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NAFTA Holds Mexico’s Door Open to U.S. Wheat; Could Open Cross-Border Trade with Canada

Original article published on Oct. 12, 2017 by the American Farm Bureau Federation in collaboration with U.S. Wheat Associates.

Before the North American Free Trade Agreement (NAFTA) entered into force on Jan. 1, 1994, state intervention and import tariffs held back U.S. wheat exports from the Mexican market. NAFTA ended both, and the newly opened market helped the Mexican flour milling and wheat foods industries to flourish, along with U.S. wheat imports (see chart).

USW represents the interests of U.S. wheat farmers in international markets. As it does with all U.S. wheat importing customers, USW focuses on helping Mexico’s sophisticated buyers, millers and food processors solve problems or increase their business opportunities utilizing specific U.S. wheat classes as ingredients in specific types of wheat foods. This effort, supported by wheat farmers and the partnership with the Market Access Program (MAP) and Foreign Market Development (FMD) program, has fostered a productive relationship that has endured for decades through many challenges.

Source: USDA Foreign Agricultural Service, Official USDA Estimates.

Mexico Leads All U.S. Wheat Importers

Today, Mexico is one of the largest U.S. wheat buyers in the world, importing just under 3.0 MMT on average going back many years. Mexico’s U.S. wheat imports typically only fall just short of the volume Japan imports. Not in marketing year 2016/17 (June to May), however, when Mexico’s flour millers imported more than 3.3 MMT of U.S. wheat, which is more than any other country. That volume is up 39 percent over marketing year 2015/16.

Breaking down their purchases by class, flour millers in Mexico generate strong demand for U.S. HRW wheat. The association representing Mexican flour millers says a rising number of industrial bakeries, along with traditional artisanal bakeries, account for about 70 percent of the country’s wheat consumption. That puts HRW producers in a good position to meet that demand. In 2015/16, Mexico was the leading HRW importer and buyers took advantage of favorable prices and the high quality of the 2016/17 HRW crop to import 2.0 MMT. That is 79 percent more HRW imports compared to 2015/16 and again led buyers of that class. 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 — duty free under NAFTA — 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 other cookie and cracker companies. The functional properties 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 1.0 MMT of SRW in 2016/17, Mexico was the year’s 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 using U.S. SW as a blending wheat for specialty flour products.

The successful story of how U.S. wheat farmers and their customers in Mexico have worked together in a mutually beneficial way under NAFTA and, for now, U.S. wheat continues to flow to our customers in Mexico. Total exports sales to Mexico returned more than $633 million to wheat farmers across the Plains and east of the Mississippi River in 2016/17.

The data for this map is based on Mexico’s market ranking for primary class of wheat grown in that state in the 2015/16 marketing year. Most wheat states’ farmers rely on Mexico as their number one market.

Source: Small Grains Summary and Export Sales, USDA

Increasing Competition

With U.S. wheat farmers facing financial hurdles, open access to the Mexican market is needed now more than ever. A prosperous Mexico is crucial for U.S. wheat farmers. But these savvy Mexican milling and baking sector customers have shown they can also adapt to other wheat supplies.

After a price shock in 2007/08, Mexico lifted its non-NAFTA wheat import tariff and wheat from other origins began to trickle in. From the first single boat carrying French wheat in 2010/11, non-NAFTA imports became a quarter of all Mexico’s wheat imports by 2015/16. The cost of U.S. wheat has a freight advantage over competitors, but if Mexico encourages purchasing from other origins or a new NAFTA agreement results in impediments to U.S. wheat imports, it has plenty of supply alternatives that are ultimately harmful to U.S. wheat growers.

Source: Global Trade Atlas

New Negotiations Can Build on NAFTA’s Success

Wheat trade with Mexico under NAFTA is already open and fair, but improvements to the agreement are possible. The three NAFTA parties agreed to some improvements as part of the Trans-Pacific Partnership (TPP) agreement that could be incorporated into a NAFTA update. TPP would have updated rules on sanitary and phytosanitary (SPS) measures, which have created major trade problems in some markets. U.S.-initiated trade restrictions often backfire on U.S. agricultural exports, so the wheat industry supports maintaining open markets for all parties.

