In a Dec. 6 posting, Kansas Wheat indicated wheat acreage in the state will likely be down from 2018; in fact, planted area may be the smallest in 100 years. Wet weather during planting season has been identified as a culprit in keeping growers from their fields. But 2018 is hardly the first year rainy or snowy weather has interfered with wheat growers during planting season — many more influences have brought about wheat area atrophy in Kansas and across the United States.

One factor gaining attention has been the sluggish improvement in wheat yields versus those for corn and soybeans. The compounding effects of this deficit have been amplified by the introduction of drought-resistant varieties of corn, giving growers in states like Kansas more economically attractive alternatives to wheat. Rising domestic demand for corn, especially for biofuel, and for soybeans, principally for export, have further contributed to the erosion of wheat plantings.

A wild card factoring into prospective U.S. wheat production has been the emergence of Russia and Ukraine as major grain exporters. While the nations have been gaining prominence as exporters for many years, the transformative heights achieved over the past few bear note.

In 2016-17, Russia became the world’s top wheat exporter for the first time since before the Russian Revolution, shipping 28 million tonnes abroad. That total was blown out of the water a year later with Russia’s exports reaching 41 million tonnes. Russia and Ukraine combined in 2017-18 to export 59 million tonnes of wheat. For perspective, consider that this export total was significantly greater than the entire production of the United States, which totaled 47 million tonnes that year. U.S. wheat exports in 2017-18 were only 25 million tonnes.

In recent years the United States has lost market share with many leading traditional customers, including Egypt and Nigeria. Russia has a freight advantage to these markets estimated recently at about $12 per tonne (33¢ a bushel) and has benefited in 2018 from a sharp currency devaluation. Additionally, U.S. exporters have failed to participate much in business with emerging wheat import markets, including Indonesia, Thailand, Vietnam and Bangladesh, where consumers have increasingly shifted to wheat consumption from rice.

By way of background, the demise of the Soviet Union and Russia’s shift from a planned to a market economy resulted in a steep decline in agricultural production in the 1990s. Production began to expand again in the late 1990s as the country became more integrated in the world agricultural economy. Producers benefited from the import of better western machinery, seeds and animal stock, and, in the 2000s, Russia began exporting wheat with its world export share of wheat averaging 12% in 2011-14.

Even in 2011-14, though, area planted to grains in Russia was about half the peak of 80 million hectares planted during the Soviet era. The surge in production and exports prompted questions about the potential upside in the years ahead, particularly if additional land is returned to production.

The recovery in planted area in Russia has been centered in one significant region — the south. The area has benefited from advantages in soil, climate, infrastructure and geography, notably  its proximity to major ports on the Black Sea. Other key agricultural districts have not yet recovered from the transition to a market economy.

U.S. Department of Agriculture analysis casts doubt on whether area planted to grains is likely to rise meaningfully in the years ahead, barring a rally in prices sustained over several  years. Grain plantings for harvest in 2018-19 are not much different from the 2011-14 average, and the cost of production is indicated to be considerably higher in areas still idled. In fact, growers have shown an inclination to shift grain acreage to oilseeds in recent years. Still, Russia’s meteoric emergence as the world’s leading wheat exporter suggests this former top importer will remain a potent force helping shape the profile of the U.S. wheat economy in ways demanding close attention.