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Brazilian Wheat Importers Set to Examine SRW, HRW Crops
May 29, 2014
ARLINGTON, Virginia — Five executives representing the largest flour mills in Brazil will be in the United States June 1 to 7 to learn more about the condition of the U.S. soft red winter (SRW) and hard red winter (HRW) wheat crops as well as the wheat supply system. The team is well timed as Brazilian millers, including the companies represented on this team, are the second largest importers of U.S. wheat this marketing year, purchasing nearly 158 million bushels (4.3 million metric tons).

The trade team visit is sponsored by U.S. Wheat Associates (USW), the Maryland Grain Producers Utilization Board, the Virginia Small Grains Board and Kansas Wheat.

“We are very pleased to bring these millers to the United States because we have a unique window of opportunity to build demand for U.S. wheat in this market,” said Osvaldo Seco, USW assistant regional director for South America, who will travel with the team.

Argentina normally supplies most of Brazil’s imported wheat but could not supply enough to Brazil in 2012 and 2013. These millers have now had success milling HRW and SRW, so this trade team visit was planned to demonstrate why they should continue importing more U.S. wheat in the future.

Brazil imports on average around 260 million bushels (7.1 million metric tons) of wheat, putting Brazil in the list of the world’s top wheat buyers. Before the early 1990s, Brazil originated most of that wheat from the United States. However, the Mercosur free trade agreement allowed millers to import Argentine wheat duty free and established a 10 percent tariff on wheat from non-Mercosur countries like the United States. When Argentina severely restricted wheat export licenses in 2013, USW helped Brazilian millers successfully petition their government to temporarily suspend that tariff. That opened a big opportunity for USW to promote the value of U.S. wheat.

By visiting farms in Maryland and Kansas, meeting with commercial elevator managers and seeing the USDA grain inspection system, these executives will go back to their mills with a greater knowledge of how to specify for the best quality and value from the U.S. HRW and SRW supply, Seco said. In turn, he added, they will have the confidence to consider buying more U.S. wheat even when more Argentine wheat is available, in part because the demand for higher quality wheat foods, including whole wheat products, is growing in Brazil.

USW is the industry’s market development organization working in more than 100 countries. Its mission is to “develop, maintain, and expand international markets to enhance the profitability of U.S. wheat producers and their customers.” USW activities are made possible through producer checkoff dollars managed by 19 state wheat commissions and cost-share funding provided by FAS. USW maintains 17 offices strategically located around the world to help wheat buyers, millers, bakers, wheat food processors and government officials understand the quality, value and reliability of all six classes of U.S. wheat.

# # #
2014 Brazilian Trade Team – Team Members

Antonio Bolzani
Supply Manager, M. Dias Branco
President, Brain Corp

Adriano Campos
Director, Grande Moinho Cearense S.A.

Sergio Chesini
Supply Director, Predileto Alimentos

Edson Csipai
Manager of Wheat Origination, Bunge Alimentos

Irineu Pedrollo
Wheat Supply Manager, J. Macedo S.A.

Osvaldo Seco
Assistant Regional Director, Santiago, U.S. Wheat Associates

Brazil Turns with Confidence to U.S. Wheat

Brazilians love bread. A tradition of eating artisanal French-style white breads is slowly being replaced by growing demand for whole grain breads and other wheat foods perceived to be healthier.

With high demand, Brazil cannot produce enough of its own wheat so it imports more wheat than most other countries — 224 million bushels every year on average and mainly from Argentina. Under the Mercosur trade agreement, Brazil’s millers can import wheat from there without having to pay a tariff of 10 percent as well as a substantial “Merchant Marine Renovation” tax.

This year is different because Argentina’s politics and poor crop severely cut exportable supplies. The Argentine government tightly controls the local wheat supply. Wheat planted area for 2012/13 was already down when the December 2012 crop bottomed out at 40 percent less than the year before. To keep domestic prices down, the government cut the amount of wheat it would allow for export.

Using information from U.S. Wheat Associate (USW) regarding a Brazilian WTO commitment to provide a zero duty tariff rate quota on wheat imports, Brazil’s millers then asked their own government to suspend the 10 percent tariff on non-Mercosur wheat imports. Fortunately, the government announced in February it would suspend the tariff starting in April 2013, giving U.S. wheat farmers — and USW — an opening.

Quickly, USW representatives in the South American regional office in Santiago, Chile, organized a trip for executives from the largest Brazilian milling company to Manhattan, KS, to visit the Kansas Wheat Innovation Center, the International Grains Program, the USDA Center for Grain and Animal Health Research, and a local wheat farm. The purchasing manager said the trip helped the millers “be more prepared to work with U.S. hard red winter wheat in our milling operation.” By October 2013, that mill had purchased more than 37 million bushels of hard red winter (HRW).

Sharing Critical Information

USW cast a wider net in August 2013 with seminars for flour mills representing 60 percent of the total Brazilian wheat imports. In Sao Paolo, USW representatives showed purchasing managers how best to manage risk and specify for the most valuable U.S. HRW and soft red winter (SRW) wheat. In a separate seminar, milling managers gained technical information to help adjust their systems to get the most yield and highest quality flour from U.S. wheat.

In April and May of 2013 Brazil imported 13.4 million bushels of HRW and SRW, or about the same amount of U.S. wheat Brazil usually imports for an entire year. The orders kept coming even after the government re-established the import tariff in November 2013. As of late May 2014, U.S. commercial sales (delivered or booked) totaled more than 150 million bushels of HRW, which represents about one-third of total HRW sales for the entire 2013/14 marketing year, and more than 7.3 million bushels of SRW.

A Billion Dollar Return

The work USW did before 2012/13 and its efforts since then gave our customers in Brazil comfort with our wheat supply system, quality and value. It helped spur millers to actively buy most of their wheat from the United States. And it helped return more than $1.2 billion to the U.S. wheat industry in just one year from an investment of less than $100,000 in market development spending.

The potential for an on-going increase in exports to Brazil is strong and USW does not take this opportunity for granted. We will conduct additional activities including sponsoring events at the milling association’s annual meeting, conducting individual service and technical support as well as trade policy efforts to keep the Brazilian market open to U.S. wheat farmers. Can Argentina, Uruguay or Paraguay meet Brazil’s growing demand for a wider variety of high-quality wheat in the future? That remains to be seen. But what Brazil’s buyers now know is that USW and the wheat farmers we represent will always be there to supply the wheat and the knowledge they need to succeed.

U.S. Wheat Commercial Sales to Brazil

1,000 Metric Tons
Crop Year
(June - May)
HRW
SRW
HRS
White
Durum
Total
2013/14
4,094.3
199.6
0.0
0.0
0.0
4,293.9
2012/13
508.9
105.0
0.0
0.0
0.0
613.9
2011/12
0.0
112.2
0.0
0.0
0.0
112.2
2010/11
378.0
26.0
0.0
0.0
0.0
404.0
2009/10
153.3
142.3
0.0
0.0
0.0
295.7
2008/09
552.4
236.6
0.0
0.0
0.0
788.9
2007/08
383.2
111.6
0.0
0.0
0.0
494.8
2006/07
0.0
25.4
0.0
0.0
0.0
25.4
2005/06
0.0
20.5
0.0
0.0
0.0
20.5
2004/05
0.0
61.7
0.0
0.0
0.0
61.7
Data current through May 22, 2014
One metric ton = 36.74 bushels


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