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Reuters Summit-US wheat exports to fade as Russia flexes muscle

Reuters Summit-US wheat exports to fade as Russia flexes muscle
546 words
16 March 2010
18:03
Reuters News
LBA
English
(c) 2010 Reuters Limited
* US losing global market share in wheat to Black Sea

* Fewer exports will lead to lower US wheat production

(For other news from the Reuters Food and Agriculture Summit, click on http://www.reuters.com/summit/FoodandAgriculture10?pid=500 [http://www.reuters.com/summit/FoodandAgriculture10?pid=500])

By Karl Plume

CHICAGO, March 16 (Reuters) - U.S. wheat production and slumping exports will continue to fade in coming years due to increasing competition in the global marketplace from lower-cost producers in the Black Sea region, grain analysts said at the Reuters Food and Agriculture Summit in Chicago.

Russia, the largest of the Black Sea producers, has invested heavily in port facilities and grain handling infrastructure in recent years, allowing it to challenge the United States as the world's top supplier of the grain.

"Undoubtedly the old bread basket of Europe is back and I see nothing to slow down that investment and the overall theme of U.S. wheat production in decline and the Black Sea rising to prominence as a major small grains exporter," said Dan Basse, president of consultancy AgResource Co in Chicago.

"The problem up until now has been that Russia has lacked the political will to be a significant exporter and that seems to have changed as investment and capital has gone from the oil industry to the small grains industry," he said.

Lower prices and cheaper freight costs to key markets have allowed Russia to undercut U.S. wheat exports, which are projected to decline 19 percent in the marketing year ended May 31.

Cost-conscious buyers such as Egypt, the world's top wheat importer, have mostly shunned U.S. wheat in recent months due to high prices in favor of less expensive Russian wheat.

Meanwhile, Japan, the top foreign market for U.S. wheat, has considered adding Black Sea countries to its list of suppliers [ID:nTOE62E07C], which could further erode U.S. market share.

Transportation bottlenecks will hold back a surge in Russian wheat exports to Asia in the near term [ID:nSGE62B04B], but U.S. exports are sure to face stiffer competition over the long term.

PRODUCTION, EXPORTS FADING

"The U.S. share of production and exports has declined steadily over the last three or four decades and I would suggest that it will continue to," said Bill Lapp, president of Advanced Economic Solutions, a food consulting firm based in Omaha, Nebraska,

"This year's decline in wheat acreage and flat to higher corn and soybean acreage are reflective of that continued trend where we are losing share, primarily to the Black Sea."

U.S. wheat seedings have dropped from more than 88 million acres in 1981 to about 59 million in 2009. Winter wheat seedings last fall were the smallest in 97 years.

"(Russia is) essentially taking bushel for bushel market share away from the U.S. while we are focused on burning our food (as biofuel)," Lapp said.

"Think oats 20 years earlier and you will have wheat's plate for the future," he added, referring to the steady decline in production of oats in the United States. (Reporting by Karl Plume; Editing by David Gregorio)

Date:  21.03.2010

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