The waning years of the Soviet Union were remarkable as a period when this nation dominated global wheat markets as a buyer. Indeed, on several occasions the Soviet Union not only bought wheat in large quantities but was the largest single purchaser. It was in the early 1970s that worsening food shortages turned into several years of Moscow purchasing that brought growth to global markets.
Following the 1989 collapse of the Soviet Union, signaled by tearing down the Berlin wall, the present-day structure of Russia once more brought food shortfalls, but only very briefly. Hardly noticed was the return of agriculture to a market-based economy, different from strict governmental controls over land use that often caused inadequate crops. In the past decade Russia has enjoyed expanding outturns, making more grain available for export and creating a competitive position in wheat exporting.
The present favorable status of Russia’s wheat economy starkly contrasts with what occurred in 1917 when early in the year Czar Nicholas II, the last of the Romanov rulers, abdicated in response to widespread unrest. It was in November that the Communists led by Vladimir Lenin took over from a weak provisional government, leading to the 72-year reign of Communist dictators who experienced multiple failures, none more disastrous than in wheat. The Bolsheviks, as one of their first acts, passed a decree directing the peasants to seize all land from the government, the Orthodox Church as well as from rich landowners. This takeover became a bloody revolution, named by some “a carnival of vengeance,” that saw peasants grabbing property over which they exercised little or no judgment, in turn leading to drastic cutbacks in crop production. Arguing among the peasantry that often prompted police and military interventions led to strict controls devastating the agricultural economy. In 1928, the central government dramatically ended all private ownership of land, in effect creating 243,000 collective farms that replaced what had been previously owned by 30 million individual farmers. The central government’s willingness to import machinery helped make this land grab appear a grand success, and production rapidly rose until just before World War II. The future required extended use of land for winter wheat production, which itself came about as the result of experiments showing new ways of seeding across land that long had been believed unusable for crops like wheat.
As amazing as it may seem to current participants in active global markets to have Russia as the world’s leading exporter of wheat, it might be helpful to realize what a key role that nation held long before the United States achieved its position. Prior to 1850, Russia was not just the leader but one of the few nations exporting wheat. It considered all of Europe its exclusive wheat market. That began to change in 1900 when America for the first time captured the lead. The lack of an internal transportation system stood as the main barrier to leadership, along with the inclination of Russian farmers to favor growing rye over wheat.
The current export scene, where sales are determined by moves between the dollar and the ruble, introduces this element as nearly all powerful. With the new U.S. administration so alert to this factor, all who deal with wheat now must heed these two currencies.