Renegotiations could also enable full reciprocity for cross-border wheat trade with Canada. Canada allows tariff-free access to wheat from the United States and certain other foreign sources. However, a Canadian law requires that imported wheat, even wheat of the highest quality, must be segregated from most Canadian wheat. It is automatically given the lowest grade established by regulation and therefore receives the lowest possible price.

By contrast, Canadian producers are free to market their wheat in the United States through normal marketing channels. When graded at a U.S. elevator, Canadian wheat is treated the same as U.S.-origin wheat and is assigned a grade based on objective quality criteria, meaning that unlike U.S. wheat going north, it retains its value when it crosses the border.

“U.S. farmers should be able to deliver their wheat to a Canadian elevator and not automatically receive the lowest grade because it was grown on our side of the border,” said Ben Conner, USW Director of Policy. “This concept is needed for U.S. wheat farmers who live near the Canadian border, is supported by the Western Canadian Wheat Growers Association, and is already Canada’s legal obligation under existing trade agreements.”

The map above illustrates U.S. land that would be most affected by an open border with Canada for wheat via truck. The blue rings represent land south of the border that is within 25, 50 and 100 miles away from a Canadian elevator.

Do No Harm, Please

The U.S. wheat industry welcomes the opportunity for improving the framework for cross border wheat trade between the United States, Canada and Mexico, but would strongly oppose changes that might limit the current NAFTA’s benefits for wheat farmers and their customers, particularly in the Mexican food processing industries.

“I cannot emphasize enough how important our Mexican customers are to U.S. wheat farmers,” said Jason Scott, a wheat farmer from Easton, Md., and USW Past Chairman. “There is nothing wrong with modernizing a 23-year-old agreement, but that must be done in a way that benefits the food and agriculture sectors in both countries.”

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The International Treaties Upholding Science-Based Wheat Trade

By Elizabeth Westendorf, Assistant Director of Policy

It’s no secret that the U.S. wheat industry and its customers rely heavily on international trade rules to keep markets open and wheat moving. The World Trade Organization (WTO) is the prime example of this, particularly in its limits on tariffs and subsidies that have done so much to push towards a level playing field in global trade. But along with the WTO are other institutions that play a critical role in trade.

As traditional barriers to trade have decreased due to the WTO and other trade agreements, many countries have adapted and found new ways to protect industries, limit imports, or retaliate on trade issues (and clearly there are still many issues with traditional barriers!). Technical barriers – in particular sanitary and phytosanitary (SPS) barriers that purportedly address health, safety, and environmental problems – are a big challenge in trade today and likely to be a growing concern in the future.

The WTO SPS Agreement identifies two additional international treaties that are relevant to wheat trade: the Codex Alimentarius and the International Plant Protection Convention (IPPC). The Codex Alimentarius is a collection of standards, guidelines and practices that aim to protect consumer health while also ensuring fair practices in international trade, and the IPPC is the international standard setting body for plant health.

The most visible standards in wheat are probably the maximum levels for pesticide residues (MRLs), mycotoxins, and heavy metals set by Codex, but there are other influential standards for things like phytosanitary certificates and pest risk assessments adopted by the IPPC.

The SPS Agreement requires that any measures that a country adopts that are more trade-limiting than the standards developed by Codex and IPPC be scientifically justified, taking into account relevant factors like exposure and risk. Countries have every right to limit imports of unsafe products, whether they’re unsafe to their consumers or the environment, as long as they have gone through the process of providing sound justification. The WTO provides a clearing house of announcement for regulatory changes proposed by member countries, giving all others an opportunity to comment and object if needed. USW staff routinely monitor these announcements for any potential new restrictions on wheat trade.

Divergence from an international SPS measure is not necessarily a violation of trade commitments, but it can be a sign that something is wrong and needs to be fixed. The U.S. government has personnel dedicated to fixing these sorts of technical barriers and ensuring that standard setting bodies rely on the best science available and avoid acting as unnecessary impediments to trade.

The highly technical nature of SPS measures means that these measures are often difficult to implement properly and address if something is wrong. Following these standards or an alternative science- and risk-based process is extremely important for trade in wheat and wheat products to avoid market disruptions. The evolving nature of trade also means that these institutions need to pursue robust agendas while maintaining their scientific integrity so that they do not become pawns of agendas, but remain independent arbiters of good trade practices in SPS measures.

