Though the volume of world wheat
trade has changed little in the past 15
years, shares of trade volume in exporting
countries have changed quite a bit. The
U.S. remains the largest exporter, but U.S.
farmers are increasingly producing other
crops, like corn and soybeans, so the U.S.
share of the wheat market has fallen from
40 percent in the 1970s to 23 percent
(forecast) for 2002/03. This shift in U.S.
agricultural production, combined with
rising prices caused by drought in three of
the largest exporters—U.S., Australia, and
Canada—has created opportunities for
“nontraditional” wheat exporters.
With their favorable climates and
large land bases, the former Soviet Union
(FSU) and Central and Eastern Europe are
traditional places for wheat production.
Reductions in agricultural subsidies dur-
ing the 1990s, however, caused a sharp
drop in livestock production, which, in
turn, curtailed domestic demand for
wheat as an animal feed. While wheat
output also fell, recent large harvests,
caused largely by favorable weather, have
supported wheat exports. FSU wheat
exports surged in 2001/02 and 2002/03 as
increasing world prices generated the
investment needed to expand port
capacity. In 2002/03, Russia is expected to
be the world’s third largest wheat
exporter, behind the U.S. and the
European Union (EU).
India, Pakistan, and China have also
become net exporters of wheat in recent
years. High government production sup-
ports during the 1990s boosted production
and stocks. When the cost of maintaining
these stocks became burdensome, exports
increased, particularly as prices increased
in 2002/03. However, these opportunistic
exports are not expected to persist
because these countries are unable to pro-
duce wheat cheaply enough to sustain
increased exports without large subsidies.
The EU continues to be a large wheat
exporter. Historically, EU wheat produc-
tion and exports depended on large
subsidies. Despite lower domestic wheat
prices, EU wheat production has grown
because of favorable net returns compared
with those for other crops. Lower prices
have increased the domestic feed use of
wheat, limiting exports.
The U.S. is expected to remain the
world’s largest wheat exporter, though its
share will likely decline if U.S. producers
continue to turn to other crops and if
other countries find wheat profitable. As
export shares shift, changes in U.S. supply
will not affect prices as much as in the
past. For example, when the U.S., Canada,
and Australia suffered from drought in
2002/03, nontraditional exporters and the
EU were able to export enough to keep a
lid on prices.
Edward W.Allen
,
ewallen@ers.usda.gov
RonaldTrostle
,
rtrostle@ers.usda.gov
This finding is drawn from . . .
WheatYearbook
, 03.27.03, available at:
www.ers.usda.gov/publications/so/view.asp?f=
field/whs-bby
ERS Wheat Briefing Room, at www.ers.usda.
gov/Briefing/Wheat
4
AMBERWAVES
ECONOMIC RESEARCH SERVICE/USDA
VOL
UME1
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ISSUE3
F
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S
MARKETS AND TRADE
Nontraditional
Exporters
Increase Role in
Wheat Markets
U.S. share of world wheat market is declining
0
20
40
60
80
1960 62
64
66
68
70
72
74
76
78
80 82
84
86
88
90
92
94 96
98
00 02
100
120
Exports, million metric tons
Source:
USDA Production, Supply, and Distribution database.
Other
Former Soviet Union & Central and Eastern Europe
European Union 15
Canada, Australia, & Argentina
U.S.
Photo by Tim McCabe, USDA/NRCS
Throughout much of the post-World
War II period, agricultural policy in the
U.S. and European Union (EU) has focused
on supporting farm income primarily
through price supports. Both countries
supported commodity prices through pur-
chase and storage of surplus commodities.
The U.S. relied more on producer loans
secured by commodities and acreage con-
trols, while the EU relied more on export
subsidies to dispose of surpluses. Both the
U.S. and the EU have significantly changed
their commodity policies in the past
decade. While their policies have evolved
in similar directions in some respects,
important differences remain.
Both the U.S. and the EU have
reduced their reliance on price support for
several commodities for the same reasons:
to improve their competitiveness, reduce
burdensome stocks associated with high
support prices, and rein in rising costs of
operating commodity programs. Both
countries now make greater use of income
support through payments to producers.
Lower support prices and govern-
ment purchases have reduced the need for
surplus disposal, including export
subsidies. Since 1995, U.S. use of export
subsidies has been limited essentially to
dairy products and poultry. The EU con-
tinues to use export subsidies for many
price-supported commodities, although
World Trade Organization (WTO) obliga-
tions have required the EU to reduce
subsidy levels.
Despite similarities in policy changes,
EU and U.S. policies differ. The EU main-
tains a higher overall support level to its
farm sector and relies more on price sup-
port than does the United States. Although
some EU support prices have been
reduced, higher tariffs
contribute to market
price support by pre-
venting the entry of
lower priced imports.
Both U.S. and EU
agricultural policies
will
continue
to
respond to domestic
needs, the interna-
tional environment,
and obligations under
trade agreements. In
addition, public pres-
sure
on
broader
issues, including envi-
ronmental protection,
rural development, and food safety,
is increasingly shaping agricultural
policy.
Mary Anne Normile
,
mnormile@ers.usda.gov
This finding is drawn from . . .
ERS Briefing Room on Farm and Commodity
Policy: www.ers.usda.gov/Briefing/FarmPolicy
ERS Briefing Room on the European Union:
www.ers.usda.gov/Briefing/EuropeanUnion
WWW.ERS.USDA.GOV/AMBERWAVES
F
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MARKETS AND TRADE
Are U.S. and European Union Agricultural
Policies Becoming More Similar?
Percent
1989-91
1999-01
1989-91
1999-01
Source: Producer support estimates, as reported in
Agricultural Policies in
OECD Countries:
Monitoring and Evaluation, 2002
, Organization for Economic
Cooperation and Development.
Income support
(producer payments)
Market price
support
U.S. and EU shift toward income support
U.S.
EU
100
80
60
40
20
0
PhotoSpin