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Exception to the Rule: Trade Policies Contribute to U.S. Wheat Market Success

The 2013/14 marketing year had two big surprises — Brazil and China topped the charts as the top two U.S. wheat customers. These markets typically do not import large amounts of U.S. wheat, but their purchasing spree demonstrated there is always great potential for increased U.S. wheat exports, especially if trade policy challenges can be resolved.

What was different this year? Both of these countries had a need for high quality wheat — and they knew where they could find it.

USW actively works to showcase the quality, reliability and value of the six U.S. wheat classes to each of these markets — even in years when they do not source such large quantities of their wheat needs from the United States. Our staff regularly meets with buyers to explain the current year’s crop quality and routinely provide information on the U.S. wheat marketing system. This long-term focus allows buyers to quickly turn to the U.S. wheat farmer, versus our competitors, when market situations arise.

For example, USW has been working in China for more than 25 years, despite China’s status as the largest wheat producer in the world. When poor crop conditions and declining strategic reserves occurred, Sinograin, a Chinese government wheat buyer, took advantage of a price advantage for a large U.S. SRW crop and acted quickly to purchase 2.8 MMT of U.S. wheat to refill grain reserves. Additionally, the private sector imported 1.21 MMT, including four of the six wheat classes. In all, China purchased 4.21 MMT of U.S. wheat.

During the past two years, Brazilian millers could not source enough wheat from Mercosur countries. Fortunately, the government implemented a temporary zero duty tariff rate quota for non-Mercosur wheat and Brazilian millers purchased 4.21 MMT of U.S. wheat, primarily HRW, according to USDA Foreign Agricultural Service.

Both of these countries, however, have policies in place that limit U.S. competitiveness as a consistent supplier.

For example, potential sales of U.S. wheat are severely limited in the Brazilian wheat market due to a 10 percent tariff differential between the United States and Mercosur member countries — despite the fact that Brazil is among the top three importers of wheat in the world. Additionally, Brazil has failed to implement a 750,000 MT duty free tariff rate quota for non-Mercosur wheat, agreed upon in the WTO Uruguay round, that further contributes to a lack of regular imports of U.S. wheat.

China has several policies in place to encourage wheat production, including minimum support prices and input subsidies. The government also administers a tariff rate quota system that allocates low import tariffs mainly to government entities and only a limited quantity is allocated to the private sector at these same low tariff rates.

Policy restrictions have routinely limited exporters’ ability to sell large, consistent amounts of U.S. wheat to these two large and important wheat markets. However, we hope that last year’s positive reactions from end users to receiving high quality U.S. wheat will lead to more open trade policies in the future to create more trade between our countries — not just in a year of need, but in every marketing year.

Source : uswheat.org


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