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U.S. Wheat Associates (USW) has made a formal agreement to support the long-term mission of the Latin American Cereals Institute (IL Cereales) to promote the benefits of cereals and wheat foods in a healthy human diet.

IL Cereales, Mexico City, currently reaches Mexican consumers but plans to expand its mission to Central America. Its members represent Mexico’s largest wheat foods associations. USW will share scientifically sound nutritional information, expert consultants and other resources as part of the agreement with IL Cereales. With average annual imports of more than 110 million bushels, Mexico purchases more U.S. wheat every year than any other country.

Shared Goals

“We know the U.S. wheat foods industry shares our goal to help consumers understand that cereals and wheat foods should always be part of a healthy, nutritious diet,” said José Antonio Monroy, Chairman, Latin American Cereals Institute (IL Cereales).

Image from Wheat Foods Council to show the U.S. industry shares goals with IL Cereales

Universal Truth. Through their state wheat commission organizations, U.S. wheat farmers support the Wheat Foods Council with a shared mission with IL Cereales. Image Source.

Chairman Monroy added, “We intend to make the most of this agreement, and we thank U.S. Wheat Associates for their support.”

This agreement was concluded following a recent meeting with IL Cereales and USW in Cabo San Lucas, Mexico. The USW delegation included Chairman Darren Padget, Secretary-Treasurer Michael Peters, President Vince Peterson, Vice President of Overseas Operations Mike Spier, and Regional Vice President, Mexico, Central America, Caribbean and Venezuela Mitch Skalicky. Representing IL Cereales were Chairman Monroy, Director General Dr. Luis Hernando Cervera, and José Luis Fuente, Executive Director of the Mexican Millers Association (CANIMOLT).

“In August 2022, U.S. Wheat Associates will celebrate 25 years with an office in Mexico,” said Skalicky. “This is the perfect time to work together with IL Cereales to help Latin American families better understand the health and well-being of wheat and cereal foods in their daily diet.”

Shared Responsibility

Noting the successful partnership with the Mexican wheat foods industry, USW President Vince Peterson said it is important to see that partnership from a broader perspective.

“Together, we are responsible for providing a very large proportion of the primary food and nutrition to our citizens and, more broadly, the world’s citizens,” Peterson said. “We share common goals, and we commend Mexico’s wheat food industry leaders for creating IL Cereales. It is a pleasure to be a partner and productive resource in this much-needed work.”

More on IL Cereales

Latin American Cereals Institute (IL Cereales) logoIL Cereales (Instituto Latinoamericano de Cereales) (Latin American Cereals Institute) is the only Institute in Latin America that seeks to promote, generate and disseminate rigorous scientific knowledge on the nutritional value of cereals and their derivatives. Its members represent the Mexican Millers Association (CANIMOLT), the Mexican Bakers Association (CANAINPA), the Mexican Association for Food Ingredients Suppliers for the Baking Industry (ANPROPAN), Grupo Bimbo, and the Mexican Cookie, Cracker and Pasta Manufacturers’ Association (AMEXIGAPA).

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By Steve Mercer, USW Vice President of Communications

When U.S. Wheat Associates (USW) was planning to hold its 2019 Mexico Wheat Trade Conference June 2 to 4, 2019, no one anticipated that the threat of new tariffs on Mexican imports would come just two days before the meeting started.

“What we thought was an unfortunate coincidence turned out to be a fortunate opportunity to address the trade policy concerns face to face with our Mexican customers,” said USW President Vince Peterson. “Talking through the potential concerns that way allowed us to move on to talk about how we can work together to navigate the policy issues and increase the efficiency and value of Mexico’s U.S. wheat purchases. We found that our shared challenges bring us closer together.”

2019 Mexico Wheat Trade Conference Cancún

 

In the just ended marketing year 2018/19, Mexican flour millers imported more U.S. wheat than any other country. The flour millers that attended the conference in Cancún represented about 80% of the 3.3 million metric tons (MMT) total 2018/19 commercial sales to Mexico reported by USDA as of May 30. USW Chairman Chris Kolstad, a wheat farmer from Ledger, Mont., thanked the millers for this and past business, and assured them that “USW and the National Association of Wheat Growers will do everything in our power to ensure that the USMCA Agreement on Trade is approved.”

