Brazilian Wheat Importers Set to Examine SRW, HRW Crops
June 10, 2015
ARLINGTON, Virginia — A team of five executives representing large flour mills in Brazil will be in the United States June 14 to 20, 2015, to learn more about the 2015/16 crop and the U.S. wheat supply chain. Together, they purchase about 60 percent of Brazil’s annual wheat imports and were among millers purchasing a record amount of U.S. hard red winter (HRW) and soft red winter (SRW) in 2013/14 and 2014/15. Wheat farmers are pleased to see these buyers return to the United States.
“Brazil turned to the United States the last two years because its usual trading partners in Argentina could not meet demand,” said Osvaldo Seco, assistant regional director for South America with U.S. Wheat Associates (USW), who will travel with the team. “They were able to do that because we kept Brazilian millers informed about the quality, variety and value — and U.S. farmers had the wheat they needed.”
With funding from state wheat commissions and USDA market development programs, the work USW did in Brazil helped spur millers actively import most of their wheat from the United States. Brazil’s imports returned more than $1 billion to the U.S. wheat industry in a little more than one year from an investment of less than $100,000 in market development spending.
The potential for an on-going increase in U.S. wheat exports to Brazil is not being taken for granted, even though Argentina’s 2014/15 production provided exportable supplies again. USW, the Ohio Small Grains Marketing Program, the Nebraska Wheat Board and the Texas Wheat Producers Board sponsored this team’s visit as a pivotal part of building buyers’ confidence in U.S. HRW and SRW wheat compared to supplies from Argentina, Uruguay, Paraguay, the EU or Canada.
After visiting farms in Ohio and Nebraska and meeting with export elevator managers in Texas’ western Gulf ports, Seco said 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. supply. These flour millers will also get a chance to meet with their peers at a visit to a Mennel Milling Company flour mill, as well as tour a Mondelez snack food plant in Ohio.
“We will also meet with export grain traders and review the federal grain inspection system in Nebraska,” Seco said. “Relationships are very important to these buyers and there is no more powerful marketing tool than sitting face-to-face with the people who develop, grow and handle U.S. wheat.”
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.
# # #
2015 Brazilian Trade Team – Team Members
Director, Grande Moinho Cearense S.A.
Supply Director, Predileto Alimentos
Manager of Wheat Origination, Bunge Alimentos
Wheat Supply Manager, Anaconda Mill
Wheat Supply Coordinator, J. Macedo S.A.
Assistant Regional Director, U.S. Wheat Associates, Santiago, Chile
Trade Policy Plays Pivotal Role in Annual U.S. Wheat Exports to Brazil
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 — 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 that is usually applied to wheat from the United States and other non-Mercosur trading partners. In addition, millers must also cover a substantial “Merchant Marine Renovation” tax that equals 25 percent of freight charges on products imported into Brazil by sea.
In 2012/13 and 2013/14, after two consecutive years of small output, the Argentine government restricted exports to only 5.8 million metric tons* (MMT) over both marketing years. This forced Brazil’s millers to find other sources of wheat to help meet their annual 7.0 MMT import demand. They turned to U.S. wheat farmers and their representatives at USW.
As part of its on-going effort to keep these buyers informed, USW told the millers that they had leverage to ask their government to suspend the 10 percent tariff on U.S. wheat. USW had discovered that Brazil’s government had never implemented a commitment it made in the World Trade Organization’s 1994 Uruguay Agreement. That commitment was to import 750,000 metric tons of wheat from non-Mercosur countries annually without charging the 10 percent tariff. The millers noted this in an appeal and, fortunately, the government announced it would suspend the tariff from April to July 2013, giving U.S. wheat farmers greater access to this large market. Brazil imported more than 4.0 MMT of U.S. wheat, mostly HRW, in 2013/14. The government also suspended the duty again for a short time in 2014/15 when Brazil’s millers imported more than 1.5 million metric tons of U.S. wheat.
Argentina’s crop of 12.5 MMT, harvested through March 2015 for marketing year 2014/15, was closer to its historical average. Brazil’s government applied the 10 percent tariff again but it did not implement the 750,000 metric ton tariff rate quota. Duty free access to such a large portion of Brazil’s imports would be a major breakthrough for U.S. producers to compete with Mercosur imports. It would result in more stable annual U.S. imports that have varied widely over the past 20 years.
Mercosur countries cannot always meet Brazil’s total import needs, so U.S. HRW and SRW exported from Gulf ports is the next best-priced, quality supply based on proximity to Brazil’s northern ports, especially at the time of year before the South American wheat crop is harvested. That is why USW will continue working in concert with our loyal customers in Brazil, the National Association of Wheat Growers and the U.S. government trade officials to help create new export opportunities in this important market.
U.S. Wheat Commercial Sales to Brazil
1,000 Metric Tons*
(June - May)
Data current through May 29, 2015
*One metric ton = 36.74 bushels
Nondiscrimination and Alternate Means of Communications
U.S. Wheat Associates prohibits discrimination in all its programs and activities on the basis of race, color, religion, national origin, gender, marital or family status, age, disability, political beliefs or sexual orientation. Persons with disabilities who require alternative means for communication of program information (Braille, large print, audiotape, etc.) should contact U.S. Wheat Associates at 202-463-0999 (TDD/TTY - 800-877-8339, or from outside the U.S.- 605-331-4923). To file a complaint of discrimination, write to Vice President of Finance, U.S. Wheat Associates, 3103 10th Street, North, Arlington, VA 22201, or call 202-463-0999. U.S. Wheat Associates is an equal opportunity provider and employer.