Issue 32
November/
December 2000

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 Assocation.

Copyright Prairie
Grains Magazine
November/
December 2000

U.S. Wheat export breakthrough to Brazil

In what could be a significant breakthrough for potential wheat exports to Brazil, it appears that the government of Brazil has agreed to adjust its import regulations to allow additional wheat classes from the U.S.

The U.S. has only been able to export hard red winter wheat to Brazil in the last few years. Because of Brazilian import regulations, no other class of U.S. wheat has been allowed into Brazil since 1996. Brazil is forecast to be the world's largest wheat importer this year at 7.7 million metric tons (about 283 million bushels).

Initially, Brazil put the import regulations in place to address its concerns on phytosanitary issues. U.S. Wheat Associates has been working over the past several years with USDA on getting these technical issues resolved. Still, the Brazilian government refused to allow shipments of all U.S. wheat except hard red winter shipped from the Gulf.

This past summer, USW sponsored, in cooperation with the Foreign Agricultural Service, a Brazilian wheat trade mission to the U.S. The team members, from five Brazilian companies, represented over a third of the Brazilian market for wheat. The team members expressed their enthusiasm in looking forward to the day that they would be allowed to use more classes of American wheat.

USW recently congratulated USDA Secretary Dan Glickman in his efforts to convince Brazil to remove trade barriers that limited U.S. wheat exports. While the door is now open to Brazil, under normal circumstances the best chance for additional U.S. wheat sales won't occur until spring 2001, at the earliest. Argentina will be harvesting a sizable crop, and will be shipping the new grain this winter, probably at lower seasonable prices than U.S. wheat. U.S. wheat, which has to deal with a 13% duty on shipments to Brazil (from which Argentina is exempt), becomes more price competitive in the summer months when the Argentine wheat prices are higher.

"The best chance for soft red winter wheat sales is to the cookie and cracker producers in northeast Brazil, where we have a freight advantage. Our wheat quality far surpasses Argentine wheat, so we may be able to garner some sales there to supplant normal Argentine supplies," says Paul Dickerson, USW vice president of overseas operations. "The good news is that (recent) action by Brazil will let the market play out without these superficial barriers."

USW leaders conduct trade visit to Cuba
A contingent of trade experts and wheat farmers recently visited Cuba, to provide potential wheat buyers in Cuba with the information they would need to eventually purchase U.S. wheat.

It was the 5th U.S. Wheat Associates trade mission to Cuba in three years. The potential wheat market is attractive. Cuban per capita consumption of wheat flour in the 1980s went as high as 110.5 lbs/person but since economic conditions have deteriorated, including bread rationing, consumption has dropped to an estimated 77.35 lbs/person. To compare, per capita consumption of wheat flour in the U.S. is 147 lbs/person, and in some European countries, is close to 300 lbs/person.

U.S. wheat has had no share in the Cuban market since Dwight Eisenhower was President. In 1959, when U.S. wheat was exported to 59 countries, Cuba was our 13th largest customer.

"When U.S. congressional approval is finally given, and when the U.S. can start exporting wheat to Cuba, there will still be obstacles in financing, logistics, infrastructure, distribution and familiarity with the U.S. marketing system," says Alan Tracy, USW president. "Even so, we think Cubans would buy U.S. wheat because it makes sense. We have the kind of wheat they need, and buying from the U.S. would save them about half of the transportation costs they pay to get shipments from the European Union."

Since U.S. law permits sales to non-governmental entities, USW has had several meetings with humanitarian organizations in Cuba. Unfortunately for the U.S. wheat industry, while the organizations have previous experience importing wheat, especially during periods of natural disasters, this is not their primary mission, nor do they have the resources to dedicate to wheat imports.

"If Congress doesn't act, we need to continue to try to find a way to sell wheat to Cuban millers," says Henry Jo Von Tungeln, a wheat grower from Oklahoma who serves as vice chairman of USW. "The Cuban people need our wheat, and the wheat farmer needs the Cuban market. It doesn't get much more basic than that."

WHEAT WORLD is brought to you by the checkoff funded Minnesota Wheat Research and Promotion Council.

The majority of the activities cited here are carried out by U.S. Wheat Associates, your checkoff funded international market development affiliate, with offices located in 15 countries around the world.