The US is being pushed out of the grain market as Russia’s bumper wheat harvest has dragged down prices to record lows. Russian agricultural exports are booming thanks to a weaker national currency and massive investment.
“We are pushing America aside in some markets, and we are satisfied with this,” said Russia’s Agriculture Minister Aleksandr Tkachev.
This year Russian farmers are expected to harvest the biggest crop in over a century. Russia will produce at least 83 million tons of wheat in the current growing season, according to estimates by The Wall Street Journal.
However, the figure announced by the Russian government earlier this year is much more impressive. The Moscow-based grain consultant ProZerno estimates a harvest of over 130 million tons. It is 2.6 percent more than the previous record set in 1978 before the Soviet-Afghan War.
“Today our task is to set reasonable prices across the country. The grain crop of 130 million tons, there is more to come. It may reach up to 200 million tons. The main thing is to find new sales markets,” said Tkachev.
The US agricultural sector has faced lousy weather this season, meaning fewer acres of wheat were sowed in 2017 than ever before. US wheat output is expected to decline by a quarter compared to the previous season.
Unfavorable conditions along with Russia’s resurgence pushed wheat prices at the Chicago Board of Trade down almost 25 percent to $4.19 a bushel (about 27 kilograms) compared to July, when Russia began a record wheat harvest. The US Wheat Associates trade group announced the shutdown of its office in Egypt, the world’s biggest wheat importer.
“We literally can’t compete on the price of wheat in those markets compared to Russia,” said the trade group’s spokesman Steve Mercer, as quoted by the WSJ.
According to the US Agriculture Department, American wheat will make up just 15 percent of global exports in 2017, down from half four decades ago. The plunge was also caused by more grain grown in Europe and India. The US will produce half as much as Russia, according to the department.
Last year, Russia managed to become the world’s leading producer and exporter of grain, after shipping 34 million tons from its 119 million ton harvest. Exports of Russian wheat are expected to increase to 40 million tons this year, according to the agriculture ministry.