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By Vince Peterson, USW President

As a new decade and a new future for wheat export market development dawned in January 1980, the urgency facing the wheat-producer boards of both Great Plains Wheat and Western Wheat Associates could not have been much greater.

They were under the strain of discussions and negotiations for months in the effort to merge the two existing regional wheat market development groups into one, single national association. Then, on January 4, these farmer leaders and all U.S. wheat producers sat in disbelief hearing President Jimmy Carter address the nation and summarily cancel 17 million metric tons (MMT) of existing wheat, corn and soybean sales contracts between U.S. exporters and the former USSR. That was 17 MMT of production that had already been grown and harvested and scheduled for movement by truck, barge, rail car and ocean vessels through the U.S. grain export system; 17 MMT of system revenue, margins and farmers’ annual income – all cancelled.

In announcing this action and a longer-term grain embargo as sanctions against the Soviet Union’s invasion of Afghanistan, the President promised protection to farmers. He also said he had faith that our competitors would not exploit the opportunity to take up the cancelled U.S. sales. Never was such a naïve assumption more foolishly made. Spurred on by the unfilled Soviet demand, export origins in Europe and South America were quite literally handed a windfall on a silver platter. It is hard to criticize them for taking up that opportunity, but that was the spark for many of them that launched them into a new permanent place as competitors of the United States in the export market.

A crisis was at hand and it was becoming clear that no action of the government was going to heal the long-term financial damage and repair the loss of export markets suffered on that day. Those making an honest historical analysis can fairly claim that the next 20 years of high inventories, stagnant prices, booming farm programs and an export subsidy war all had their roots firmly planted in that one single policy decision.

The newly founded U.S. Wheat Associates (USW) had more than its hands full as a national market emergency now far outpaced any internal issues that may have seemed monumentally disagreeable during the merger discussions. Those were now just minor bumps in the road by comparison to the tasks in front of them. Ultimately, USW’s new leaders and staff fought hard to replace the lost export sales, build a reputation for reliability and create a more conducive policy environment for global trade.

Never Again

One of the longer-term benefits to the U.S. wheat industry and its domestic and overseas customers that came out of this very difficult time originated in a very simple thought and demand: “This can never be allowed to happen again.” The U.S. grain export industry from farm to port were all completely unified in the pursuit of legal protection from an action of this nature for all time. These political efforts were successful. The U.S. Congress eventually passed, and the President signed, new contract sanctity laws which, short of a national emergency or war, precluded even the President from canceling any pre-existing grain export sales contacts.

The implications of this important protection echoes through the years to today, a new time of global crisis and uncertainty in the face of the coronavirus pandemic. Selfish hoarding is causing shortages and prices to rise. To combat that, some countries retreat behind protectionism to limit, tax or cut off exports in order to secure their own domestic supplies and hold down inflationary prices at home – with little apparent concern about the effects their actions will have.

Today, very concerned import-dependent countries are rightly asking: “Are there adequate supplies of wheat in the United Stated to cover all of our demand? Is there hoarding or a price shock? And, will our vessels be loaded?”  We are quite humbled and yet proud to be able to tell them yes, there is plenty of wheat available. In the commercial market, there is no hoarding and prices remain relatively low during this time. Perhaps most importantly, as opposed to governments that hide from global obligations, the U.S. government has declared the entire U.S. food industry, from farm to table and to export, to be essential services. We are also very pleased to know USDA’s agencies that handle grain inspection and phytosanitary compliance and certification are committed to making every effort possible to maintain those services to both domestic and export markets during this time.

No Export Taxes

As for the export taxes that some countries are so quick to consider and employ as the easy tool to control their own domestic market and economy, our country’s founders took care of that issue for us in 1787 when they wrote the Constitution of The United States of America. Article I, Section 9, Clause 5 states that “No Tax or Duty shall be laid on Articles exported from any State.” No export taxes. Period.

Situations such as the Soviet Grain Embargo and, perhaps, the coronavirus pandemic, while very difficult to experience and understand, can provide lessons and new policies that continue to serve wheat farmers, our country’s export supply industry and our customers securely and quite well.

Today, in part because of what happened back in 1980, the U.S. wheat store remains open, equally and fairly to all market participants at home and abroad.

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By Vince Peterson, USW President

Today, I had the unique privilege to accept an invitation to the White House to represent U.S. wheat farmers, our state wheat commission members and U.S. Wheat Associates (USW) as President Donald Trump signs implementing legislation for the U.S.-Mexico-Canada Agreement (USMCA) into U.S. law (that’s my viewpoint at the ceremony in the picture above).

