Rarely do we read or hear a wheat market report today without being informed about what is happing in the Black Sea area (Russia, Ukraine, and to a lesser degree, Kazakhstan).
The reason is that in the 2018/19 wheat marketing year, Black Sea exporters are projected to control 49 percent of the hard wheat (hard red winter, hard red spring, and hard white) export market (Figure 1) and 38 percent of all wheat exports.
During the 2000/01 wheat marketing year, Black Sea exports were only 12 percent of hard wheat exports and only eight percent of total wheat exports (Figure 2).
Total (all classes) exports increased from 4.17 billion bushels in 2000/01 to 6.66 billion bushels in 2018/19. Increases in hard wheat exports from the Black Sea area made up 2.18 billion bushels of the 2.49 billion bushel increase in total exports.
Russia’s percentage of world hard wheat exports grew from 1 percent in 2000/01 to 29 percent in 2018/19. Russia is projected to export 1.341 billion bushels in 2018/19, compared to 19 million bushels during 2000/01.
Ukraine’s wheat exports increased from 72 million bushels (2 percent) to 606 million bushels (13 percent). Kazakhstan’s wheat exports expanded from 239 million bushels (9 percent) to 312 million (7 percent).
MAJOR SHARE CHANGE
Note that between 2000/01 and 2018/19, Argentina’s percentage of world hard wheat exports dropped from 15 percent to 11 percent, Australia’s percentage went down from 24 percent to 8 percent, Canada’s export percentage decreased from 26 percent to 19 percent, and the U.S. export percentage fell from 23 percent to 13 percent.
Not much change occurred in the bushels exported by non- Black Sea exporters. The percentages declined because world exports increased (mostly in the Black Sea area).
Between 2000/01 and 2018/19, Russia doubled wheat production (1.3 billion bushels to 2.6 billion bushels), and Ukraine increased wheat production by 150 percent (375 million bushels to 920 billion bushels). Between 2000/01 and 2018/19, Russian, Ukrainian, and Kazakhstan wheat production increased 2.1 billion bushels.
Russia and Ukraine invested billions of dollars in production equipment and inputs, roads, storage facilities, rail and truck transportation systems, and export facilities. The 2018/19 wheat crop was reported to have had an average protein of 12.5 percent.
The export standard for U.S. hard red winter wheat has been 12 percent protein. Many importers can originate a high-quality flour milling wheat with 12.5 percent protein from the Black Sea region for a significantly lower price than they can import from other regions.
Black Sea exporters have an ocean transportation advantage for 31 percent of the world’s wheat imports. The North African countries of Egypt (No. 1 importer), Algeria (No. 3 importer), Libya, Morocco, and Tunisia import 16 percent of the world’s wheat exports. Ocean transportation for wheat from Black Sea ports to North African ports is about 41 cents per bushel, compared to about 82 cents from U.S. or Canadian ports and about 95 cents from Australia.
Russia also has a transportation advantage into Middle Eastern countries. The U.S. and Canada do have a shipping advantage into Japan, the Philippines, and other southeastern Asian countries, but only if the wheat is shipped out of ports in the western U.S. or western Canada.
Russia, Ukraine, and Kazakhstan captured a 49 percent share of the world’s hard wheat market and 38 percent of the total market by producing and delivering high quality wheat and by taking advantage of lower ocean freight costs.
Figure 1. 2018/19 world major hard wheat exporters’ exports (million bushels and percent of world hard wheat exports).
Figure 2. 2000/01 world major hard wheat exporters’ exports (million bushels and percent of world hard wheat exports).