June 22, 2004 -- CropChoice news -- Roger Thurow, Scott Kilman and
Gregory L. White, Wall Street Journal, 06/18/04:
On a vast, windy plain, a farmer swells with optimism
as he surveys a carpet of wheat stretching toward the
horizon. Bankers are throwing money at him to reap bigger
harvests. Grain traders are elbowing their way to his
front door, eager to export his wheat. Last year, he
marvels, "they sold it to the Arab Emirates."
This tableau has long been a trademark of the American
Great Plains, which flourished for more than a century
on an export economy fueled by amber waves of grain.
But this farmer, Yuri Bogomolov, is on the opposite
side of the world. His tractor was made in Minsk. His
seed variety is Don 95, named for a river that nurtured
his Cossack ancestors. The nearest town is Zernograd
-- Grainville, in Russian.
Meanwhile, in Eureka, S.D., Greg Grenz is retreating
from wheat. Seven years ago, he sowed 2,000 acres. This
season he planted only 975. On the same spring day that
Mr. Bogomolov was admiring his realm, Mr. Grenz was
preparing to plant soybeans, which, at least for now,
are more profitable. "You just can't make a living
growing wheat anymore," he said from behind the
wheel of his pickup truck.
America's run as a wheat powerhouse, and the dominant
player in global agriculture, is under attack from a
crop of newly emboldened, low-cost international rivals
who are striking at one of the main pillars of American
economic might: food exports. U.S. farmers are increasingly
under pressure as they compete with commodities including
Brazilian soybeans, Indian wheat, Chinese apples, Mexican
tomatoes and Caribbean sugar. This "farms race"
has implications beyond agriculture. America's influence
on issues such as international trade owes much to its
domination of food.
"The U.S. has been the superpower of agriculture,"
says Ben Pearcy, director of Eastern Europe operations
for commodity processing giant Bunge Ltd. "Now
it faces a number of new powers."
The shift is shaking a foundation of America's economic
might. About two-thirds of the land in the 48 contiguous
states is tied up in agriculture. Farming and related
businesses account for about 12% of U.S. gross domestic
product and about 17% of American jobs, according to
the U.S. Department of Agriculture. America currently
exports more agricultural goods than it imports, a rare
bright spot in the nation's trade balance. Half of America's
annual wheat harvest is sold overseas, a trade that's
expected to fetch $5 billion this year.
There's a strong link between agricultural and political
power, and the new farming players are feeling their
oats. During trade negotiations last year, Brazil, India
and China rallied opposition to agricultural subsidies
handed out by the U.S. and European Union to their own
farmers. That set back a critical round of trade talks.
Wheat is at the vanguard of this change. In the 1980s,
America controlled half the world's trade in the hardy
grain, competing with Europe, Canada and Australia.
Now more than 90 countries grow wheat and many have
lower costs and closer proximity to key markets. China,
in a drive for self-sufficiency, has become the world's
top wheat producer and is nurturing a sophisticated
biotechnology program. India, a land long-associated
with hunger, became an important exporter three years
ago when it released part of its huge wheat reserves
onto the world market.
But it's the return of the Black Sea wheat belt, home
to Mr. Bogomolov, that stands as one of the great turnarounds
in global agriculture. In the early 19th century, Russia
was an important grain producer, but it stumbled midcentury
amid war in the Crimea. The U.S., with the help of Russian
immigrants, took advantage and built a thriving agricultural
economy. American supremacy was cemented in the 20th
century as the Soviet Union's collectivized farm system
faltered. The communist government imported so much
U.S. wheat that by 1988 it was buying 18% of America's
Now, wheat is once again pouring out of Russia in volumes
rarely seen since the days of the czars. Long a sleeping
giant with an abundant supply of cheap, fertile soil,
Russia is now putting that land to work through political
and market reforms. Combined with neighbors Ukraine
and Kazakhstan, Russia will supply 11% of the world's
wheat exports over the next 12 months, according to
the USDA. Some economists see the region controlling
20% in about a decade. Using mostly American equipment,
a farm in Ukraine set the record last year for the most
acres of grain planted in a day (1,413).