While this invitation came addressed to me, it is only because I occupy a specific desk at USW with the consent of our U.S. farmer board of directors. I sincerely hope that everyone associated with our organization feels the same pride I do to witness this important national event because everyone put in a tremendous amount of work to help bring it about.

The trade agreement USMCA will replace (after Canada’s parliament approves it and implementing changes are made, as we are sure will happen) opened mutually beneficial trade between U.S. wheat farmers and Mexico’s flour millers and wheat food industry. Under the North American Free Trade Agreement (NAFTA), USW focused on helping Mexico’s buyers, millers and food processors solve problems or increase their business opportunities with U.S. wheat classes—as it does with all U.S. wheat importing customers. This effort, supported by wheat farmers and the partnership with USDA’s Foreign Agricultural Service, has fostered a productive relationship that has endured through many challenges.

So, when the Trump Administration announced in 2017 it intended to renegotiate NAFTA, USW quickly engaged in the process on many levels to advocate for continued duty-free wheat trade and other improvements in the agreement.

For example, I invited José Luis Fuente, President of the Mexican Millers Association (CANIMOLT), to address the USW board of directors meeting in October 2017. Sr. Fuente had been appointed as an advisor to the Mexican Minister of Agriculture in the negotiations. He made a passionate plea for USW to work together toward resolving the trade agreement as soon as possible. In addition, our former Vice President of Policy Ben Conner was granted status as an advisor to the U.S. Trade Representative and was one of only a few agricultural industry representatives who participated in side-briefings at almost all the official negotiating sessions. Vice President of Communications Steve Mercer, his team and our friends at the National Association of Wheat Growers (NAWG) published an on-going series of press statements, social media posts, comments and fact sheets supporting our positions. As the U.S. Congress considered the agreement, NAWG’s staff and its dedicated farmer officers and directors continued to advocate for its passage.

Regional Vice President Mitch Skalicky and our staff in Mexico City steadfastly maintained contact with Sr. Fuente and our other customers. Then, last year at a USW marketing conference in Mexico, USW and Mexican millers renewed our agreement to work together toward approval of the USMCA. We also made it very clear that our commitment to serving their industries was among our most important goals.

“We have 14 farmers here representing 13 different state wheat commissions, and U.S. Wheat Associates staff from 3 offices here to show you that we take your business seriously,” Past Chairman Chris Kolstad told the millers. Those farmers, state commission members and USW, he added, “are all united in our desire to earn your full trust in the United States as your primary source of imported wheat.”

After I received the White House invitation to the USMCA signing ceremony, I forwarded a copy to Sr. Fuente with a note of thanks and congratulations to him and CANIMOLT members for their work and the collaborative effort toward a favorable agreement for each of us.

“We congratulate U.S. Wheat Associates on behalf of the Mexican millers for all of the collaborative work, negotiations, and achievements attained (in negotiating the new USMCA),” Sr. Fuente responded to Mitch Skalicky and me. “I am very happy and proud to have been part of the effort and above all to confirm the excellent relations and friendship that exists between the Mexican milling industry and the U.S wheat industry.”

That is a humbling and generous confirmation that our relationship stayed strong throughout the negotiations. USW will continue to work hard to make our partnership even stronger in the future.

José Luis Fuente, President of CANIMOLT, addresses the USW Mexican Wheat Trade Conference in June 2019.

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By USW President Vince Peterson

Recently, I have heard several of the farmers that U.S. Wheat Associates (USW) represents say they are hoping for a much better year in 2020. No wonder, given the low farmgate prices, trade uncertainty and difficult harvest conditions last year. A better year would be good for our farmers and for our overseas customers, too, who want farmers to have the incentive to continue producing a reliable supply of high-quality U.S. wheat.

From the perspective of global supply, demand and trade factors, we do see mostly positive influences hovering just out in front of us as we start the new year. After a long-term bear market that pulled Chicago wheat futures down from $9.50 in 2012 to a bottom of nearly $3.50, recent firmness in prices represents possible change and momentum on the horizon.

