The traditional major wheat exporters are Australia, Canada, the European Union (EU), and the United States, but in recent years the Black Sea region–Kazakhstan, Russia, and Ukraine – has emerged as a strong player in the global wheat market.
Wheat from Australia, the EU, and the United States is marketed on its high quality, while the Black Sea has been successful at competing on lower price and location. This dynamic has increased competition rapidly and has affected all major suppliers in the global market.
The Black Sea region will continue to challenge its competitors, with this year’s record crop in Russia dampening prospects for the traditional exporters.
Expansion of market share by Black Sea suppliers is most prominent in nearby price-sensitive markets. The United States has been affected by increased competition from the Black Sea, exemplified by the falling market share in Egypt, the largest wheat importer in the world, and Nigeria.
Russia and Ukraine, combined, currently hold around 82 percent of the Egyptian market, while the United States only carries a 1 percent market share, down from 8 percent 5 years ago. Not only has the United States lost its share in the Egyptian market, it has also lost share in Nigeria.
For decades, Nigeria purchased more than 80 percent of its import supply from the United States, buying mostly on quality. But with the down turn in the Nigerian economy, they turned to purchasing wheat more on price. Just 5 years ago, the United States supplied nearly three-quarters of wheat imports, with Russia only 1 percent. In 2016/17, those shares were radically different at 33 percent and 26 percent, respectively.
Australia primarily supplies Asia for wheat, since the variety of wheat Australia produces is excellent for local preferences. Over the last 5 years, however, Ukraine has gained market share in the Indonesian market, which is Australia’s main customer and the second-largest wheat importer.
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In 2012/13, Ukraine supplied just 1 percent of the Indonesian wheat imports; today its market share has reached 16 percent. Despite Indonesian preference for Australian wheat for its milling quality, the competitive price for Black Sea wheat has prompted increased purchases to blend with higher-quality milling wheat.
Alternatively, the impact on the European Union has not been as drastic as the Australian and U.S. market share. The European Union has been rivaling with the Black Sea region for market share. The European Union is competing heavily to regain its share of the Middle Eastern and African markets, after last year’s poor wheat crop. Canada as a high-quality exporter has seen relatively limited effects on its export market during this time period.
North Africa Wheat Consumption Growth Drives Imports
North Africa’s wheat imports continue to grow as the gap between consumption and production widen. Consumption growth in North Africa has been steady for much of the last decade at about 2 percent a year.
Rising populations in the region have kept consumption growth on a steady upward trend. In many of these countries, bread is considered a staple with prices often subsidized by the government. This is especially the case in Egypt. Egypt accounts for nearly half of the region’s total consumption. Its subsidy system allows low-income consumers to purchase “baladi” bread at a low price, while other wheat-based products are available without subsidy through the private sector.
Wheat production across this arid region has shown very little growth as it is prone to large weather-induced fluctuations. For example, in 2017/18, Morocco rebounded from drought conditions, more than doubling production from the previous year.
Egypt’s production has been relatively high in recent years with substantial government support. The policy, however, changed from government supported prices to world prices, which would result in lower compensation and the possibility of reduced plantings.
Across the region, imports have filled the growing gap between production and growing domestic consumption. Egypt and Algeria, the world’s first-and third-largest importers respectively, represent about 70 percent of the region’s imports. More importantly, they represent nearly all of North Africa’s import growth over the last decade.