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Cuba’s Recovery from Another Hurricane Should be Eased by an End to the U.S. Embargo

By Steve Mercer, USW Vice President of Communications

The aftermath of Hurricane Irma is simply stunning. So many of our Caribbean neighbors are facing so much destruction, including in Cuba where the full fury of Irma raked the northern coastline as a Category 5 hurricane that killed at least 10 people and flooded central Havana.

As I read about the damage in Cuba, I could not help thinking about other hurricanes and their impact on our relationship with the island nation.

In 1998, Hurricane Lily hit Cuba hard, too, putting flour mills offline. The Kansas Wheat Commission responded with a generous offer to donate 20 MT of flour to help Cuban people in need. USW helped coordinate the donation, but it had to be made to Caritas, a CARE affiliate non-governmental organization relief organization, not directly to Cuba, because the U.S. government’s embargo prevented them from sending it directly to Cuba.

We believe that the donation did help open some hearts and minds, and the Trade Sanctions Reform Act (TSRA) of 2001 opened exports of wheat and other U.S. agricultural products to Cuba. Yet, the travel and financing restrictions that remained continued to compound the regulatory difficulties of trading with Cuba.

When another hurricane, Michelle, struck Cuba later in 2001, the U.S. government offered aid. The Cuban government refused that offer, but the gesture helped encourage Alimport, Cuba’s food buying agency, to import its first bulk load of U.S. HRW wheat. According to former USW President Alan Tracy, “Cuba’s flour millers and bakers loved that wheat.”

More and more HRW was imported until the annual volume reached almost 500,000 MT, a substantial portion of Cuba’s annual imports of about 800,000 MT.

In 2005, it was not a hurricane, but rather new regulations implemented by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) that interrupted this trade. The changes forced Cuba to obtain and present letters of credit from a third-party, foreign bank, and U.S. exporters had to receive payment only from a third-party bank, rather than through direct payment from Alimport. It was an excessive and unnecessary administrative burden that increased Cuba’s cost of buying U.S. wheat. OFAC also modified the definition of “cash in advance” that required payment before a shipment left a U.S. port rather than before the title changed hands at the shipment’s destination. This rule was unique to our exports to Cuba and removed the ability of Alimport officials to inspect U.S. origin cargo before payment.

Alimport slowed and ultimately stopped importing U.S. HRW wheat completely by marketing year 2011/12.

There was renewed hope when the Obama Administration announced its intention to renew and, eventually, re-open diplomatic relations with Cuba and ease some travel restrictions. Several organizations, including USW, formed the United States Agricultural Coalition for Cuba (USACC) to work together toward more open trade. However, the OFAC rules were never reversed and Cuba continued to import all its wheat from Canada and the EU — no doubt at higher freight rates and likely at higher relative FOB costs.

And, sadly, just hours before Irma struck Cuba, the United States officially renewed its embargo for another year, as required under TSRA.

Cuba’s proximity, as well as historical and cultural ties, should make it a natural trading partner for the United States. The U.S. wheat industry supports easing travel restrictions, permanently overturning the 2005 regulatory changes and increasing access to credit and USDA commercial loan programs. However, the larger political implications of the embargo and its negative effects will likely preclude effective competition by U.S. wheat exporters even if these other changes are implemented.

“Aside from hurting the Cuban people, the embargo has only strengthened the Castro brothers’ grip on power and stymied any change for the better,” Tracy said.

Soon after the most recent hurricane, our organization and other USACC member organizations sent a letter of support and concern to the Cuban people through Cuba’s ambassador. We wrote: “It is at these times when humanity stands together both in fear of the destructive forces of nature that impact us all, and in solidarity in the determination to help one another recover.”

In that spirit, we stand with U.S. wheat farmers to support ending the Cuban embargo entirely.

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The European Union’s Uneasy Relationship with Science

By Elizabeth Westendorf, USW Assistant Director of Policy

Last week, the European Court of Justice ruled that EU member states cannot ban cultivation of genetically engineered crops without scientific evidence of risk to human health. The ruling was on a case that dates back to 2013, when an Italian farmer wanted to plant biotech corn. Italy has long banned the planting of genetically engineered crops. The farmer in question, Giorgio Fidenato, planted the corn on his land in defiance of Italy’s ban. Four years later, it is a win for science-based regulation that the European Court of Justice sided with Fidenato and ruled that Italy does not have the right to ban GM crops without a scientific reason.