To highlight the primary market factors, we can start with a look at the Southern Hemisphere. Australia remains in the grips of drought that has reduced this year’s harvest outlook by 35 percent below their 10-year average. Australian wheat export prices are currently among the world’s highest at around $265 per metric ton (MT) FOB. In Argentina, the newly elected government has increased export taxes again for wheat from 7 percent to 12 percent (soybean export taxes were raised by 30 percent!). The bump in wheat export taxes raises FOB prices by more than $10 per MT, allegedly to protect domestic producer prices. That is not good for their importing customers, particularly for Brazil. However, after more than a dozen years of negotiations, Brazil on January 1 opened its 750,000 MT duty free tariff rate quota (TRQ), potentially advancing wheat import demand from outside Mercosur. When Mercosur wheat supplies have been tight, U.S. farmers have supplied an average of 80 percent of Brazil’s non-Mercosur needs.

In the Northern Hemisphere, Russian wheat export expectations have been reduced based on lower domestic supplies and prices for their standard 12.5 percent protein wheat (calculated on a dry matter basis and is most closely comparable to U.S. HRW 11 protein calculated on a 12 percent moisture basis). Russian FOB export prices are now around $219 per MT, with U.S. hard red winter (HRW) 11 percent at approximately $222 FOB from the Gulf. Long gone are the $40 to $50 per MT FOB discount spreads that have disrupted what would be normal logistical trade patterns in some recent years.

In its December “Wheat Outlook” report, USDA noted that cuts in wheat production in Argentina, Australia and Canada create potential opportunities for U.S. wheat exports in marketing year 2019/20.

In trade, despite the uncertain slog of negotiations, the United States has completed trade deals with Mexico through the finalization of the U.S.-Mexico-Canada Agreement (the new NAFTA) and through an initial bilateral agreement on agriculture with Japan. U.S. wheat export shipments to Mexico in marketing year 2019/20 already stand at 2.74 million metric tons (MMT) versus sales at the same date last year of 2.18 MMT. Together, Mexico and Japan account for more than 4.0 MMT and 25 percent of all U.S. wheat export sales to date.

Finally, trade negotiations with China, which have been perhaps the biggest weight on U.S. wheat market fundamentals and psychology, appear to be at a more hopeful position. This week, President Trump announced that the U.S. and China will sign a so-called Phase One deal on January 15. Based on information provided by the Office of the U.S. Trade Representative, China has agreed under the Phase One agreement to cancel retaliatory tariffs and import significantly more U.S. agricultural products, including wheat. Running parallel to this potential demand, China has also agreed to start filling its annual 9.6 MMT reduced tariff TRQ for imported wheat. In the five years before the start of the U.S.-China trade “war” in 2018, U.S. wheat exports to China averaged 1.5 MMT per year. That provides a logical basis for a more robust world and U.S. wheat trade with China.

Over the last five years or so, U.S. wheat producers have shouldered many challenges and continued to produce the highest quality, most wholesome milling wheat in the world, as they have done for decades. We do not yet know if these positive shifts in market and trade factors will provide the economic boost they need. But in that hope, our team at USW will be watching how they affect the markets – and how that will affect our overseas customers.

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It is certainly true that the trade relations between the United States and China are in a difficult place. With the latest round of tariff increases announced and imposed, it is certainly possible to imagine that this conflict will not end soon. But we must all remember that negotiations are happening, and reworking the trading relationship between the two largest economies in history was never going to be easy.

In the meantime, U.S. Wheat Associates (USW) stands firmly by the following article by USW President Vince Peterson, “In Spite of Trade Conflicts, U.S. Wheat Farmers Will Not Abandon Customers in China,” published in “Wheat Letter” nine months ago.

USW remains engaged in keeping our once and future customers in China informed about the quality, variety and value of U.S. wheat in anticipation of future opportunities. Upcoming work includes a short course on contracting for wheat value, baking demonstrations in cooperation with the USDA’s Foreign Agricultural Service trade office in Beijing, and additional technical milling support activities in China. The commitment to service there will continue long after this trade conflict has ended. 

In Spite of Trade Conflicts, U.S. Wheat Farmers Will Not Abandon Customers in China

By Vince Peterson, USW President. Originally published August 21, 2018.

Chinese Vice Minister of Agriculture Han Jun recently acknowledged the decades of work that U.S. farmers have put into growing the Chinese market for U.S agriculture. He then warned that this market may never come back to where it was if the trade dispute with the United States continues much longer.

We can guarantee the Vice Minister, and the wheat food industry in China, that U.S. Wheat Associates (USW) and the farmers we represent will not turn our backs on our outstanding customers in China. We remain dedicated to our core mission in China, as we are everywhere in the world, to bring profitability and value to our customers even if that is temporarily more difficult today.

