Where the world buys its wheat has seen some dynamic changes in the last couple of years, said Mark Welch, grain marketing economist with the Texas AgriLife Extension Service.

“For many years, the nations of the United States, Canada, Australia and Argentina were considered the nations responsible for producing the highest quality, most reliable wheat supplies in the world market,” Welch told Central Texas growers at a recent field day in McGregor.

“But we’re starting to see shifts in several of those markets now, primarily under the influence of changes in other grains and oilseed markets.

Mark Welch, grain marketing economist with the Texas AgriLife Extension Service, speaks to Central Texas growers at a recent field day in McGregor.
Bobby Horecka photo

“In many areas, farmers are shifting their production to soybeans, which have a relatively higher price.”

The U.S. contribution to world wheat supplies fell from roughly 29 percent in the 2007-08 crop year to about 18 percent in 2009-10.

In fact, planted wheat acres are now some of the smallest in decades, with crops such as corn and soybeans seeing reciprocal acreage increases.

Texas growers rank third nationally in overall U.S. wheat production, second overall in the production of red winter wheat, with roughly 141 million bushels produced annually.

Most of the crop is grown from Central Texas northward, though drought last year stunted production numbers greatly.

“While our nation’s exports have declined over the past two years,” Welch said, “we’ve seen a greater percentage of the world’s exports coming from nations that have long been wheat exporters but are now taking a more dominant position in those exports, particularly among those nations of the former Soviet Union.”

Where American supplies fell from 29 to 18 percent during the past two years, Russia and its neighbors have seen their market share grow from 19 to 28 percent.

It’s all about location.

Primary buyers

“We are seeing an advantage, particularly in places like the Ukraine, Kazakhstan, southern areas of Russia. They have a logistic proximity to many of the import markets,” Welch said. “The primary buyers of wheat on the world market are located in Northern Africa, the Middle East and the far Eastern nations of Korea, Japan, Indonesia, the Philippines and those areas.

“Logistically, they definitely have an advantage.”

Combined, those importing nations account for about two-thirds of the wheat purchased on the world market.

But location isn’t everything, Welch said.

Russia’s increase in supply to the world market “definitely places the wheat market in a more tenuous situation,” he said.

“They simply don’t have the ability as we do here in the states of maintaining the quality of that wheat from the interior areas where it is grown, storing it, transporting it, loading it on ships, getting it to the customer.

“The question remains, especially in some of those less developed areas, can they maintain that quality?” Welch said.

Meanwhile, these swiftly changing market dynamics will definitely impact the financials of growing wheat, he said.

Playing field

“When it comes to marketing these products on a world stage or global marketplace, the playing field is not level,” he said. “And when you look at countries like the former Soviet Union, much of the production is heavily subsidized.

“Those governments may not have the ability to have a market support program in place, but they can do things with the resources they can provide such as seed, fertilizer, electricity and fuel.”

Quality and reliability, though. remain key factors for American wheat producers.

“We’ll lose market share from time to time,” Welch said, “but over the long haul, if we can maintain the quality and integrity, we’ll always have a good share of the export market niche.”