June 1998
Wheat 
World News
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Prairie Grains is the
official publication of
the Minnesota
Association of
Wheat Growers,
North Dakota Grain
Growers Association,
South Dakota Wheat,
Inc., and the
Minnesota Barley
Growers Association.
The MWRPC and the ND Wheat Commission recently hosted a key durum buyer for Algeria, one of the largest durum importing counties in the world. The buyer, Moatassem Bouchemha, is responsible for negotiating and executing cereal imports in Algeria and obtains and prepares bids from suppliers for review by an Algerian purchasing committee. Algeria is the world's leading importer of durum, with average annual purchases of nearly 70 million bushels.
In his visit to the Twin Cities arranged by the MWRPC, Bouchemha was able to meet face to face with US durum and hard wheat suppliers who have been cut out of the Algerian market since July of 1997.
Algeria has long held a policy of buying the cheapest wheat on the market because of a lack of private capital in the country and government dominance in wheat purchasing, processing and product handling sectors. Quality in wheat imports has been a far lower priority, according to the NDWC. Algeria's government buying agency has been depending solely on Canadian Wheat Board and Syrian grain board confidential offers.
Import needs vary from year to year based on the success of Algeria's own farmers in producing durum, according to the NDWC. However, with Bouchemha's visit, US companies will have a greater opportunity to bid on more of Algeria's wheat business.
"It's sometimes difficult to understand the importance of trade teams and how they relate to wheat prices. But building better relationships between wheat buyers and suppliers is a key function to export market development," says David Torgerson, executive director of the MWRPC.
Lost Potential in Cuba: Wheat Market 90 Miles From US Off Limits
US economic trade sanctions are keeping US wheat out of important world markets, while failing to achieve the desired results, USW Chairman Dan Gerdes said during a recent hearing on Capitol Hill regarding US economic and trade policy toward Cuba.
Gerdes said USW conservatively estimates that in the last 10 years alone, the US lost out on wheat sales to Cuba of 3.5 million metric tons (about 128 million bu.), valued at more than $500 million. These exports could well have been higher due to the tremendous freight advantage the U.S. has with Cuba.
In 1997-98, Cuba, which has no commercial wheat production, expects to import approximately 900,000 tons of wheat (about 33 million bushels), primarily from the European Union, Canada and Argentina. This figure would likely be higher, up to 1.5 million tons or 55 million bu., if Cuba did not ration bread, which it does due to a shortage of cash to pay for wheat imports.
Although the US embargo with Cuba prohibits commercial food sales, it does allow for limited donations for humanitarian reasons. Earlier this year, USW and the Kansas Wheat Commission donated 22,000 pounds of flour through a Catholic Church humanitarian relief organization. The donated wheat flour was used for a variety of charitable purposes, including making bread for residents of a retirement home. On May 14, legislation was introduced in the US Senate to provide $25 million a year in US government humanitarian assistance, including food, to the Cuban people.
"It is disturbing that among the largest barriers to trade US wheat farmers face today are the economic trade sanctions imposed by our own government, including that with Cuba, which shuts US wheat producers out of a strong potential market right in our own backyard," Gerdes said. "Meanwhile, Castro remains in power, our long-term embargo having done nothing to help a freely-elected Cuban government come to power."
US Shut Out of Nearly 11% of World Wheat Market
In addition to Cuba, sanctions also keep US wheat producers out of other markets, including Iran, Libya and North Korea. Wheat imports by these four countries are expected to reach 6.8 million tons (about 250 million bu.) in marketing year 1997/98, representing nearly 7% of the global wheat market. Adding Iraq, where wheat is currently allowed only through the Oil for Food Program, to this list shuts the U.S. out of nearly 11% of the world wheat market.
Gerdes noted that the US maintains sanctions on 75 countries representing 52% of the world's population. Unfortunately, these sanctions are proliferating. The US has imposed sanctions for foreign policy purposes 100 times since World War II, and more than 60 of these sanctions have been imposed since 1993. Gerdes said sanctions also allow our competitors to charge higher prices in these markets, using the higher margins to undercut us in other markets, making it difficult for the US to compete in countries even where it can freely trade.
"History has shown us that unilateral trade sanctions fail to achieve the desired results, and instead hurt American business and farmers," USW President Alan Tracy says.
