Source: Stu Ellis, University of Illinois
The U.S. has been the global breadbasket in the post World War II era, but part of that honor and responsibility may soon have to be shared with the resurging agricultural production in the former Soviet Union. The slow changes forged by U.S. farm policy and growing production in Eastern Europe have combined to see those nations surpassing the U.S. in global trade in wheat in the next 10 years. Once a buyer of wheat, Russia has become a seller of wheat.
This sea-change in global trade is noted in the latest edition of USDA's electronic magazine Amber Waves, which reports the largest gains in wheat production and exports in the coming decade will be in Russia, Ukraine and Kazakhstan. That means the U.S. would slip to second place as the world’s largest wheat exporter. By 2019, those three nations will be exporting more than double the amount of wheat exported by the U.S. With commercial imports of grain rising in many countries, economists say the development will help improve global food security.
In the recent decade, the U.S. has exported about 24 percent of the wheat traded globally, but that is expected to drop to 16 percent in the next decade. However, the EU, Canada and Argentina will also lose some of their share of the world wheat trade, and Australia will hold steady. Russia, Ukraine and Kazakhstan will climb from their current 20 percent share of world trade to 33 percent. But they were also major wheat exporters under the Tsars.
The U.S. change is a result in farm policy shifts, which allowed more flexibility to switch acreage to corn and soybeans, which occurred at the expense of wheat. Biotechnology has allowed more rapid growth in corn yields, compared to wheat, and new varieties of corn and beans have been adaptable in traditional wheat growing regions of the U.S. Conservation tillage has also retained more moisture for row crops to grow in drier climates.
But while U.S. wheat production has declined, wheat production has increased in the Former Soviet Union. The transition to a market economy allowed the countries to restructure their production and trade. That allowed a shift from importing 35 mmt of wheat about 1990 to exporting 55mmt of wheat in 2009, which is 90 mmt more wheat available to global markets. One of the reasons for the shift was the contraction of the livestock industry in Eastern Europe, which required substantial amount s of feed. Wheat yields there have 25-30 percent helped by large vertically integrated agricultural operations which have access to better seed technology and more inputs.
When market prices climbed in 2006 through 2008, USDA economists say idled land in Eastern Europe was returned to production with a potential dampening effect on world prices. Questions remain if prices will remain high enough to maintain wheat production in Eastern Europe, since infrastructure is needed to store and transport the increased production. But whether that is developed may depend on the state-based grain companies, which are also trying to ensure domestic food security. One of the goals is restoration of the livestock industry, and that will require feed. If successful, that will reduce U.S. poultry products being exported to that part of the world.
The USDA economists raise an important issue about the sustainability of Eastern Europe as a global wheat supplier. They say, "The region's climate is characterized by variable temperature and rainfall, with severe drought possible in any year. These conditions can produce major fluctuations in annual grain output and exports. This effect can be exacerbated if the countries react with policies that restrict exports."
A shift from wheat to row crops in the U.S. has long been recognized as one of the reasons for our decline in wheat production and share of the global wheat trade. However, that may be replaced by Russia, Ukraine, and Kazakhstan which have expanded their wheat production and trade, and are poised to overtake the U.S. as the world's leading wheat exporter in the next 10 years.