SINGAPORE (Reuters) — Wheat exports from the Black Sea region, which have climbed nine-fold in the past 20 years, could see further growth in the decade ahead, says a leading grains brokerage.
Nico de Deugd, chief executive officer of Vicorus, said the area has potential to boost yields as much as 2 1/2 times.
Black Sea wheat exports were one of the biggest challenges faced last year by U.S. producers. They have weighed on benchmark Chicago futures, which recently slid to their lowest levels since 2010.
“There is big potential for growth in yields in the Black Sea region over the next 10 to 12 years,” de Deugd said.
“Russia is producing around 60 million tonnes of wheat with current yields. The output will reach 150 million tonnes if yields rise to the level of the European Union.”
Russia, the world’s third largest wheat exporter, produces 36 bushels per acre, while crop yields in Ukraine are 60 bu. per acre, de Deugd said. This compares with European Union yields of 90 bu. per acre.
Attaining European style yields would build on the surge in wheat exports from the Black Sea region, which stood at 45 million tonnes last year, up from five million in 1995-96, de Deugd said.
U.S. wheat has struggled to find business in recent months with the market in negative territory for a fifth straight year.
Global wheat ending stocks for 2015-16 are projected to reach an all-time high, the U.S. Department of Agriculture has said, while U.S. wheat exports are forecast at a 44-year low.
Egypt, the world’s top importer, bought most of its wheat from the Black Sea region last year, drawn by cheaper prices. The country recently set a tender to buy wheat for shipment from April 5-14, and the market expects suppliers other than the United States to win the business.
Exporters of Black Sea wheat have also made inroads into Asia, with sales to Indonesia, Australia’s traditional stronghold. Ukrainian corn sales to China and South Korea have taken away U.S. business.
More investment in technology and infrastructure was in the cards, de Deugd said.
“It has to come from better seeds and technology, and it is happening,” he said.