Posted March 11, 2016
When farmers spot wheat prices at their local coop, it’s hard not to have a bleak outlook for the rest of the day. While you’re producing the wheat that feeds the world, it’s easy to forget that international markets are constantly changing. Take Nigeria for example. It’s Africa’s largest economy and an important U.S. wheat customer, purchasing upwards of 90 million bushels annually in the past several years.
Peter Lloyd, Regional Technical Director at U.S. Wheat Associates said, “Nigeria, as we know, is one of the U.S.’ most loyal customers, and has been routinely for the last 15 years. But, times are changing. It’s not through any dissatisfaction with what they get from Kansas or the quality of the wheat, it’s just simply that the market is in a price constraint where the majority of millers are not being rewarded for high quality.”
While the American economy is gaining strength, so is the U.S. Dollar, but across the world currencies, like the Russian Ruble, are very weak. This allows Russia to sell wheat much, much cheaper as returns to their growers, in their currencies, still look good.
While this news may sound dismal, there is some hope to reclaim some market share in countries like Nigeria.
“How do we recover some of this market? Some of it, I’m sorry to say, we won’t be able to recover, unless we have white wheat," said Lloyd. "All of the large Nigerian flouring milling companies would like to double or triple or quadruple the amount of hard white wheat that they are able to buy. We are at a disadvantage because of logistics. We have growers who are happy to grow white wheat, and we have customers in Nigeria and all other parts of the world who would love to buy it, but getting it from the farm to the customer is the issue. We must leverage all of the many years of varietal development, grading and inspection and good farming practices for our growers to make the best profit that we can in the international marketplace. I believe the best route for that is hard white.”
Kansas farmers aren’t the only suppliers that see value in Nigeria. Argentina, Canada, Australia, the EU, as well as the emergence of non-traditional suppliers like Russia, Brazil and more, all have their eyes set on the Sub-Saharan region. We have lost the hard white wheat business because we do not produce it in sufficient quantities. We specifically lost that business to Australia, who produces only white wheat. They not only displaced our small hard white wheat sales, but also a much bigger piece of our hard red winter sales.
“Bottom line to the U.S. growers here in Kansas: that was 480,000 tons of wheat that has gone to Australian farmers and not U.S. farmers," said Lloyd. "I think that we must have the facilities inside the U.S. system to address this problem, to make white wheat available to more customers overseas, because that is what they want.”
Looking for new ways to make Kansas wheat an irreplaceable item on international shelves is no small task, but Lloyd and the rest of the U.S. Wheat Associates team are more than up for the job.
“In Kansas you have some of the best farmers in the world producing some of the best wheat in the world. The secret is to develop niche markets for end products that are fitting exactly the bill for what is required," said Lloyd. "Niche markets are the king. I think the more we can make wheat coming out of Kansas, be it red wheat or white wheat, irreplaceable in a particular end product, the more profit for the grower and the more profit there is for the manufacturer in the other part of the world that is buying the wheat.”
Niche markets don’t necessarily mean “small.” In terms of a 160 million metric ton world trade environment, if we can sell one million metric tons into a ‘niche’ market, that is a big deal for Kansas farmers.