Black Sea importance rises as U.S. loses wheat exporter crown

For the first time in the modern agricultural era, the United States in 2014-15 will likely not be the world’s largest wheat exporter.

The title will go to the European Union, formerly the perennial runner up.

The U.S. Department of Agriculture’s forecast for the new crop year shows the U.S. exporting 25.86 million tonnes of wheat and durum.

It forecast that the EU will lead with exports of 27.5 million tonnes.

Canada is seen in third place at 21 million tonnes and Russia in fourth with 19 million tonnes.

Drought has cut the U.S. hard red winter wheat crop and carry-in stocks are smaller, which means the total supply of wheat in the U.S. is expected to fall 10.6 percent to 69.3 million tonnes. As a result, it simply has a smaller pile from which to export.

The EU’s new wheat crop is expected to increase a little, and overall supply will also be up.

Europe’s exports, while world leading, are expected to fall from the current year’s 30 million tonnes.

Indeed, global wheat exports are expected to be down because crops in major exporters Canada and Australia are expected to be smaller and demand from importers China and Brazil is falling.

This exporter ranking is interesting, but it is not that important.

More important are the longer-term evolution of the world wheat market and the shift of competitiveness.

We have written many stories over the past decade of the growing importance of the Black Sea region, which exports crops from three countries: Russia, Ukraine and Kazakhstan.

Taken together, they have often been the world’s largest exporter since they muscled onto the scene in the early 2000s.

They have largely captured the growth in world wheat trade, moving from exports of less than 10 million tonnes in the late 1990s to regularly topping 35 million tonnes in recent years.

However, production has been volatile with severe droughts slashing production twice in the past five years.

Black Sea grain exporters could become more united in their approach to exports as Russian president Vladimir Putin pushes for more economic linkages. He wants to restore Russia as the dominant country in a collection of states.

Putin is engineering the formation of the Eurasian Economic Union with Kazakhstan and Belarus. The signing ceremony creating the economic union, the first step toward a more integrated bloc, is expected later this month. Ukraine was to be part of the union, but the uprising this winter in the capital Kiev toppled the pro-Russia government and brought in a pro-European parliament.

That triggered Russia’s takeover of Crimea and now its encouragement of the breakaway forces in eastern Ukraine.

There has also been talk since 2009 of creating a Black Sea grain pool to improve marketing and logistics and reduce competition among the three countries, which is estimated to reduce the price by about $10 per tonne.

Progress stalled for a few years, but talks revived last fall. They will likely be on hold now because of the unrest in Ukraine, but if the country breaks apart, the eastern areas will likely be open to joining these Russian-dominated economic unions.