Meanwhile, American wheat acreage has shrunk to its
smallest size since the Nixon administration. The U.S.
now claims just one quarter of the world export market,
as other nations with cheaper land and labor become
better at farming and take advantage of falling trade
barriers. Some economists predict that within 20 years
America may no longer be a net exporter. Terry Zetterlund,
the loan officer at Great Plains Bank in Eureka, advises
clients to get out of wheat if they want to stay in
business. "We aren't the big player anymore,"
America's agricultural balance of trade is being pressured
by the country's growing appetite for largely imported
foods such as olives and avocados. The Bush administration
forecasts that farming's trade surplus will drop to
$10 billion for the fiscal year ending Sept. 30, about
a third of the record $27.3 billion surplus logged in
1996. If current trends continue, the U.S. might run
an agriculture trade deficit by the end of the decade,
according to calculations by economists at Purdue University
in West Lafayette, Ind.
It will be difficult for the U.S. farm belt to regain
its momentum. Despite subsidies from Washington, America's
advantages as a farming power are slipping. Emerging
food powers are pumping money into infrastructure such
as ports and river navigation. In the U.S., new land
is hard to come by and farming and environmental groups
are fighting over whether to modernize the aging system
of locks and dams that let grain barges use the Mississippi
Many American farmers are finding it difficult to squeeze
more out of their land every year. Wheat's average per-acre
yield has been flat for several years, agronomists say.
Improvements in biotechnology enable U.S. farmers to
better deal with weeds and bugs, but companies such
as Monsanto Co. and DuPont Co. will export that technology
anywhere in the world.
In perhaps the sharpest sign that American agriculture
is stagnating, the combined acreage dedicated to the
nation's major crops slipped this spring despite the
broadest rally of farm commodity prices in decades.
On the southern Russian steppe, just outside Zernograd,
49-year-old Mr. Bogomolov points to a field beyond a
line of trees. It belonged to his grandfather, who Mr.
Bogomolov says was shot by the Bolsheviks in 1923 for
resisting their increasing control over farming regions.
The Bogomolovs nonetheless continued to toil on collectivized
farms. After the Soviet Union collapsed in 1991 Mr.
Bogomolov decided to become an independent farmer and
began to accumulate land distributed by the government
as part of a privatization process. From his original
170 acres, he's expanded to 2,470, including his grandfather's
confiscated field. This season, he planted about 700
acres of wheat and plans to double that as fast as he
"Freedom," he says, inhaling deeply on a
cool spring day. "You're working for yourself."
Mr. Bogomolov won't divulge his earnings but says he
makes a "comfortable" income.
The tortured history of the Bogomolovs mirrors the
saga of the Black Sea wheat belt. In the 19th century,
imperial Russia was a titan on the world grain market,
with the vastness of its fields making up for farming
techniques that hadn't advanced since the Middle Ages.
It took the Crimean war of the 1850s to block Russian
exports to Europe. That was one of a series of events
that gave American wheat farmers their chance to expand
The Black Sea business collapsed after the 1917 revolution
as the Bolsheviks tried to harness Russia's peasant
farms to power the country's crash industrialization.
The numbers are disputed, but historians believe as
many as 10 million people died in famines in the 1920s
and 1930s. When communism collapsed in 1991, so did
its big, state-run industrial farms. By late that decade,
cities such as Moscow and St. Petersburg imported more
than half their food, according to the USDA.
Russian agriculture's comeback was sparked by the 1998
global financial crisis, during which Russia defaulted
on its foreign debt and devalued its currency. Consumers
suddenly found locally grown farm produce, priced in
rubles, much cheaper than imports. Russia's wheat harvest
grew every year from 27 million tons in 1998 to 50.6
million tons in 2002. With markets around the world
increasingly open to international trade, the Russians
found plenty of willing takers for their inexpensive
Last year, bad weather hurt production and the harvest
declined by about one third. Black Sea farms are more
than most vulnerable to changing weather patterns and
their supplies to world markets are sometimes erratic.
Nonetheless, as the market boomed, farmers and trading
companies that scraped for cash during the 1990s started
spending their newfound revenue on fertilizer, equipment
and land. They found plenty of room for expansion. A
third of Russia's arable land lies fallow and production
costs are one-third lower than those for American wheat
farmers. The government, which wants to bolster Russia's
reputation as a wheat exporter, has supported farmers
with reforms such as lifting restrictions on land ownership.
