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Russian wheat export limits may aid U.S. farmers


By STAN MADDUX
Indiana Correspondent

WASHINGTON D.C. — A decision by Russia, a leading supplier of wheat to the world, to try to keep more of its wheat at home should result in open doors for wheat growers in the United States to increase sales abroad.
A tariff of 15 percent on the value of wheat is scheduled to be imposed on Russian exports beginning Feb. 1, as incentive for exporters to sell to more buyers inside the country’s borders.
Dave Salmonsen, senior director of Congressional relations with the Washington, D.C.-based American Farm Bureau Federation, said the Middle East is one of the potential new markets for U.S. wheat producers once the tariff goes into effect. That’s because the Middle East receives a substantial amount of its wheat from Russia and will have to look to other countries to maintain supplies, he explained.
Opportunity could also come for wheat growers in Europe, the largest producer of wheat in the world, along with Canada, the third-largest wheat supplier behind the United States, said Salmonsen.
He said the tariff is something world markets are watching closely because of the impact it could have on factors like wheat prices and countries that emerge as new customers. He would not make any specific predictions, though, on what impact it might have on prices, feeling it’s too early to forecast.
“There should be some more opportunity for U.S wheat,” said Salmonsen.
According to reports, Russia wants to restrict wheat exports to increase its own supply of wheat, to help control rising food prices. High inflation in that country is being caused primarily by a drop in the value of the Russian ruble from declining oil prices.
Chris Hurt, a professor of agricultural economics at Purdue University, said the impact of falling crude prices on Russia has been significant because oil primarily is what drives the country’s economy. He agrees wheat growers in America stand to benefit from the restrictions on exports – at least during the short term.
“We will not face Russia as a competitor in the wheat export market as much,” said Hurt. In the long term, however, he said any kind of instability in a major country is bad, overall, for agriculture.
He said sharp declines in the value of a nation’s currency and the political and military tensions like those happening in Russia, for example, tend to result in things such as tariffs and trade embargos, actions that can put a damper on prosperity even here.
Countries sell what they can produce the most of at the lowest cost, a benefit when trade is free, for suppliers with more goods to sell and consumers in countries that buy the goods from prices being kept low. For example, Hurt said U.S producers of pork and chicken have been negatively impacted by embargoes imposed by Russia early in 2014 in retaliation for sanctions by the United States on Russia for that country’s involvement in Ukraine and other uprisings.
Conflicts that weaken the currency in another country also tend to strengthen the U.S. dollar – but a stronger dollar means it usually takes more of a trading partner’s currency to purchase products from here, resulting in fewer U.S. exports, he explained.
“Open trade is the best. This is going the other way,” said Hurt.
Already, restrictions on exports already in effect in Russia has been one of the likely factors in driving up the price of wheat here in 2014, from $4.80 to $6.80 per bushel, said Salmonsen.
The tariff on wheat exports in Russia is scheduled to be short-term, ending June 30, but he said the restrictions can always be extended depending on how well they’re working. This adds difficulty to making any early predictions on the worldwide impact.
“I think it could turn into something that everybody will really watch, if it continues,” said Salmonsen.
1/7/2015