It is not all good news for science in Europe though. The EU has previously had pesticide legislation that sets risk-based tolerances and maximum residue levels (MRLs). However, the EU is now in the process of introducing hazard-based restrictions on import tolerances. These restrictions are not only contrary to the EU’s MRL legislation but also contrary to the World Trade Organization (WTO) Sanitary and Phytosanitary (SPS) Agreement, which requires that decisions be based on risk assessments. A hazard-based approach risks significantly impacting trade and affecting product availability in the EU. This would also jeopardize trade litigation that could result in retaliation against billions of dollars of its exports.

For a highly traded commodity like wheat, it is imperative that regulatory systems worldwide be transparent and science-based. Otherwise, exporters jeopardize having shipments held up — or prevented altogether — and importers cannot rely on deliveries arriving in a timely manner. When technology does not have a negative impact on health or the environment, there is no reason for countries to needlessly restrict its use, or worse, vilify its existence. It is heartening that the EU has taken a step in the right direction on biotechnology, but they are moving backward on SPS issues that could inhibit trade and hurt domestic businesses. Unscientific regulations make it hard for a globalized market to function well.

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Congressional Support for U.S. Agricultural Export Market Development Programs

Legislation that would amend the U.S. Agricultural Trade Act of 1978 to extend and expand the Market Access Program (MAP) and the Foreign Market Development (FMD) program, which are administered by USDA’s Foreign Agricultural Service (FAS), has now been introduced in the U.S. House of Representatives and the U.S. Senate.

The Cultivating Revitalization by Expanding American Agricultural Trade and Exports (CREAATE) Act was introduced in the House May 3, 2017, by its original sponsors U.S. Representatives Dan Newhouse (R-Wash.) and Chellie Pingree (D-Maine). Several other U.S. representatives have co-sponsored the bill since then. On Sept. 20, 2017, U.S. Senators Angus King (I-Maine), Joni Ernst (R-Iowa), Joe Donnelly (D-Ind.) and Susan Collins (R-Maine) introduced the CREAATE Act in the Senate.

USW is a participant in both MAP and FMD, with funding awarded by FAS, based on annual matching funds from U.S. wheat farmers, currently through 17 state wheat commissions, evaluation of a detailed annual export market development plan and other competitive factors. USW uses program funds primarily for overseas staff and office expenses, and for trade servicing, technical support and other activities designed to help overseas wheat buyers, millers and food processors understand how to get the most value from U.S. wheat as specific ingredients in high quality wheat foods.

Statutory funding of $200 million per year for MAP and $34.5 million per year for FMD has been static since 2006 and 2002, respectively. In fiscal year 2017, FAS awarded MAP funds to 68 organizations and FMD funds to 23 organizations. CREAATE calls for phasing in additional annual funding for MAP to $400 million in FY 2023, and additional annual funding for FMD to $69 million in FY 2023.

The House version of the CREAATE Act is posted online here. To read more about MAP and FMD and other topics related to agricultural export market development, visit www.AgExportsCount.org.

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Historic NAFTA Renegotiation Underway

By Ben Conner, USW Director of Policy

On Aug. 16, 2017, the United States, Mexico and Canada began negotiations to modernize the North American Free Trade Agreement (NAFTA). The first round concluded on Aug. 20. It was historic, in the sense that this is the first time the United States has attempted to renegotiate all parts of an existing trade agreement.

The Mexican market is extremely important to U.S. wheat farmers, and duty-free access under NAFTA to U.S. wheat is extremely important to Mexican flour millers. As the top export destination in marketing year 2016/17, Mexico accounted for 12 percent of all U.S. wheat exports. This growth stems without doubt from a successful trade agreement that has provided positive economic opportunity for a growing Mexican middle class that is able to spend more money on products made from U.S. wheat.

It is too early to say what kind of outcome to expect, but U.S. agriculture has been emphatic in its message to “do no harm” in these negotiations to the agricultural industry and its customers. That was reflected in the opening remarks of Ambassador Lighthizer, the U.S. Trade Representative, when he acknowledged the importance of NAFTA to U.S. farmers.

However, he also said the agreement had fundamentally failed many parts of the U.S. economy and required major changes. As the negotiations move forward, we will find out what changes will be proposed and acceptable to all three parties — and what tradeoffs will be required.