Kolstad said the North American Free Trade Agreement (NAFTA) served both countries well and the United States-Mexico-Canada Agreement (USMCA) will continue to benefit the three countries with increased trade and new economic opportunity. His focus set the stage for insight from other conference speakers into why approval of USMCA is so important. They all agreed that the agreement will be implemented — but they do not know when it will happen.

Interviewing conference attendee, Francisco Salas Romero, Harinas.

Interviewing conference attendee, Francisco Salas Romero, Harinas.

“NAFTA has integrated the U.S. and Mexican economies steadily over 30 years,” said speaker Juan Carlos Baker, who served on the Mexican government’s USMCA negotiating team and now is a private trade consultant in Mexico. “But recently, the negative voices about NAFTA and USMCA have been the loudest. We must tell the positive stories about our trade benefits and the USMCA. I believe we will have a new agreement and will be able to continue trade, but how open it will be is up to us to determine.”

José Luis Fuente, President of Camara Nacional de LA Industria Molinera de Trigo (CANIMOLT), offered an inspired appeal to work together to tell officials in both countries that export opportunities must be improved, not restricted.

José Luis Fuente, President of Camara Nacional de LA Industria Molinera de Trigo (CANIMOLT)

José Luis Fuente, President of Camara Nacional de LA Industria Molinera de Trigo (CANIMOLT)

“We know that U.S. wheat farmers and U.S. Wheat Associates have done many things to tell this story,” Mr. Fuente said. “We have a partnership based on affection that is backed by actions. But actions are more needed now in this unusual trade environment.”

A large portion of the conference focused on other actions that can help facilitate U.S. wheat trade between Mexico and the United States. Two speakers focused on how millers can manage price risk. Christopher Lawrence, Senior Market Strategist with Rabobank, covered how best to hedge exchange rate exposure between U.S. dollars and Mexican pesos. Austin Damiani, an independent wheat futures trader from Minneapolis, Minn., provided valuable insight into hedging price risk.

<em>Austin Damiani, independent trader, Minneapolis Grain Exchange</em>

Austin Damiani, independent trader, Minneapolis Grain Exchange

“It is very important to consider locking in prices with futures,” Damiani said. “I am a speculator who bets on how the market will move. That is a risky activity. But I believe that as wheat buyers, if you are not hedging you are speculating.”

Panel discussion speakers: Justin Gilpin, CEO, Kansas Wheat; and Luis Olivera, Executive Vice President Sales, Ferromex, Mexico City.

Panel discussion speakers: Justin Gilpin, CEO, Kansas Wheat; and Luis Olivera, Executive Vice President Sales, Ferromex, Mexico City.

With so many logistical options for delivering wheat to Mexico, USW Regional Vice President Mitch Skalicky and his colleagues based in Mexico City who planned the conference emphasized commercial rail issues and opportunities in the program. A panel discussion on optimizing rail shipments and minimizing additional expenses included the President of Kansas City Southern Railroad-Mexico, and the Executive Vice President of Sales for Ferromex (Mexico’s national rail system). These two private sector companies are the principal railroads who operate Mexico’s rail lines through long term concessions that they have with the Government of Mexico. Representatives from the Mexican government and U.S. wheat grower organizations were also included on the panel. Gabriel Letona of Advan Sea in Panama City, Panama, also discussed the comparative advantages of FOB and CIF ocean freight contracting.

Presentations on contracting to receive U.S. wheat of superior value and how the U.S. farmer co-operative system has evolved as a major source of efficiently delivered wheat and grain exports rounded out what participants deemed as a very welcome and successful conference.

Chuck Conner, CEO, National Council of Farmer Cooperatives

Chuck Conner, CEO, National Council of Farmer Cooperatives

“We have 14 farmers here from 13 different states and U.S. Wheat Associates staff from 3 offices to show you that we take your business seriously,” Chris Kolstad told the millers. Those farmers, state commission members and USW, he added, “are all united in our desire and goal to earn your full trust in the United States as your primary source of imported wheat.”

