In Brief... World News Review: A Shrinking Wheat Belt?

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In Brief... World News Review

A Shrinking Wheat Belt?

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There was a time in the American plains when the wheat harvest was so abundant that the silos and barns were filled to overflowing. The grain was piled in the streets of small farming towns till it could be shipped off to market. The scene has changed in recent years as America's role as the world's dominant wheat producer has diminished.

According to a recent piece in the Wall Street Journal, the United States now claims just one quarter of the world wheat export market. Other nations with cheaper land and labor have become better at farming and are taking advantage of falling trade barriers. Some economists predict that within 20 years America may no longer be a net exporter.

Terry Zetterlund, the loan officer at Great Plains Bank in Eureka, South Dakota, advises clients to get out of wheat if they want to stay in business. "We aren't the big player anymore," he says.

America's agricultural balance of trade is being pressured by the country's growing appetite for largely imported foods such as olives and avocados. If current trends continue, the United States might run an agricultural trade deficit by the end of the decade, according to calculations by economists at Purdue University in West Lafayette, Indiana (June 18, 2004).

In a historic reversal, wheat is again pouring out of the Black Sea region of Russia. Long a sleeping giant with an abundant supply of cheap, fertile soil, Russia is now putting that land to work through political and market reforms. Combined with neighbors Ukraine and Kazakhstan, Russia will supply 11 percent of the world's wheat exports over the next 12 months, according to the U.S. Department of Agriculture (USDA). Some economists see the region controlling 20 percent in about a decade.

A series of events beginning with the Crimean War in the mid-1800s altered the Russian farming climate, resulting in the migration of farmers to the American plains where similar growing conditions enabled them and their descendants to grow America into the "world's bread basket."

Two years ago a U.S. drought diminished its wheat crop, allowing Russia to temporarily pass it as the leading wheat exporter. America has recovered, but USDA economists say Russia's wheat production could soar 30 percent within a decade if it adopts further reforms. That would pressure U.S. exports to places like the Middle East.

Drought, competition and other factors are placing the American wheat farmer into riskier positions. The wheat belt is being drawn tighter.