The farm belt's renaissance has attracted the attention
of Moscow's millionaire magnates, many of whom made
fortunes in currency speculation, metals and oil. In
2001, the Interros banking and metals group acquired
a company that was once the Soviet Ministry of Bread
for an undisclosed price. Interros spent an additional
$20 million buying farms and replacing dilapidated equipment.
Interros found itself butting heads with some Soviet-era
habits; managers go house to house after weekends to
get workers back on the job. But the company is nevertheless
pushing into new markets. In March, it touted a contract
to supply grain to Iran. Russia's proximity allowed
the company to undercut firms from Canada and Australia,
Tehran's traditional suppliers. U.S. wheat shipments
to Iran dried up after Washington imposed a series of
In Rostov, the region's key town, Vadim Vikoulov ships
Russian wheat to southern Europe, the Middle East and
North Africa. He smiles at his change of career. "I
carried U.S. grain to Russia from 1985 to 1991,"
he says. In the past six years, his company, Aston Agro-Industrial
Corp., has invested $75 million in grain exporting.
In 1994, Aston took over a bankrupt and abandoned shipyard
on the Don River. Three years later, it built its first
grain terminal in Rostov with a 40,000-ton capacity.
When the 2002 bumper wheat harvest arrived, Aston's
silos overflowed. It has now completed construction
that increased capacity to 100,000 tons.
Awaiting the coming harvest, the new complex glistens
in the sun, as does a shiny Mercedes sedan and an SUV,
badges of success for Russian businessmen. "We
can fill and empty the silos five times a month,"
Mr. Vikoulov boasts.
An hour's drive from Rostov, vast wheat fields welcome
visitors to Zernograd, as do a couple of relics of the
old Soviet days: a hammer-and-sickle monument and a
statue of Lenin. Zernograd became a showpiece of the
Soviet collectivized farm system with help from American
sympathizers who arrived in the 1920s with U.S. tractors
and combines. Now, the town is again in the vanguard
of Russian agriculture.
Yegveny Semikov, an agronomist who works in the town
for the Kalinenko All-Russian Scientific Research Institute
for Sorghum and Other Grains, walks though one of the
center's test fields and likes what he sees. "Better
crop varieties, better technology, better management
of fertilizer and pesticide and growing techniques,"
he says. "The law of agriculture economics is the
same now, here and in the U.S."
In America, few wheat farmers understand the challenges
posed by Russia's rebirth as a food power better than
Mr. Grenz and the farmers around Eureka, population
1,100. Eureka lies on a similar latitude to Rostov close
to the 45th parallel. Both towns have fashioned icons
to the local economy. Zernograd's museum doubles as
a Hall of Fame for its wheat farmers; Eureka has a monument
to wheat in front of its museum.
"We never thought Russia could come back,"
says Mr. Grenz. "We always looked at them as our
customer. Now, out of the clear blue sky, they are producing
crops we didn't dream they could."
It wasn't long ago that Eureka's families worked the
Black Sea soil. Many of their great-grandfathers were
part of a tide of wheat farmers that moved to the plains
from the Russian steppes in the 1880s, fleeing conscription
in Russia's imperial military. The U.S. federal government
offered 160 acres of land for homesteaders on the harsh
fringe of the American breadbasket, where blizzards
rule the winter and drought haunts the summer.
Based on their experience in Russia, the new arrivals
knew how to grow the one crop hardy enough to survive.
By 1892, the fledgling town was booming. Eureka produced
so much wheat that to transport it in one shipment would
have required a train 30 miles long. Farmers piled wheat
in the streets until it could be transported elsewhere
and with hotels jammed, many slept on store floors or
patronized all-night saloons.
America's "amber waves of grain," enshrined
in the second line of the late-19th century anthem "America
the Beautiful," became an instrument of foreign
policy. The U.K. didn't side with the Confederacy during
the Civil War in part because it needed the North's
wheat more than the South's cotton.