One change that would benefit wheat farmers and the wheat trade, particularly in northern border states, is a commitment from Canada to treat U.S. wheat farmers equitably when delivering across the border to a Canadian elevator. The current system is a legacy of the old Canadian Wheat Board monopoly, and there is broad recognition that it should be updated to allow reciprocal treatment for U.S. and Canadian farmers.

As these negotiations continue, USW, the National Association of Wheat Growers (NAWG) and other agricultural organizations will be vigilant in pursuing the interests of the North American food and agriculture supply chains.

 

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Renegotiating Bilateral FTA with Korea Risks Disrupting Effective Trade

By Ben Conner, USW Director of Policy

It was a decade ago this month that the United States completed its last successful free trade agreement negotiation. Under the Bush Administration, the United States and South Korea signed the U.S.-Korea Free Trade Agreement (KORUS) on June 30, 2007. However, it would be almost five more years before it entered into force following minor modifications by the Obama Administration.

Now the Trump Administration has hinted that it, too, may try to make its mark on the U.S.-Korea trade relationship, citing statistics that the U.S. goods trade deficit with South Korea has doubled since KORUS implementation in 2012.

History shows that with bilateral FTAs there are always issues that may block some trade, and balancing all bilateral trade relationships is impossible. For example, KORUS maintained major barriers to U.S. rice exports and the United States maintained significant barriers on Korean automotive exports. Reducing the overall trade deficit is a major policy goal of the United States, so renegotiating free trade agreements one by one is not the best approach.

The only way to reduce overall deficits is to promote savings and decrease consumption by U.S. citizens. The most effective way to do that is recession, as evidenced by 2009, the lowest U.S. trade deficit in the past 10 years and the heart of the “Great Recession.” New restrictions on trade are not likely to affect the trade deficit, except that they could lead to or exacerbate economic recession, an outcome previous U.S. administrations have wisely avoided.

Renegotiating agreements risks disrupting established supply chains and endangering trade. Our organization has worked for many decades to build a preference for U.S. wheat in South Korea. While there were limited policy barriers to U.S. wheat exports before KORUS, the agreement provides strong assurances about the continued viability of the trade relationship between U.S. wheat farmers and Korean customers. This is an extremely valuable trade relationship for both sides and it would be unfortunate for both partners if it does not remain open and fair.

USW will continue to advocate for trade policy that is based on openness to trade, with individual actors being free to choose with whom to buy and sell. That has always been the best policy framework for U.S. wheat farmers and their customers, and KORUS as it exists today for wheat trade is an important part of that system.

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USTR Report Highlights Need for Rules-Based Trading System

By Ben Conner, USW Director of Policy

Every year, the USW Wheat Letter features an article on the annual release of the National Trade Estimate (NTE) report by the Office of the U.S. Trade Representative (USTR). While the issues it quantifies do not change rapidly, the latest NTE shows the extent of the problems facing the Trump Administration, which has made trade enforcement a cornerstone of its economic policy.

The NTE is the U.S. government’s most comprehensive report on trade barriers. It covers more than 40 countries or country groupings. In just under 500 pages, it clearly shows that these barriers pose a major challenge for U.S. exporters and investors. Most of the issues are policies that violate rules of a U.S. trade agreement or the World Trade Organization (WTO).

Considering trade enforcement, the NTE may understate the challenge. For the wheat industry alone there are several barriers not listed in this massive report. If USTR decided to pursue every long-standing issue facing the United States through dispute settlement, it would stretch its resources far past the breaking point. Unfortunately, new problems seem to arise faster than it takes governments to fix old problems.

This underscores the need for countries to commit strongly to a rules-based trading system. Trade disputes are one way to address the problems, but even a country with considerable resources for trade disputes like the United States, which has sued or been sued in nearly half of all WTO disputes, can barely begin to address outstanding issues through disputes alone.

However, strategic enforcement is important to maintaining the effectiveness of international trade rules. There are economic benefits from fixing specific trade barriers, but just as vital is the deterrence effect on countries that would consider implementing new barriers. If we must litigate every issue, the system could collapse.