Presumably, Chinese leaders believe that U.S. farmers can persuade the Trump Administration to end this trade war with China. However, U.S. farmers have been clear with their own government that China’s predictable response to the conflict has harmed them and we have supported negotiations to resolve this conflict. While we agree that escalating rounds of tariffs are a bad idea, we also believe that many of the U.S. government complaints about China’s policies are valid.

In our experience, state disruption of the wheat trade has been an enormous problem, severely limiting opportunities and profitability for both U.S. farmers and our wheat food industry customers in China. Through opaque administration of its wheat tariff rate quota (TRQ), China has deprived its flour mills of an average of 6.5 MMT of imported wheat annually over the past decade. In fact, recent import volumes are still well below what China imported in the 1980s and early 1990s; that is, before it joined the World Trade Organization (WTO). One could be forgiven for thinking China was a more promising market before joining the WTO than after; almost entirely because of excessive subsidies to the domestic wheat crop in recent years, as well as tight limits on TRQ access. This is why the U.S. government, under the Obama Administration, initiated two WTO cases on these issues in the fall of 2016. The prosecution of those cases has been continued and pressed forward by the Trump Administration. We are highly supportive of this action.

The Chinese government should recognize that its many years of flouting international commitments and highly interventionist “state capitalism” have led directly to the present conflict. If China had lived up to the commitments made when it joined the WTO, it is highly doubtful that we would still find ourselves in this situation. If Chinese leaders want to avoid further conflict and bolster the international trading system that they claim to defend, China can first start behaving like a responsible economy and adhere to its trade commitments in both letter and spirit. Of course, we are urging the same from the United States, which must also approach China with clear demands and a path towards achieving them.

Nevertheless, we are confident that this trade confrontation will one day be resolved. In the meantime, we will continue to reach out to our customers and friends in China, to reassure them of our unfailing dedication to our work with them. Further, we will make the guarantee that, once this trade dispute is resolved and behind us, we will work harder than ever to continue earning their business as we chart a path, together, to build the commercial channels that hold so much promise for Chinese and American industries and people.

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By Vince Peterson, USW President

Recently, I was searching online for some wheat market information to share at an upcoming meeting. I saw a headline that asked: “What country exports the most wheat?” Great, I thought, here we go again with more propaganda about Russia beating the United States in the global wheat export market contest.

Instead, I was quite pleased to scroll down to find that the United States was still the world’s largest wheat exporter in 2017 in terms of “value” according to the “World’s Top Exporters.” Russia produced almost twice the volume of wheat than the United States and more than matched U.S. export volume that year; but at an estimated $6.1 billion, U.S. wheat exports generated $300 million more value than Russian wheat exports.

The reason is clear: there are many private and public wheat buyers, millers and processors around the world that prefer the quality, variety and value of U.S. wheat; and that remains a primary asset to our farmers.

U.S. Wheat Associates (USW) has adjusted its allocation of wheat farmer dollars and program funds from USDA’s Foreign Agricultural Service to activities in markets that have a growing need for a variety of flour products with high quality functional characteristics. There our differential advantages shine through and where the investment offers the most return. On the other hand, USW continues to provide the trade servicing needed in the more cost-sensitive markets that are buying Russian wheat. There is value there, too, with a market environment like today’s in which the price spread between U.S. wheat classes and Black Sea supplies has narrowed. We continue to provide technical support to those buyers to demonstrate and build more knowledge about the true functional value of U.S. wheat. In addition, we are strong advocates for continuous improvement in wheat quality.

Looking ahead, I believe this is the right position for U.S. wheat in a global market with growing income levels, increasing urbanization and record setting consumption every year. It also reflects our mission: to enhance wheat’s profitability for U.S. producers and its value for their customers.

 

USW President Vince Peterson

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Following is a transcript of oral testimony by U.S. Wheat Associates President Vince Peterson at a public hearing held Dec. 10, 2018, by the U.S. Trade Representative (USTR) on potential trade negotiations with Japan.

“Thank you for the opportunity to speak on behalf of U.S. wheat farmers about trade negotiations with Japan.“Our mission is to develop, maintain, and expand international markets for U.S. wheat farmers, and one of our most critical markets is Japan.

“Given its demographic and consumption trends, Japan is generally a market where we seek to maintain our strong 53 percent market share, but today we face an imminent collapse. Frankly, this is because of provisions negotiated by [a previous administration] for our benefit under the Trans-Pacific Partnership. Our competitors in Australia and Canada will now benefit from those provisions, as U.S. farmers watch helplessly.

