How the Wheat Market Has Changed The Past 120 Years
Prior to 1914, the Black Sea Area (Romania, Belarus, Ukraine, Russia) was the "Bread Basket of the World". If a person needed to buy large amounts of wheat, he went to Black Sea.
World War I (1914-1918) ended grain production for four years from Russia to the English Channel. It was during those years the vast prairies of the US Midwest were plowed and put into grain production to feed the armies and civilians of the world.
With socialist/communist revolution in Russia in 1917, the three century rule of Romanov Monarchy was replaced by socialist communism and by 1920, the socialist/communist government ruled the Black Sea area. All farming decisions were made in Moscow for a country that covered eleven time zones.
Hunger and starvation were common for decades in the Black Sea Area as what grain they grew was confiscated by the government for the city folks. A Ukrainian husband and wife were executed in the town square for hiding six kernels of wheat to grow some wheat for their family the next year.
In May 1972, Richard Nixon persuaded the Soviet Union to buy US grain, which led to the Great Grain Robbery shortly thereafter, but that is another story. By 1979, the Soviet Union was the largest buyer of US corn.
In the years before the Soviet Union collapsed at the end of 1991, Russia was buying 11% of the world's exported wheat.
With the end of socialism in early 1992 in the Soviet Union countries, a long, ugly struggle to rebuild a capitalistic economy ensued. No one alive in that area had ever made a business decision before and there was no infrastructure for a free enterprise economy to function. The USA gave Russia millions of tons of wheat in those years.
In 1995, Ukraine became a net grain exporter. In 2001, Russia became a net exporter of wheat. Russia’s wheat exports as a percentage of the global total increased from less than 4% in 2002/03 to more than 20% the 2020 crop marketing year.
Russia is now the world's third leading wheat producer and, by far, the world’s largest wheat exporter. The world wheat market is no longer dominated by Kansas and North Dakota. Russia's wheat market dictates world wheat prices. While their corn and soybean production is expanding, their climate is much better suited for wheat.
Ukraine, on the other hand, has become a major competitor in the world corn export market and China’s first choice corn supplier because it is so much closer to Chinese ports than any USA port.