Russia Reemerges as Biggest Wheat Supplier

Long known for its oil and gas, Russia is now moving to retake leadership in the world wheat trade it last held when the Czars ruled. In the process, it is reshaping the market for one of the world’s most important traded food products.

“People have started to think about the future,” said a Russian farmer, Burdin, 42, with new tractors lined up outside the window of his office. “Before, everyone just lived day to day,” Bloomberg reported.

He plans to buy a Deere & Co. sprayer for 20 million rubles ($311,000) to add to his fleet in time for planting next spring, he said.

From the Black Sea coast and the Volga River heartland to the sun-scorched steppes of Siberia, Russia’s farm belt is enjoying a renaissance, with grain at the leading edge. Turbocharged by the 45% drop in the ruble against the dollar over the last few years and bumper crops, local producers are crowding into export markets long dominated by big western players.

Last season, Russian topped the US in wheat exports for the first time in decades and is expected to extend those gains to displace the EU from the top spot this year, according to the US Department of Agriculture. Investors from local farmers to billionaire tycoons are pumping money into the business.

Russian wheat has crowded out US supplies in Egypt, the world’s biggest buyer, and is gaining footholds in some other countries, such as Nigeria, Bangladesh and Indonesia. Over the last decade, Russia has been the biggest single source of growth in wheat exports, vital to meeting surging global demand.

“Russia will be among the top exporters for a long time, especially given the potential advances in productivity there,” said Tom Basnett, general manager at Market Check, a Sydney-based commodity consultant. “Other producers need to fight harder to maintain their traditional markets.”

 Attracting Traders

The boom in Russia is attracting some of the world’s biggest trading houses, with Olam International Ltd., Cargill Inc. and Glencore Plc investing into everything from silos to export terminals.

Rich soil, government support and proximity to Black Sea ports for shipping means Russian costs can be as little as half those of major competitors supplying key import markets in the Middle East, according to researchers at Kansas State University.

Limited storage capacity means most of the Russian crop is sold shortly after it’s harvested, further depressing prices. Moscow has also imposed export tariffs and even a ban in the last several years in an effort to keep domestic prices down, scaring foreign buyers. The 2010 ban sent prices skyrocketing in key markets like Egypt, fueling unrest that contributed to a revolution.

The price of Russian wheat for export from Black Sea ports dropped to the lowest in at least six years in July and was at $169 a metric ton as of Sept. 30, according to the Institute for Agricultural Market Studies.