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The Russian Bear Is Back



The former Soviet Union may not have been a model of economic efficiency, but there was one thing that it did very well, and that was import grain.

In the grain trade heyday of the 1980s, the Soviets would import up to 50 million tonnes a year and distribute it far and wide across the largest nation on Earth. As far as suppliers were concerned, the Soviet vessel operation was a model of efficiency and regularity, which means the grain must have been rolling out pretty smartly at the other end.

The thing about grain import facilities, be they rail cars, terminals or vessels, is that they are easily if not instantly reversible. So for anyone who remembers when the Soviets were our largest grain customer, which was not so long ago, it’s a bit of a jolt to see the graph on page 13, listing the major world wheat exporters’ market share so far this year. It puts the former Soviet Union (FSU) states at a whopping 28 per cent, 10 percentage points above the U. S., the traditional market leader.

Now consider a few more things. While the FSU export machine is obviously working well, we know that the production machine has yet to recover from the Soviet influence, and if more modern techniques are applied, as they increasingly are, there’s plenty more grain to come.

That’s through the current export channels, mainly through the Black Sea region. The good news is that most of this is lower-quality winter wheat. While all this competition is beating the heck out of the world price, Canada is at least holding market share and some premium thanks to the higher demand for high-quality spring wheat.

So far, that is. But remember where much of what we today call the “genetics” of our spring wheat came from, and that’s the Russian steppes, where the terrain and climate are similar to Western Canada’s. So another jolt came when reading a recent report that the Russians are shopping spring wheat samples to Japan. That’s not much of a threat now because of an ocean freight disadvantage from the Black Sea, but pull out a world map. You will see that Japan and other Southeast Asian markets are a comparative stone’s throw from Russia’s eastern coast.

That’s where the Russians are planning to invest up to $100 million to improve port and rail facilities.

A Singapore-based trader recently said his company had already booked 500,000 tonnes of Russian spring wheat and said, “We will be focusing on high-quality milling wheat from the Siberian region. It grows the best-quality wheat with high protein content because of cold growing conditions, and it will stand to benefit when the ports in the Far East are developed.

“From ports in the Far East you can reach South Korea in one day and Japan in less than two days,” the trader told Reuters. “We see this as a massive opportunity.”

Meanwhile, the Russians, through a state-trading agency, are seeking long-term agreements with Japan, Indonesia, Bangladesh, India and Pakistan.

As for the eventual potential of Siberian wheat yields, let’s assume that they’re about where Western Canada was in 1920. We won’t even speak of the potential additional acres to bring into cultivation.

For farmers on the Canadian Prairies, 2,000 kilometres from the West Coast (with the Rockies in between) and seven days’ sailing from Japan, the solution to this threat is obvious.

1) Go along with the U. S. initiative to convince buyers to accept genetically modified wheat so we can all increase yields, thus increasing the world surplus and making wheat even cheaper.

2) Remove the underpinnings of Canada’s wheat-quality system and buyer acceptance, such as kernel visual distinguishability. That will allow farmers to grow higher-yielding, lower-quality wheat to meet the booming demand from hog and cattle feeders.

Sorry, sarcasm is the lowest form of humour, but this isn’t meant to be funny. In fact, it’s time to get serious, and for wheat producers to stop taking advice from those who want to by their grain cheap.

While we don’t want to beat up on livestock feeders, who have enough problems these days, one has to point out that they haven’t exactly called their industries’ future correctly. And they’ve naturally reacted to economic circumstances. If they can buy cheap U. S. corn and U. S. DDGS from subsidized ethanol plants (as they are doing in huge volumes), more power to them. But let’s not pretend that wheat can ever compete in that market.

At least for now, if only for rotation, we need to grow wheat in Western Canada. The question is how to do it economically and sustainably, and how we can compete with countries that have cheaper land, cheaper labour, cheaper shipping, more rainfall and a longer growing season.

The answer? That’s not entirely clear, but it is clear that wheat producers can’t grow their way out of this problem. It’s time for a serious discussion about the future of the wheat industry in Western Canada. [email protected]



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