USW Announces Web Site
Check out US Wheat Associates' recently-developed web site, where you will find web versions of USW's newsletters and other publications, including US Wheat Export News, Wheat World, the Wheat Letter, press releases and USW's annual crop quality report. USW's web site address is: www.uswheat.org.
Sanctions Against India Do Not Include Agricultural Commodities
Sanctions announced by President Clinton against India in May as a result of India's nuclear weapons testing will not affect the USDA's $20 million GSM-102 credit package for India. U.S. banks can still make loans and provide credit to the government and India for purchases of food and agricultural commodities. To date this year, India has not utilized any of the available GSM credits. India has not purchased any wheat from the US this year; however, it has purchased 2.3 million tons from Australia during the past 14 months, including a 1.5 million ton purchase in early April of this year. Reports indicate India may purchase additional quantities of wheat yet this year.
Should Pakistan, a large buyer of US wheat, also conduct nuclear weapons tests, some in the wheat business are concerned that US wheat sales might be affected. To date in the 1997/98 marketing, Pakistan has purchased 2.23 million metric tons of US wheat, making it the third leading importer of US wheat.
Brazil Lifts Ban on Imports of US Wheat
Brazil's nearly two-year ban on imports of U.S. wheat due to concerns regarding TCK smut was lifted April 22. USW's offices in Washington, D.C., and Santiago, Chile, have been involved in activities regarding repealing the ban, as well as the maintenance of positive relationships with Brazilian millers.
However, Brazil's phytosanitary requirements include four other minor pests that can occur in US wheat: flag smut, cereal rust, witchweed, and wheat nematode. USW's Jim Frahm says he feels confident that these remaining requirements can be resolved. A Brazilian technical team is scheduled to visit the US sometime in early June before these issues can be addressed and any US wheat can be sold to Brazil.
The largest wheat import market in South America, Brazil imports about 5.5 million metric tons (about 200 million bu.) of wheat each year, relying mostly on wheat imports from Argentina, due to import tariff and freight tax breaks. Before the ban, the US competed primarily with Canada to fill the remaining demand.
USW estimates the US could export up to 350,000 metric tons (12.9 million bushels) of wheat to Brazil during the remainder of 1998. The timing of the lifting of the ban was crucial in order to allow the US to be in a position to contract sales, in order to take advantage of market opportunities in August and September, prior to crops being harvested in Argentina and Brazil.
The recent Summit of the Americas in Santiago could eventually lead to the creation of a Free Trade of the Americas, a huge trading bloc within the Western Hemisphere. However, the current lack of congressional approval of Fast Track makes it difficult for the US to formally negotiate membership in regional trading blocs.
"With fair and open competition, Brazil has the potential to become an excellent long term market for US wheat," USW President Alan Tracy says. "However, we need fast track for this to become a reality."
Minnesota Wheat Council Hosts Tunisian Wheat Buyers
The Minnesota Wheat Research and Promotion Council (MWRPC) recently hosted a team of wheat millers and buyers from Tunisia, a country about two-thirds the size of Minnesota that is sandwiched between Algeria and Libya at the very tip of Africa.
Tunisia has the highest per capita income in the North African region by a considerable margin. Tunisian per capita wheat consumption is also the highest in North Africa, exceeding 500 pounds (compared to 150 pounds per capita in the United States). This high consumption rate can be attributed to high government subsidies, which place the price of a one-pound loaf of bread at about 15 cents.
The country has a Cereals Office that retains a monopoly on wheat imports and sets both farm gate and mill prices for wheat and durum, as well as flour, semolina, bread and pasta prices. However, purchases by private industry is expected to increase.
"Long-term prospects are for increased market share once liberalization takes place. Private buyers will most likely be millers who are more sensitive to quality and end-use considerations. It is important to educate these buyers about the advantages and logistics of buying US wheat before greater privatization of the Tunisian wheat market takes place," says Torgerson.
While in Minnesota, the MWRPC arranged a tour of the Minneapolis Grain Exchange for the four-member Tunisian trade team, and visits with U.S. grain suppliers based in the Twin Cities. The Tunisian team was accompanied by George Galasso, director of U.S. Wheat Associates' regional office in Casablanca, Morocco. n