*Header Photo Caption: Panel on “Optimizing Rail Operations of U.S. Wheat Shipments and Minimizing Additional Expenses for Mexican Importers.

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By Steve Mercer, USW Vice President of Communications

U.S. Wheat Associates (USW) represents the interests of U.S. wheat farmers in international markets. The organization is grateful to all its overseas wheat buyers, flour millers and wheat food processors for their strong preference for U.S. wheat and for their friendship. At a time when new circumstances have generated some uncertainty about trade, USW believes it is important to provide perspective on the long-standing, loyal relationship U.S. wheat farmers have with one of those customers: our neighbor to the south, Mexico.

Simply put, Mexico is one of the largest U.S. wheat buyers in the world, importing just under 3.0 million metric tons (MMT) on average going back many years. Mexico’s U.S. wheat imports typically only fall just short of the volume Japan imports. Not this year, however. In the first 7 months of marketing year 2016/17 through Feb. 2, Mexico’s flour millers have imported 2.4 MMT of U.S. wheat, which is more than any other country. That volume is up 5 percent over last year at the same time.

Breaking down their purchases by class, flour millers in Mexico generate strong demand for U.S. hard red winter (HRW) wheat. In 2015/16, they were the leading HRW importers and are taking advantage of the favorable prices and high quality of the 2016/17 HRW crop. At a current volume of about 1.4 MMT, they have imported 71 percent more HRW this year and again lead buyers of that class. A rising number of industrial bakeries, along with traditional artisanal bakeries, account for about 70 percent of wheat consumption according to CANIMOLT, the association representing Mexican millers. That puts HRW producers in a good position to meet that demand. Being closer to HRW production and having a highly functioning ability to import a large share of HRW directly via rail from the Plains states is an advantage for Mexico’s buyers.

In addition, Mexico is home to Bimbo, the world’s largest baked goods company, and an increasing number of cookie and cracker companies. The low protein content, soft endosperm and weaker gluten of U.S. soft red winter wheat (SRW) is well suited to the production of cookies, crackers and pastries, and serves as an excellent blending wheat. Millers supplying this growing market imported an average of 1.2 MMT of SRW between 2011/12 and 2015/16. With imports from the Gulf of more than 730,000 MT of SRW so far in 2016/17, Mexico is the top buyer of SRW again. USW and state wheat commissions from the PNW are also helping demonstrate how millers and bakers can reduce input costs by blending with U.S. soft white (SW).

As it does with all U.S. wheat importing customers, USW focuses on helping Mexico’s buyers, millers and food processors solve problems or increase their business opportunities with U.S. wheat classes. This effort, supported by wheat farmers and the partnership with USDA’s Foreign Agricultural Service, has fostered a productive relationship that has endured for decades through many challenges. More than 22 years of duty free access to the Mexican market under the North American Free Trade Agreement (NAFTA) certainly helped build the relationship.

Yet our customers there have many other sources of milling wheat to which they can turn. In response to rising world grain prices in 2008, Mexico lifted a 67 percent import tariff on wheat from outside the United States and Canada. In 2009/10, France made the first non-NAFTA origin wheat sale to Mexico since the trade agreement was implemented in 1995. Russian and Ukrainian wheat has been imported, too. To date, the tariff has not been reapplied and the Mexican import market is currently tariff-free for wheat from all qualified origins. Just this week, the leaders of Brazil and Argentina, both large grain exporting nations, said they would pursue closer ties with Mexico and other Latin American nations.

Looking ahead, NAFTA will likely be renegotiated. USW and wheat farmers understand that there are a number of elements of the trade agreement that need to be re-examined and modernized. The successful story of how U.S. wheat farmers and their customers in Mexico have worked together in a mutually beneficial way must be shared as part of the effort to update NAFTA. For now, U.S. wheat continues to flow to our customers in Mexico. During upcoming trade negotiations and beyond the eventual outcomes, wheat farmers, through USW, will continue to help and support the buyers from Mexico, as they would help and support their own neighbors.