“Over the immediate past 5 years, Japan is our largest, most reliable and valuable market. The importer is Japan’s Ministry of Agriculture, Forestry, and Fisheries or MAFF. MAFF is the only entity that can import duty-free; all others must pay a prohibitive tariff. After MAFF imports, it resells wheat to flour millers with a significant mark-up; currently in excess of $150 per ton. This is the equivalent of a 60 to 70 percent ad valorem tariff at today’s prices.

“While we certainly wouldn’t hold up this system as an example, it has historically worked for us in Japan. Wheat is higher priced than elsewhere, but MAFF still imports enormous quantities of high quality American wheat. Since the wheat market in Japan is relatively stable, there tends to be little variation in quantity of imports from the US, Canada, and Australia, the three principal suppliers.

“This will start changing in 2019 as the CPTPP (Comprehensive and Progressive Trans-Pacific Partnership) takes effect.

“There will be an immediate seven percent drop in the mark-up for Canadian and Australian wheat. By April it will have gone down by 12 percent. In very real terms, as of April 1, 2019, U.S. wheat will face a 40 cent per bushel, or $14 per metric ton, resale price disadvantage to Australia and Canada.

“After 9 years the U.S. will face an automatic premium of 70 dollars per ton. But by that, time most of the market will be long gone.

“Japanese food processors are looking at ways to reduce their exposure to U.S. wheat right now. They will reformulate products to adapt to wheat from different origins because they will have to. If they don’t, their competitors will.

“We are relieved that this Administration is prioritizing negotiations with Japan. We urgently need a solution that will fix the enormous vulnerability created by CPTPP.

“There are other improvements that can be made, such as ‘WTO Plus” sanitary and phytosanitary rules, but for us, nothing is more important than fixing the mark-up disparity.

“American farmers have been travelling to Japan promoting U.S. wheat since shortly after World War Two. We have had an office in Tokyo for over six decades. We have spent countless hours and millions of farmers’ hard-earned dollars building this market.

“During that time the Japanese milling industry has become an indispensable partner for U.S. wheat, particularly for farmers whose wheat is exported out of the Pacific Northwest. All of that is at risk without a quick U.S.-Japan agreement.

“U.S. wheat farmers and Japan’s flour milling industry hope that we can maintain provisional equivalence for U.S. wheat imports while our two countries conduct ongoing, good faith negotiations.

“We thank you for understanding the plight of these farmers, who are already facing severe trade disruptions in other markets. As you are well aware, the United States has not sold one kernel of wheat to China, our fifth largest export market, since March 1, 2018.

“We urge you to act quickly to save our market in Japan. Thank you.”

For more information about what is at stake for U.S. wheat farmers under the CPTPP agreement, visit the USW website at https://www.uswheat.org/policy/trade-negotiations/ and click on “Trans-Pacific Partnership (TPP).” Use this link to access USW’s written submission to the USTR on trade negotiations with Japan.

Vince Peterson, President, U.S. Wheat Associates

 

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By Vince Peterson, USW President

Chinese Vice Minister of Agriculture Han Jun recently acknowledged the decades of work that U.S. farmers have put into growing the Chinese market for U.S agriculture. He then warned that this market may never come back to where it was if the trade dispute with the United States continues much longer.

We can guarantee the Vice Minister, and the wheat food industry in China, that U.S. Wheat Associates (USW) and the farmers we represent will not turn our backs on our outstanding customers in China. We remain dedicated to our core mission in China, as we are everywhere in the world, to bring profitability and value to our customers even if that is temporarily more difficult today.

Presumably, Chinese leaders believe that U.S. farmers can persuade the Trump Administration to end this trade war with China. However, U.S. farmers have been clear with their own government that China’s predictable response to the conflict has harmed them and we have supported negotiations to resolve this conflict. While we agree that escalating rounds of tariffs are a bad idea, we also believe that many of the U.S. government complaints about China’s policies are valid.

