told an afternoon audience at USDA’s 2019 Agricultural Outlook Forum at Crystal Gateway Marriott in Arlington, Virginia, U.S.
An examination of Russian agriculture trends shows room for even more yield growth in Russia if supported by climate conditions. But the country has continuing challenges, some of which are shared by U.S. producers. They include:
- Elevator throughput issues, especially as trains toting grain grow longer.
- The majority of Russia’s grain storage facilities were built prior to 1960 and the aged facilities slow the transfer of grain. Many Russian barns used to store grain were not designed to do so.
- While distance to ports isn’t a major issue for winter wheat grown in southern Russia, it’s a major challenge for the country’s spring wheat areas where sheer land size and time of harvest make it difficult to ship supplies before winter sets in.
- Climate challenges and setbacks during winter, sometimes seen in the transport of U.S. wheat, are exacerbated by Russia’s proximity to Antarctica. Those challenges severely hamper winter grain movement in Russia.
Increasing consistency of Russian wheat exports in the past decade has been a big part of the country cutting into the importance of U.S. wheat. Russia banned wheat exports in 2010-11 and put an export duty in place in the spring of 2015. Since that time, there have been no outright restrictions or bans despite persistent rumors, including in the past three months.
While the rise of Russian wheat has lowered the importance of U.S. wheat in the global marketplace, global wheat trade has flourished, Sowell said. The most staggering growth has been recorded in Sub-Saharan Africa and Southeast Asia. Changing diets and growing feed use are the biggest contributors to that growth.
Russian wheat has had deleterious effects on U.S. wheat exports as the former moved more and more into markets once dominated by the United States. Nigeria is a prime example, he said. Russia’s lower freight-on-board prices have made it the primary wheat supplier to Egypt, a country known typically as a price buyer.
“Even in Mexico, Russia has found a friend,” Sowell said of the southern neighbor previously dominated by U.S. and Canadian wheat. While the United States maintains a strong freight advantage and still is Mexico’s leading supplier, competitors have taken most of the new growth, especially during years when the origin country’s oversupply allows them to overcome freight disadvantages.
This year, the Russian wheat crop “started the year with a boom,” Mr. Sowell said, and while rumors of wheat export restrictions abounded, wheat continued to flow. Supplies have tightened and won’t equal last year, though, he said. U.S. wheat exports to Nigeria, Mexico and Egypt are likely to improve as Russian wheat declines, Sowell said.
Russia is forecast for another large all-grain, up 3% year over year. While not a direct comparison, the USDA economist noted the projection for U.S. winter wheat is the lowest in 100 years.
As a long-term projection, the USDA sees the U.S. share of global trade continuing to decline, while the projection for Russia is steady.
Full USDA global supply and production data is scheduled to be published in May.