World Grain - November 2013 - 30

FEATURE: U.S. wheat Seeing mixed trade reSUltS

Wheat crop ready to harvest in Eastern Washington. The U.S. is the world's largest wheat exporter.
Photo by earleliason.

about the nutritional benefits of bread
and baked goods through events like
"World Bread Day." Demand for wheat
foods in this large region continues to
grow and USW is working with flour
millers to help them meet that demand
using U.S. wheat.
* Colombia is the largest South
American customer with imports of
around 22 million bushels annually.
The U.S.-Colombia free trade agreement was implemented May 15, 2012,
permanently eliminating import duties
on wheat, allowing U.S. market share to
increase to 44%.
As pleased as the USW is with the
gains made in these regions, there is disappointment in the loss of market share
in the Middle East and North Africa,
which not long ago were strongholds for
U.S. wheat.
"Most of those countries are showing
big goose eggs for sales this year," Peterson
said. "That's really unusual. What we have
is the reemergence of Russian/Black Sea
region supplies this year which were kind
of restricted a bit last year because of production and export policy. This year they
have a more normal crop and are back in
the markets."
The reason for this surge in Black Sea
region sales, he said, is price as wheat
from that part of the world is selling at
$25 to $50 per tonne below U.S. prices
and even those from wheat producing
countries in Western Europe.
30

Peterson said demand for high quality wheat has waned in most parts of
the Middle East and North Africa as
economic issues and government policy has led countries such as Egypt,
Tunisia, Lebanon and Jordan to seek
lower-cost alternatives.
"The market that was there for higher
quality wheat has kind of disappeared,
and it is almost an all price-driven market, particularly in Egypt," he said.
"There is a big pool of subsidized
cheap bread for that market. It's a government food policy and they almost
can't afford to change it. You couple
that with the economic circumstances
there and it doesn't seem like the situation is going to reverse itself anytime
soon. There almost has to be a change
from the supply side in that region before you're going to do business there
in a big way anymore."
Removal of aWB, CWB
monopolies Benefits U.s.
One of the biggest game changers in
global wheat trade was the elimination
of the trade monopolies of the Australian
Wheat Board (AWB) and Canadian
Wheat Board (CWB). The opening up
of free trade in those markets, which
have occurred within the last five years,
has benefited the U.S.
"When the CWB had monopoly selling ability it could sell spring wheat in
Japan at a $15 or $20 per tonne premium

to U.S. spring wheat, and at the same
time it might sell it at $5 or $10 less into
the Philippines or some other market,"
Peterson said.
"Those kind of distortions were really vexing, because U.S. exporters who
were operating on a replacement cost
basis weren't able to do that. You can't
overprice in one market and underprice
in another when you've got competition;
it's not going to let you do that. That one
change is something that's really leveled
the playing field internationally. I think
for the U.S. that's probably the biggest
gain out of the entire thing. It ends an
unfair advantage and it allows everyone
to compete on the same level based on
price, quality and value factors."
He said although the AWB monopoly
no longer exists, Australia has not yet
evolved into a truly open market.
"What was left there was primarily some regional large operators
that didn't have much competition in
Western Australia and some others left
over from the board that owned export
facilities, so the Australian market has
become kind of an oligopoly," Peterson
said. "It's still a bit different than what
we have here in the U.S., which is a
little more open and competitive."
BioteCh fRUstRation
Perhaps no issue has the potential to
affect the future of wheat production
and trade than biotechnology.
For years wheat has been losing the
acreage battle around the world to corn
and soybeans, which have utilized genetic modification to increase yields and
decrease fertilizer usage, making these
crops more profitable and thus very attractive to producers.
While corn and soybeans are primarily consumed by animals or made into
processed foods, most wheat is directly
consumed by humans. Opposition to
GM crops in several markets around the
world and concerns by growers about
potential competitive trade issues temporarily halted biotech research in 200405. In 2008-09, following the dramatic
run-up in world wheat prices because

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World Grain - November 2013

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