After the Russian revolution, when the country's farm
belt declined, generations of farmers across the Great
Plains prospered by shipping their crops there and wheat
again became intertwined with politics. After the 1979
Soviet invasion of Afghanistan, the Carter administration
embargoed U.S. grain exports to the Soviet Union. President
Reagan scrapped the ban in 1981 after farm groups complained
that competing exporters were simply filling the void.
Two years ago, the U.S. wheat harvest was stunted by
drought. At the same time, the Black Sea region -- comprising
Russia, Ukraine and Kazakhstan -- stunned the American
farm belt by temporarily surpassing the U.S. as a wheat
exporter. It hasn't repeated that feat but USDA economists
say Russia's wheat production could soar 30% within
a decade if it adopts further reforms. That would pressure
U.S. exports in places like the Middle East.
Growing wheat is now a riskier proposition for American
farmers. In the past, the U.S. controlled such a large
chunk of the world's exports that the quality of its
harvest had a big influence on prices. A drought in
the U.S., for example, would create a world-wide shortage
and push up the cost of wheat, mitigating losses for
U.S farmers. Now, they don't have as much leverage.
Some farmers in Eureka are switching to corn and soybeans.
These crops are harder to grow, requiring more money,
water and skill. They are also not immune to foreign
competition. The U.S.'s corn industry is healthy, but
Brazilian soybean sales are rising fast and will likely
overtake U.S. exports in a few years. Fertile land is
so cheap in Brazil that some American farmers are migrating
This spring, Dean N. Schumacher, 54, planted the smallest
amount of wheat ever on his farm. "The wheat belt
is dying," says the fourth-generation descendant
of Russian immigrants as he stands near his idling tractor.
Banking on China's growing appetite, he's growing 746
acres of soybeans this year, compared with just 358
acres of wheat. For now, an acre of soybeans could generate
twice as much revenue as wheat.
For some local merchants, the initial flush of spending
by farmers making the switch is good business. DeWayne
Weiszhaar, owner of Haberer's Implement Inc. in nearby
Bowdle, says he has sold 12 tractors so far this year
compared with just one tractor in all of 2003. He's
also selling machine parts to harvest corn and soybeans
and figures only about 25% of his business is tied to
For others, the winnowing of the wheat economy is creating
hard choices. Farmer Jim Fischer, 48, grows and sells
wheat seed around Eureka. He cut his wheat acreage by
20% this spring and is traveling farther to find customers.
Some companies are getting out of the wheat business
entirely. Monsanto, the St. Louis crop biotechnology
company, cited the drop in wheat acreage as a big factor
in its decision to shelve plans to introduce the world's
first genetically modified wheat plant.
Towns giving up on wheat will be more vulnerable to
fickle weather patterns. Mr. Schumacher's farm, for
example, usually averages just 17 inches of rain annually,
barely enough for a crop of soybeans. There isn't a
river or underground aquifer for irrigation water. Last
year, when Eureka suffered through a dry August, farmers
ended up with a soybean crop a quarter of the size they
To husband a thirsty crop in an arid climate, Mr. Schumacher
practices no-till farming, which means he doesn't turn
over the soil for planting. Instead, he plants directly
into last year's stubble. The old plants hold the dirt
in place and prevent the wind from taking the topsoil,
retaining moisture. Mr. Schumacher figures that stretches
out his annual rainfall by the equivalent of another two
to three inches.
How far will the American wheat belt shrink? Some parts
of the Great Plains will continue to plant wheat simply
because nothing else will grow. Regions including eastern
Montana and western Kansas face a future of lower prices
and thinner profits.
By shifting away from wheat to more weather-sensitive
crops, farmers are taking bigger risks to stay on the
land. As a result, farmers are becoming wedded to federal
aid, such as subsidized crop insurance, at a time when
Washington is under pressure to cut farm assistance.
Mr. Grenz, who figures he reaps as much as 40% of his
income from government farm programs, talks proudly
about his 26-year-old son, a data programmer who has
worked for International Business Machines Corp. He
doesn't mind that his son's career choice will likely
end a bloodline of farmers stretching back four generations
"Farming is only getting riskier," says Mr.
Grenz, 56, as he scouts the progress of his fields in
his pickup truck. "I don't have any romantic notions
Write to Roger Thurow at email@example.com,
Scott Kilman at firstname.lastname@example.org
and Gregory L. White at email@example.com