Last year, USTR took a big step in challenging non-compliant domestic support programs in China — a growing problem for at least a decade. The NTE mentions similar problems in India, Turkey and Brazil and the hope is that the China cases lead to serious reforms to subsidies in these countries as well. USW and USTR need to stay vigilant to help reverse the trend of increasing WTO-violating subsidies and ensure that countries consider their trade commitments before implementing new policies.

Every country, including the United States, has unique internal pressures that may divert them from trade commitments at the margins. The NTE is an important way to demonstrate how those pressures affect U.S. industries, but without effective enforcement and negotiated solutions, it is just a very long list.

As an industry stakeholder, USW provided input on its key trade barriers through comments submitted in October 2016. Read those comments here. The full 2017 NTE report is posted online here.

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Policy Organizations Call for Increased Investment in Agricultural Research

Excerpts reprinted from Agri-Pulse, April 5, 2017

USW shares strong support for more investment in agricultural research with our sister organization, the National Association of Wheat Growers (NAWG). NAWG notes that wheat relies on public, private and grower funding for crop innovation. Only 1.6 percent of the $142 billion U.S. federal investment in research is allocated toward agriculture research, according to American Association for the Advancement of Science (AAAS).

NAWG adds that the amount of funding dedicated to wheat research has been dwarfed by the funding dedicated to other major crops. So, growing the investment in wheat research over time is critical to achieving the innovation needed to sustainably support a rapidly growing world population.

Several major policy organizations and influential non-governmental organizations also see global benefits to enhanced agricultural research. For example, the Chicago Council on Global Affairs recently issued a report called “Stability in the 21st Century; Global Food Security for Peace and Prosperity” that calls for increased research investment. The Chicago Council introduced that report, at a Global Food Security Symposium in Washington, DC, covered this week by Agri-Pulse, a news organization reporting on U.S. agricultural policy.

At the symposium, Nick Austin, the director of agricultural development for the Bill and Melinda Gates Foundation, called for the United States and other developed countries need to continue to support agricultural research if farmers are to meet the demand for food from a burgeoning world population.

“We need to feed more with less,” Nick Austin told Agri-Pulse. “I’d like to look at the glass half-full scenario, with ag research leading to improved conditions, especially for small-holder farmers, many of which are women.”

He cited research by the Farm Journal Foundation which found that the high-yielding wheat and rice varieties developed by the Green Revolution during the 1970s led to “substantial growth” in Asian and Latin American agriculture. Those same varieties were used successfully in the United States and added $3.7 billion in value to the U.S. economy by 1996, “an astonishing return to taxpayers on the $134 million investment,” Austin said.

During the Chicago Council symposium, speakers discussed how agriculture must adapt to a number of challenges, including climate change, which is bringing increased temperatures, erratic rainfall, flooding and increased pests and disease. At the same time, Austin said, the world’s farmers need to boost food production by about two-thirds to feed a global population of more than 9 billion by 2050, up from 7.5 billion at present.

“It is a real challenge, but it can be done,” Austin said, citing several hopeful signs, including projects supported by the Gates Foundation.

The fact is, global demand for wheat is on a steadily increasing trend and today’s surplus can quickly become tomorrow’s shortage. U.S. farmers are doing their part to increase average yields through direct support for wheat breeding and research through state wheat commission support and in partnership with land grant universities. With the cost and stakes increasing, Austin stressed that governments need to contribute to the effort, not only to help the poor, but for their own benefit, given the “high rate of return” from investments in ag research.

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Learning About Food Security and Development in Tanzania

By Elizabeth Westendorf, USW Policy Specialist

U.S. wheat farmers are proud of their commodity’s role in U.S. foreign aid around the world, and the U.S. Wheat Associates (USW) Food Aid Working Group (FAWG) works diligently to support U.S. international food assistance programs. Food aid has always been an important focus of USW’s policy work, both to ensure wheat’s appropriate use in programming and to help protect and expand U.S. food aid programs. Wheat makes up 40 percent of U.S. in-kind food donations, making it the most popular commodity for aid donations.

