Drought and ban interrupt Russia’s march to dominance

BakingBusiness.com, August 17, 2010
by Jay Sjerven

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Russia’s march toward market dominance in the world wheat trade suffered a severe setback dealt by drought and the government’s response, which was to ban grain exports, at least through the end of the year. The U.S. Department of Agriculture on Aug. 12 reduced its forecast for Russian wheat production to 45 million tonnes, down 8 million tonnes from its July forecast and down 16.7 million tonnes, or 27%, from 61.7 million tonnes in 2009. Concerned about domestic wheat supply and consumer prices, the Russian government announced a ban on grain exports. The U.S.D.A. then reduced its forecast for Russian wheat exports in 2010-11 by 12 million tonnes, to 3 million tonnes, which would constitute the smallest Russian wheat outgo since 696,000 tonnes in 2000-01. Russia exported 18.5 million tonnes of wheat in 2009-10 and saw year-to-year increases in exports from 3,114,000 tonnes in 2003-04 to last year.

The new export forecast for Russia would see that nation’s share in world wheat trade plunge to 2.4% in 2010-11 from 14% in 2009-10 and 12.8% in 2008-09. In its world agricultural projections through 2019 issued in February, the U.S.D.A. forecast Russian wheat exports to eclipse those of the United States by 2016-17, which would make Russia the world’s largest wheat exporter. The U.S.D.A. projected by the end of its forecast period, the 2019-2020 marketing year, Russia would command a 19% share in world wheat trade compared with 16.4% for the United States.

Certainly, weather may improve next year and put Russian wheat production back on track. Stocks may be replenished and exportable supplies increase with a couple of good harvests. But the export ban has raised questions about Russia’s reliability as an exporter, and reputations often take longer to restore.


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