Questions: “Why have U.S. wheat exports as a percentage of world exports declined?” “Which countries have gained export demand?” And, "What is the projected long-term impact of losing wheat export demand?”
A simple answer for the first question is that cropland is allocated to the commodity that produces the highest profit. Profit is partially determined by “comparative advantage.” With wheat production, some countries have a comparative advantage over the U.S. These countries’ wheat production has increased relative to U.S. wheat production.
Note that since 1987, average annual U.S. wheat production has shown a slight decline (Figure 1), while world wheat production has increased 50 percent (18 billion bushels to 27 billion bushels). During the same period, Russian plus Ukraine plus Kazakhstan (R+U+K) wheat production went from about 3.5 billion bushels (1990) to below 2.0 billion bushels (1998) and then back up to more than 4.0 billion bushels (Figure 1). The point is that R+U+K wheat production has increased about 2.0 billion bushels since 1998.
U.S. WHEAT PRODUCTION DECLINE
Other major wheat producing countries (areas) with increased production are Australia (50 percent), Argentina (40 percent), China (50 percent), and North Africa (50 percent). R+U+K (2.0 billion bu.) and China (1.2 billion bu.) have had the largest increases in production.
Since the 1987/88 wheat marketing year, U.S. wheat exports declined from 1.26 billion bushels to 1.0 billion bushels – a 260 million bushel decline (Figure 2). During the same period, world wheat exports have increased from 4.5 billion bushels to a projected 6.5 billion bushels - a 2.0 billion bushel increase.
The total increase in world exports since 1987 plus the 260 million bushel decline in U.S. exports is 2.26 million bushels.
Since the 1987/88 wheat marketing year, R+U+K wheat exports increased from about 300 million bushels to 2.0 billion bushels (Figure 2). This 1.7 billion bushel increase in exports explains all but 460 million bushels of the world’s change in wheat exports.
Since 1987, Australia’s wheat exports have increased about 200 million bushels. The remaining 160 million bushels may be the result of slightly higher exports from Argentina, Canada, and India.
In summary, over the last 30 year world wheat production has increased about 9 billion bushels. R+U+K and other countries’ production has increased. United States wheat production has declined.
World wheat exports have increased about 2.0 billion bushel while U.S. wheat exports have declined. R+U+K exports have increased about 1.7 billion bushels. Australian wheat exports have increased about 200 million bushels.
The odds are that R+U+K production and exports will increase rather than decline. These countries appear to have a comparative advantage for wheat production.
Wheat prices will continue to be determined by the world wheat market and are not expected to be much different than what the market has offered over the last 10 years, which is $9.00 on the top and $2.50 on the bottom with an average over time of about $5.75.