To better understand the role of wheat in U.S. aid programming, USW Policy Specialist Elizabeth Westendorf led a team of U.S. wheat farmers, state wheat commission staff members and others to Tanzania to visit current USDA Food for Progress projects funded by wheat monetization. The team included: Mike Schulte, Oklahoma Wheat Commission Executive Director and FAWG Chairman; Reid Christopherson, South Dakota Wheat Commission Executive Director; Scott Yates, Washington Grain Commission Director of Communications and Producer Relations; Leonard Schock, Montana Wheat and Barley Committee Director and past USW Chairman; Ron Suppes, Kansas Wheat Commission Commissioner and past USW Chairman; Cathy Marais, USW Financial Accountant at the USW Cape Town Office; Brian Holmes, CFA Services Director;  Don Evans, Program Coordinator for Africa in the USDA Foreign Agricultural Service (FAS) Office of Capacity Building and Development; and Nicola Sakhleh, Branch Chief of Food for Development in the FAS Office of Capacity Building and Development.

Tanzania is one of the least developed countries in the world, ranking 151 of 188 on the Human Development Index. Eighty percent of the population is involved in farming, typically at the subsistence level — and most farmers are women. Tanzania grows very little wheat and relies on imports to supplement that production. Those imports come primarily from Russia, but mills will buy smaller quantities of higher quality wheat for blending purposes, mainly from the EU, Argentina and Australia. USDA Food for Progress has five active projects in Tanzania focused on agricultural development, and wheat monetization funds four of those. In Tanzania, the team visited those four projects as well as the World Food Programme (WFP) and the mill that purchased the monetized wheat to fund the Food for Progress projects.

The team spent its first three days around Dar es Salaam. On the first day, the team met with Global Communities, which works with small and medium-sized enterprises in Tanzania, Kenya and Malawi. They also met with one of the project recipients, Basic Element, which is a corn and sorghum mill. Basic Element’s mill manager Abel Tabula said that with the help of Global Communities, they can source their inputs directly from smallholder farmers instead of relying solely on middlemen that aggregate purchases from smallholder farmers at a markup.

“We appreciate that the wheat we monetize comes from farmers,” said Simon Muli, Global Communities Deputy Chief of Party. “What you create in another part of the world is creating serious impact here.”

The team also met with Small Enterprise Assistance Funds (SEAF) to visit Hill Animals Feeds, one of their project recipients in Bagamoyo. Hillary Shoo started the company in 1993 and, with a loan from SEAF, he plans to increase his storage capacity, which will allow him to buy directly from smallholder farmers during harvest season.

The team spent an afternoon with WFP to learn more about emergency aid in Tanzania. USAID Food for Peace works with WFP to provide aid to refugee camps in the northwest region of the country, where there has been a recent influx of refugees from Burundi.

The team then spent a day at Bakhresa Mill and its baking facility to gain a better understanding of the wheat monetization that funds the Food for Progress projects. Bakhresa Mill purchased the wheat that funded four of the Tanzanian projects. Bakhresa’s Milling Director Arvind Shukla told the team that they fortify products going to poorer segments of the population, and purchasing the monetized wheat allows them to pass savings on to their consumers and sell their flour at a lower price. This way, customers in Tanzania also benefit from the monetization, in addition to those who benefit directly from the funded projects.

After Dar es Salaam, the team traveled to Morogoro to visit rural programs in the region run by Catholic Relief Services (CRS) and FINCA International. The CRS project, Soya ni Pesa, is a soybean value chain development project, geared toward helping farmers produce soy and gain access to the poultry feed value chain. CRS provides management and technical assistance to facilitate farmer growth. The project has stimulated a soybean price increase for farmers and benefits the feed producers by giving them better access to the soy inputs they need. The team met directly with some of the farmers in the program and learned about their challenges and successes.

The FINCA project provides loans to smallholder farmers, focusing on loans that are accessible to agricultural workers. USW met with several farmers who receive these loans. They shared what they have accomplished with increased access to credit. It has allowed many of them to increase their farm size, improve infrastructure and send their children to school.

Agriculture plays a crucial role in Tanzania’s economy, so improvements to that industry benefit the entire country. The four Tanzanian projects funded by wheat monetization work in different ways toward a common goal of agricultural development. Seeing the positive effects of those projects on the entire economy helped the trip participants better understand the role that U.S. wheat plays in the process.

“This trip helped clarify how the funding works, but more importantly, the big picture of the real purpose of the projects,” said Schock. “It was transformational for my attitude of world food production. As humans, and particularly as farmers, we must try to help those that want to help themselves, and that’s what these programs do.”

Pictures from this trip can be found on the USW Facebook page at www.facebook/uswheat.

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