In our experience, state disruption of the wheat trade has been an enormous problem, severely limiting opportunities and profitability for both U.S. farmers and our wheat food industry customers in China. Through opaque administration of its wheat tariff rate quota (TRQ), China has deprived its flour mills of an average of 6.5 MMT of imported wheat annually over the past decade. In fact, recent import volumes are still well below what China imported in the 1980s and early 1990s; that is, before it joined the World Trade Organization (WTO). One could be forgiven for thinking China was a more promising market before joining the WTO than after; almost entirely because of excessive subsidies to the domestic wheat crop in recent years, as well as tight limits on TRQ access. This is why the U.S. government, under the Obama Administration, initiated two WTO cases on these issues in the fall of 2016. The prosecution of those cases have been continued and pressed forward by the Trump Administration. We are highly supportive of this action.

The Chinese government should recognize that its many years of flouting international commitments and highly interventionist “state capitalism” have led directly to the present conflict. If China had lived up to the commitments made when it joined the WTO, it is highly doubtful that we would still find ourselves in this situation. If Chinese leaders want to avoid further conflict and bolster the international trading system that they claim to defend, China can first start behaving like a responsible economy and adhere to its trade commitments in both letter and spirit. Of course, we are urging the same from the United States, which must also approach China with clear demands and a path towards achieving them.

Nevertheless, we are confident that this trade confrontation will one day be resolved. In the meantime, we will continue to reach out to our customers and friends in China, to reassure them of our unfailing dedication to our work with them. Further, we will make the guarantee that, once this trade dispute is resolved and behind us, we will work harder than ever to continue earning their business as we chart a path, together, to build the commercial channels that hold so much promise for Chinese and American industries and people.

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By Vince Peterson, USW President

U.S. Wheat Associates (USW) President Vince Peterson traveled to Australia last month to speak to an Australian farmer organization about what the future might hold for wheat farmers around the world. His message was far more upbeat than might be expected at a time when U.S. wheat planted area is historically low and Russian wheat production and export demand in on the rise.

Peterson shared this summary of his presentations for Wheat Letter.

There is no doubt that Russian wheat has benefited from record yield after record yield for the last five years leading to an 85 million metric ton (MMT) year in 2017. That yield was about two-thirds of a metric ton per hectare greater than its trend line projection. Digging deeper, though, it is interesting to note that Russia has not increased its wheat planted area all that much. It is about 3 million hectares on the trend line. Its farmers have increased land area planted to “other crops” at more than double the rate they increased wheat. Russian farmers and investors, like their counterparts around the world, will be looking for the best possible return on that land. As the cropping trend continues, it implies a shift in future growth away from a wheat concentration to broader diversification of crops.

Buyers and other industry analysts also need to remember that Russia has, on average over the past five years, sold more than 80 percent of its wheat exports to buyers in Africa and the Middle East. Those regions are wheat production deficient — and per capita wheat consumption in many of those countries is very high. Population in those regions will grow by 1.3 billion people who will collectively eat at least another 60 MMT of wheat every year and about 50 MMT of that increased demand will likely need to be imported.

In addition, the final cost of imported wheat, rather than end-product quality, weighs most heavily in these same markets. The signals from these buyers back to Russian wheat farmers will continue to be a need for low to moderate protein wheat at very low, delivered prices.

Rightly so, markets in Russia’s “backyard” will represent its most profitable export opportunity. In turn, these market factors offer limited incentives for Russian farmers to produce high performing wheats for far off markets.

Freight costs matter, too. The cost of moving wheat has shifted wildly over the past 15 years. The commodity spikes in 2007 to 2012 in both prices and trade volume, fueled by the price of petroleum reaching $140 per barrel, pushed ocean freights to outlandish numbers about 10 years ago. That provided an incentive for ship building and expansion that more than doubled the dry bulk carrier fleet.

The growing cargo fleet capacity peaked in 2015. In 2016, for the first time in a dozen years, the fleet capacity began to decline. Ocean freight rates quickly hit bottom so Russia could afford to move wheat almost everywhere. That pendulum is now starting to swing back. Oil prices have moved back up; the ship supply will continue to shrink with fewer new commissions and increased demolition/scrapping. It is likely the next cycle will “normalize” with freight rates back at least at moderately higher levels that are profitable for ship owners. The next cycle is going to make it far more expensive, and far less economical, for Russia (and any origin, for that matter) to be shipping their wheat half way around the globe into a competitor’s backyard. Particularly if those supplies are just of moderate to fair quality parameters.

So, my crystal ball conclusion is that the influence of Russian wheat is not done growing, but the outlook for other global suppliers is much more positive. While Russia’s wheat industry is here to stay as a main player in the world market, it will behave more responsibly to these changing market signals in the next 20 years, making this next cycle far different for the United States, Canada, Australia and other suppliers than it has been in the past 20 years.