Remember those “minor” exporters who flooded the world wheat market three years ago?
Well, they’re not back.
And that’s good news for wheat prices, which have taken a battering in the past year.
“There isn’t anyone (except for major exporters) at the moment, with their current crop prospects, that will have a lot of wheat or other commodities to put onto the world market,” said Canadian Wheat Board world crop analyst Bruce Burnett June 22.
“Price prospects won’t be enough for some countries, even if they do have it, to participate in the market.”
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The year of the non-traditional exporter was 2002-03, when good prospects for wheat prices were dashed by surging exports from such unlikely countries as India, Pakistan and Russia, all of which enjoyed big crops. Huge exports from Ukraine also helped hammer wheat prices that winter.
But this year, none of these countries appears to be threatening. When Russia became a major exporter through the Black Sea, wheat board analysts said it was probably a blip that would disappear once Russia began rebuilding its livestock industry after the economic turmoil that followed the crash of communisim.
That appears to be happening.
“They’re growing more coarse grains for livestock,” said Burnett.
“In the days of the Soviet Union, they had higher grain production and higher livestock production, but the livestock disappeared after communism fell.”
Russia’s botched conversion to a market economy led to wide scale poverty. With people not able to pay for meat, livestock producers slaughtered and sold most of their herds and didn’t replace breeding stock.
The land became available for export wheat production, so when good prices eventually coincided with a big crop, shipments boomed.
But now that some order and lots of oil money have flowed into the Russian economy, people can afford to buy meat. Livestock numbers are building and many farmers are favouring feed grains over export wheat production.
Burnett said Russian wheat production could drop even more because some southern areas could produce corn and soybeans.
“As the technology gets adapted, they can switch over to those other crops,” said Burnett.
Events in China also have the potential to shake wheat markets.
China has stopped the slide in its wheat acreage but has not significantly increased it.
“They will probably import some,” he said.
India had a disappointing harvest.
“It doesn’t look like they will be a significant player in the export market this year.”
That leaves Canadian producers with their usual competitors, the United States, the European Union, Australia and Argentina. Crops in most of those countries look fairly good, Burnett said, with a few pockets of problems, such as dryness in U.S. winter wheat areas, a lessening drought in parts of Australia and late crops in Europe.
Overall, the board expects the world wheat crop to drop by 20 million tonnes from last year, which will still be above the world’s five year average.
