Russia, Ukraine and Kazakhstan are becoming key players in the world’s grain markets, likely entailing serious consequences for their performance.
According to the Institute for Agricultural Markets Studies, Russian wheat exports should reach over 20 million tons for the 2011/12 crop, leading the country to rank second largest wheat exporter in the world, behind the United States.
Ukraine, for its part, should see its corn crop reach a record 20 million tons for the 2011/12 season––close to twice the previous crop–says the American Department of Agriculture (USDA). In addition, corn exports should reach 14 million tons. These figures should place Ukraine among the world’s top five corn producers, and among the three largest exporters.
Volodymyr Lapa, General Director of the Ukrainian Agrarian Business Club, indicates that Russia, Ukraine and Kazakhstan could therefore account for 30 to 35 percent of global wheat exports in seven to ten years, against 12 to 17 percent today.
And their power could even escalate, since these nations’ agricultural development attracts recurrent investments as a result of significant production capabilities that are yet to be farmed. There is indeed a high availability of farmland in the region. Russia is known to have huge areas of arable land for grain crops not yet cultivated (close to 385 million acres, or more than the total of cultivated farmland in Russia, Ukraine and Kazakhstan)1. In addition, the present-day low yields––0.86 ton/acre according to the FAO––are opening up high yield possibilities.
Yet, the events of 2010 have emphasized how climate and political instability can impact the region. Following a severe drought, Russia enacted a ban on wheat exports, leading to a drop in Russian wheat exports––a fivefold reduction as compared to the previous crop––and a drastic price surge in global markets.
This emerging output and export cluster in the Black Sea area should therefore be closely monitored. As Russian, Ukrainian and Kazakh export volumes are accounting for an increasing share of global grain exports, local developments are bound to bear a greater impact on international markets.
1 According to the Center for Studies and Foresight of the French Ministry of Agriculture, http://agriculture.gouv.fr/Veille-no48-Septembre-2011-La