This year’s bumper wheat crop in Eastern Europe is a sign of the region’s untapped productive potential.
Market watchers have long said that if the region ever got its act together, it could trigger big shifts in world wheat markets.
A 34 percent increase in wheat production this year is bound to raise questions as to whether that is beginning to happen.
But Peter Watts, who tracks developments in the region for the Canadian Wheat Board, says 2001 doesn’t signal any significant shift in the region’s grain growing ability.
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“It’s not an overnight change. They’ve still got a long way to go.”
The jump in production this year was simply due to ideal growing and harvesting conditions, not any fundamental changes in productivity.
“They will gradually increase their production over the years and if they get good weather they can get these kinds of crops,” said Watts.
“But it’s not as though all of a sudden now they’re going to start producing these kinds of crops every year.”
The states of the former Soviet Union produced 86.2 million tonnes of wheat in 2001, up from the previous year’s 64.2 million.
Russia led the way, producing 43 million tonnes, up 25 percent from the previous year. Ukraine grew 20.2 million tonnes, up 98 percent, while Kazakhstan grew 12 million tonnes, up 32 percent.
Watts said farmers there don’t have the money to pay for the inputs needed to achieve that kind of output every year, whether it’s fertilizer, pesticides, fuel or machinery, especially harvesting equipment.
“Definitely if they had the money, they could produce these kinds of crops every year, and even larger. In some ways, this should be their base line.”
With such good crops, all three countries will be exporting a lot of wheat in the coming year.
The International Grains Council projects Kazakhstan will export four million tonnes, Ukraine 3.5 million and Russia 1.5 million. That total of nine million tonnes is nearly double last year’s 4.6 million tonnes.
The wheat exported by those countries is generally lower quality and doesn’t directly compete with Canadian wheat in world markets. That’s especially true this year given the high quality of the Canadian crop.
Nor does Canada export grain directly into that region.
However, Watts said when there is a big increase in production and trade, world wheat prices will fall.
“If the whole marketplace is pressured by increased availability of wheat from that region, certainly it can have an effect on the whole market,” he said.
He expects those countries, along with neighbours such as Hungary and Romania, will become “fairly active” exporters in the future, trading three to five million tonnes annually.
Exports will obviously be higher in years when crops are good, but there will always be some trade because wheat is an important earner of foreign currency for those countries.
While the talk out of Ukraine this year is about wheat exports, farmers seeding the winter crop there now are concerned about dry soil.
The wheat board’s weather surveillance office says about 30 percent of Ukraine’s winter wheat crop is in critical condition due to the lack of autumn rain.
Drought is also a problem in parts of Russia this fall.
