Canadian producers hang on to wheat market share

Facing increasing competition from abroad and major system reorganization at home, Canada has done a good job of hanging on to its share of the global wheat market.

That is a significant accomplishment, for as we leave behind the teens and head into the twenties of this still young century, Russia has come to dominate the market, pushing some once mighty players away from centre stage.

I dug into wheat export statistics to see what has happened over the past 10 years. To smooth out the data so that a year of drought or political upheaval would not throw off the comparisons, I took the averages of the most recent three years, 2017-18, 2018-19 and 2019-20 and compared them to the average of 2007-08, 2008-09 and 2009-10. I used United States Department of Agriculture all-wheat trade statistics that combine wheat and durum.

Over that period, the volume of global wheat trade rose by about 43 million tonnes or 32 percent.

Russia’s production and exports rose spectacularly to become the king of the market.

From being almost a non-player entering the 21st century, Russia became a force by the latter three years of the first decade with a market share average of about 12 percent.

Back then some analysts were still reserved in their expectations of Russia, saying that the wheat-growing area in the country had volatile weather and the export system was decrepit and not up to the task of moving huge volumes.

But another decade on and Russia has proven a more muscular competitor than expected thanks in part to strong investment in infrastructure and a natural advantage from its proximity to expanding consumption markets.

In the latest three years, on average, Russia has captured almost 21 percent of the wheat market, exporting on average about 37 million tonnes.

Neighbouring Ukraine has also made great strides moving to a 10 percent market share from about six percent.

During this same period Canada’s wheat industry successfully underwent an enormous transition.

The Canadian Wheat Board’s single desk authority ended in 2012 and by 2015 its remaining assets were sold to G3, a joint venture of Saudi Arabian agriculture company SALIC and Bunge.

There was a major restructuring of grain-handing assets when Richardson, Glencore and Agrium bought out Viterra.

New players G3 and GrainsConnect joined established players building a host of new high throughput inland grain elevators.

Established players also enlarged their port terminals in Vancouver and G3 is expected to open in 2020 the first entirely new port terminal in Vancouver since the 1960s. The state of the art facility is expected to be able to handle up to eight million tonnes of grain annually.

These investments and farmers’ increased productivity helped Canada maintain its share of the global wheat market even with the onslaught of competition from the Black Sea. Another factor is the persistent demand for the high quality hard wheat that Canada produces.

In the last three years, Canada had 13.23 percent of all wheat trade, almost unchanged from the 13.26 percent it had on average in the last three years of the previous decade.

Looking at volume exported, movement increased to an average of about 23.6 million tonnes from 18 million previously.

Looking back a decade, in the last three years of the 2000s Canada held 14.4 percent of the world market.

The European Union also held on to its market share with 14.12 percent on average in the last three years, down only slightly from 14.67 percent.

Argentina saw a modest improvement in market share, climbing to 7.4 percent from 5.7 percent. About half of its exports go to neighbouring Brazil.

The biggest loser was the United States, seeing its wheat market share fall from more than 21 percent at the end of the previous decade to about 14 percent in recent years.

Wheat acreage in the United States has been falling since the early 1980s and recently reached the lowest levels since record keeping began in the early 1900s.

Farmers have turned to soybeans and corn, which provide better returns and are more competitive on the global market.

Australia’s market share has also fallen, declining to about six percent on average from a little more than nine percent. However, its export performance has suffered mostly due to the last three years of drought that slashed production. It has been forced to import wheat from Canada this year.

It is also interesting to note that global wheat trade grew much faster in the second decade of this century than it did in the first decade.

In the first decade, trade grew by only 10 million tonnes or eight percent, while in the second decade it grew by 43 million tonnes or about 32 percent.

The more recent stronger growth was led by Indonesia, the Philippines, North African countries and Turkey, all of which have enjoyed strong economic growth.

But while wheat trade growth has improved, it is still slower than trade growth in corn and soybeans.

Global trade in corn about doubled over the decade while soybean trade was five times bigger.

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