Russia boosts production to become top wheat exporter
February 22, 2019
ARLINGTON, Va. — Change in global trade was a hot topic at the USDA Agricultural Outlook Forum here, with one session looking at emerging suppliers of key commodities like wheat, corn, soybeans and meat.
Andrew Sowell, a senior analyst at the Agriculture Department's Foreign Agricultural Service, presented his perspectives on the growth in Russian wheat production and the potential impact on U.S. markets.
Surging production means Russia is now the world's leading wheat exporter, Sowell said, with production nearly doubled in the last 10 years as Russia shifts small grain production over to wheat.
Sowell credited Russia's ability to quickly increase its yield to planting better varieties, shifting from spring to winter wheat, and improving planting technology, fertilization and irrigation, plus recent years of good weather.
“Still, Russia is playing catch-up, since its yields have been behind other countries.” Andrew Sowell, senior analyst for Agriculture Department’s Foreign Agriculture Service
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"Still, Russia is playing catch-up, since its yields have been behind other countries," Sowell said.
There has also been a "huge boost" to Russia's port capacity in the last 15 years, he said, providing quicker turnover while also improving its rail capacity by government subsidization to move the wheat to port faster.
Sowell noted that while Russia's market share is surging, the U.S. share is falling, as Russia moves into markets that used to be dominated by the United States, such as Nigeria and Egypt.
Russia has even found a foothold in Mexico, he said. Although the U.S. is still Mexico's leading wheat supplier, providing more than half, Russia has been able to use its increased production to offer lower prices to overcome the cost of overseas shipping.
Meanwhile, he said, the United States is planting its lowest acreage of winter wheat in more than 100 years, while Russia is expecting another large crop, with an increase to its winter grains area.
And while U.S. wheat is still competitive, Sowell said this is unlikely to hold into the next marketing year, "unless the weather intervenes." The long-term projection is for the U.S. share of global wheat trade to trend lower, he said, while Russia remains steady.
Thome Guth, manager of agriculture products for Brazil's food supply and statistics agency. said soybeans have become a major crop in his country, with increased acreage and stable yields.
"Corn acreage is going down," Guth said, and is being replaced by soybeans "which is more profitable," as he showed the considerable spread between corn and soybean prices.
Brazil has had success, he noted, by following its soybean harvest with a second crop of corn. He showed an aerial photograph of a row of machines picking a field of soybeans, followed by a row of machines right behind them, planting corn.
Brazil also has been able to increase the volume of its exports through the development of its Acro Norte Port complex, Guth said.
He also noted that while Brazil is the third major producer of soybeans, it is first in exports now because of the U.S.-China trade war.
Erin Borror, an economist with the U.S. Meat Export Federation based in Denver, spoke about the challenges facing the global trade in red meat.
"Things are literally changing by the minute," she said, citing tariff issues in the pork trade with China, Vietnam and Mexico, and African swine fever emergencies in China and the European Union, as well as the uncertain outcome of the United Kingdom's departure from the EU.
Both the pork and beef industries have a "critical need for a free-trade agreement with Japan," Borror said, in light of the implementation of the Trans-Pacific Partnership agreement that the United States has left.
Borror said it will be "another wild year" for the meat industry, with trade driven by disease and tariffs, "forces out of our control."
The United States maintains a supply advantage, she said, and red meat exports are expected to again be "record large, barring our own crisis." But the degree to which the United States is able to supply the world depends on trade policy, she said, with meat producers around the world looking to sell more to China.
Japan's import of meat "will continue to set new records," Borror said, "with growth going to our competitors until a U.S.-Japan trade agreement happens."
"The longer-term potential is significant, as the United States has the production base and natural resource advantages, but we must also have partnerships and trade agreements," she said.
–The Hagstrom Report