Growth of Russian wheat production is a threat to US farmers - Finance and Markets

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Wheat production in Russia is on the rise. Despite the fall in prices in recent years, the Russian farmers have increased exports, threatening the welfare of US producers.

Russia became the largest exporter of grain in the world. In 2016 Russia surpassed the United States on the world wheat market, the same is happening this year. Moreover, the production of American wheat for this agricultural season has decreased by 25%.

Growth of grain production in Russia is a threat to US farmers, as the United States is experiencing the strongest wave of farm closures since the 1980s. Russian farmers are working just as much as their American counterparts, but in Russia the cost of production is much lower because the costs are in rubles and the grain is sold out in US dollars.

Russia may be an even more attractive seller because of the possible increase in tariffs for US grain exports, as China has imposed a 25% duty on US wheat. So far, Moscow has failed to take advantage of this due to the Chinese restrictions on imports of wheat from the Russian Federation.

But analysts note that Russian grain is already successfully competing with American in such traditional US markets as Mexico. Cheaper, but not with lower quality, the Russian wheat presses American and European exporters in North Africa and the Middle East, where Moscow has a political influence.

The new Russian policy seeks to diversify the economy by reducing the share of oil revenues in the budget, developing agriculture. However, the agrarian sector still suffers from underdeveloped infrastructure and corruption , as well as low efficiency in government subsidies.

In 2017 the export earnings of agricultural products in Russia reached 20.7 billion USD. And they have surpassed by this indicator the revenues from export of military production.