World Grain - July 2014 - 30

FEATURE: SHIFTING HORIZONS FOR GLOBAL TRADE

of equivalent size is coming out of the
southern hemisphere."
U.S. WHEAT EXPORT CHALLENGES
Vince
Peterson,
vice-president
Overseas Operations at U.S. Wheat
Associates, explained how U.S. wheat
exports had reached a peak in 1981 and
then followed a steady downtrend for 15
years before stabilizing.
"We have had this volume of about
27 million tonnes," he said. "It has been
pretty stable. The USDA says it's probably going to drift higher. But if we
look at market share, in 1980 we had a
market share that exceeded 45%. USDA
says that is going to continue to erode to
17% to 18% in the next 10 years. The
question is, is that concerning?"
World wheat production and consumption has been growing fast. "When
we come to the last ten years, we start
to get into interesting times," he said.
"We added as much new production and
consumption as we did in the previous
20 years."
He looked at the change in the destinations for U.S. wheat. "Last year we
did about 4 million tonnes to China and
also another 4 million tonnes to Brazil,"
he said. "These two markets are trade
policy issue markets," he said, referring to differences over China's tariff
rate quota and to Brazil's membership
of Mercosur. "Where have we gained?
Latin America, Sub-Saharan Africa and
East and Southeast Asia.
"Trend patterns have shifted dramatically for us on a volume that has been
stable. About 40% of U.S. exports now
go to Latin America."
A further 40% goes to Asia, including China, while 18% goes to Europe
and Sub-Saharan Africa. "Beyond that
you've got a huge part of the world that
we weren't in this year," he said.
He considered the reducing joint
role of North and South America in the
world wheat market.
"In 1981, we had 70 million tonnes
of surplus production that could go out
of the Americas," he said. "Today we
have about 40 million. It might be a
30

concern if you are in importer in the
Middle East or North Africa.
"Each time you had to buy wheat
from the U.S. coincided with spikes
in the world market. You pay the price
when you can't buy it locally."
World wheat trade is going to continue to consolidate into greater hemispherical dependence, Peterson said.
"Highly specific quality requirements
are going to move some wheat. The access to North American wheat is going
to be open to everyone," he said. "It's
just a matter of what price you're going
to have to pay for it.
"Any solution is going to require producing wheat beyond normal trend line
yields. Wheat is going to have to face
up to that," he said, noting the need for
technologies like genetic modification.
BLACK SEA REGION'S
GROWING INFLUENCE
Dmitri Rylko, General Director of the
Institute for Agricultural Market Studies
(IKAR) in Russia, looked at Russia,
Ukraine and Kazakhstan and how their
role in the market has changed from being "the biggest importer of grains -
and it was just more than 20 years ago
- to one of the biggest exporters."
They played a big role in the market
in 2013-14. "Ukraine finished the year
with an export record," he said. "Russia
and Kazakhstan are going to finish with
the second highest exports."
One of the explanations is rooted in
the market economy, he said. One factor
is that currencies have fallen.
"It's only part of the story," he said.
"If we had nothing to sell, we wouldn't
have sold it. We did have something to
sell to the world market.
"We rather complemented each other
than substitute for each other. Russia has
high protein wheat. Ukraine has corn, barley and low protein wheat. Kazakhstan is
basically specialized on higher protein
wheat. Ukraine and Russia specialize in
different geographies. Ukraine has made
a breakthrough in corn to China. Ukraine
has made breakthroughs to South Korea
and Japan."

Russia's traditional corn market is
Turkey, he said. It travels by coaster.
"Our Turkish buyers are extremely
satisfied with this relationship. It will
probably last forever."
Kazakhstan exports to the so-called
"stans," near neighbors in the former
Soviet Union.
"They made a breakthrough in exports
to China," he said. "It's all done in bags.
In a couple of years our Kazakh friends
will be able to sell to China in bulk."
The Nigerians very much like Russian
hard red winter wheat, he said.
"For the first time, we were able to
supply 14.5% protein. Every season we
supply more and more protein to international markets," he said.
This year that has been a record supply
of 13% and above. "Our Turkish buyers
are totally crazy about high-protein," he
said. "This price signal resulted in the
overall increase in Russian protein."
The three countries are changing their
role in the new season. "Each of our
three countries are shifting toward oilseeds," he said.
Ukraine has had almost no winterkill.
"Ukraine managed to plant almost the
same area on the corn," he said. "We
know they imported approximately the
same amount of agchems. But they imported one-third less fertilizer. Fertilizer
manufacturers asked for the money up
front. There was no money up front."
Kazakhstan was going through the
same gradual shift toward oilseeds. "This
year it will result in an additional 230,000
hectares under oilseeds," he said.
In Russia, the shift to oilseeds meant a
20% increase in area this season. "There
was record low winterkill," he said.
"Unlike other countries, we have pretty
dramatic weather concerns as of today.
Southern Russia is going to provide 15
million tonnes of wheat exports, 84% of
the total."
Chris Lyddon is World Grain's European editor. He
may be contacted at: chris.lyddon@ntlworld.com.
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