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An Appeal to Protect International Food Assistance

By Elizabeth Westendorf, USW Assistant Director of Policy

On Feb. 12, President Trump unveiled a FY2019 budget proposal that included several areas of support for agriculture. It was disappointing, however, to see that the proposal eliminates federal funding for Food for Peace, the most effective U.S. emergency food assistance program helping populations in need around the world. The budget would also de-fund USDA’s McGovern-Dole Food for Education program, which addresses nutrition and literacy goals in rural schools overseas, and Food for Progress, an innovative program combining U.S. commodity donations with commercial purchases and agricultural development.

U.S. farmers are proud of these programs and the important role that U.S. commodities play in international assistance. Wheat farmers have long been the leading suppliers, and in 2017, the United States sent more than 800,000 metric tons (MT) of wheat overseas as food aid.

U.S. Wheat Associates (USW) has been a partner in supporting these programs for their more than 60 years of existence and works hard to make sure that wheat is used appropriately and that wheat buyers and NGOs can use the programs effectively. We are proud of our long partnership with USDA and USAID in accomplishing those goals.

This year, the world faces even more need with famine on the horizon in Nigeria, Somalia, South Sudan and Yemen. The overriding moral imperative demands that we maintain our international food assistance efforts. Beyond the help for those in need around the world, these programs have vital benefits for domestic constituents. International assistance fosters goodwill, which helps with national security efforts. The use of U.S. commodities ties farmers directly to program beneficiaries, allowing them to connect with the programs’ goals in a way that simply using cash (or not being involved at all) does not. Additionally, development programs boost burgeoning economies, which benefits the entire global economic system by encouraging trade with the full participation of poorer nations.

We strongly urge the Administration to reconsider the value and effectiveness of these programs in future budget proposals. We are grateful that most U.S. lawmakers seem to appreciate the importance of international food assistance. As its members did last year, we hope Congress once again ignores the ill-conceived call to eliminate these successful and indispensable programs and keeps them intact in the final 2019 U.S. budget.

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USW Participating in Wheat Education Event on Capitol Hill

Between record low commodity prices, extreme natural disasters and unfair trade practices in the global marketplace, wheat growers across the country have experienced a multitude of challenges the past couple of years. To educate the Administration, Members of Congress and their staff on just how expansive and important the entire wheat value chain is to the economy and to global food supplies, the National Wheat Foundation (NWF) is hosting a wheat industry educational event Feb. 8 in Washington, D.C.

“This event featuring organizations throughout the entire wheat value chain is the first of its kind for the Foundation and for Congressional staff,” stated Foundation Board Chairman Phil McLain. “We hope to give our policy makers and all attendees a better understanding of the how each component of the wheat value chain functions. We were also particularly pleased to be able to have USDA Deputy Secretary Censky, Chairman Roberts, and Ranking Member Stabenow walk through the event during a special preview.”

U.S. Wheat Associates will join other participating organizations in the event, including the NWF, American Bakers Association, American Seed Trade Association, Association of Equipment Manufacturers, BASF, Bayer, BNSF Railway, CropLife America, Farm Credit Council, Flowers Foods, Food Marketing Institute, General Mills, Grain Foods Foundation, Monsanto, North American Millers’ Association, Texas A&M University, Syngenta, U.S. Custom Harvesters, Wheat Foods Council, Wheat Marketing Center and Wheat Quality Council.

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U.S. Wheat Farmers Also Need FTAs in Africa

According to the United Nations, over a quarter of the world’s population will live in Africa by 2050. That will be something like 2.5 billion people. With less than 4 percent of the world’s wheat production, Africa will require significant imports to feed its growing population. A major factor in in ensuring a predictable, stable supply of a staple food like wheat is through predictable, rules-based trade policies.

That is one reason why the Office of the U.S. Trade Representative (USTR) should start transitioning countries from the one-sided preferential arrangement of the African Growth and Opportunity Act (AGOA) to a more reciprocal trading relationship based around free trade agreements (FTAs).

Gerald Theus has represented U.S. wheat farmers in Sub-Saharan Africa as U.S. Wheat Associates (USW) Interim Regional Director in Cape Town, South Africa for nearly three decades. He highlighted the need for reciprocal trade, for the benefit of both U.S. farmers and African millers and consumers, in recent submission to the U.S. International Trade Commission.

The submission points out that the United States only has one FTA in Africa – with Morocco – and that FTA has significant limitations. There is a pressing need to negotiate new agreements with African countries so that trade policies can be reciprocal and those countries can benefit from both exports and imports.

Theus laments that the European Union (EU) has managed to outmaneuver the United States by converting its trade preferences into reciprocal access, pointing to the 300,000 ton duty-free quota enjoyed by its exporters into southern Africa, sidelining U.S. opportunities in that region.

If U.S. farmers are to be competitive in Africa, the U.S. government needs to negotiate new market access (the same holds true in Latin America, the Asia-Pacific region, and elsewhere). No new deals have been struck since 2007.

USTR Robert Lighthizer recently stated that it was his intention to negotiate a “model” FTA with an African country. That is an encouraging step, because the United States clearly needs to develop closer trading relationships with its African partners. As Theus notes, there should be strong affinity between the views expressed in his submission and the statements of USTR Lighthizer on reciprocal free trade.

There is plenty of opportunity in Africa. U.S. farmers hope to see their wheat play a part in a bright future for the continent.

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Glimmer of Hope in the EU on Plant Breeding Innovations

By Elizabeth Westendorf, USW Assistant Director of Policy

Last week, the European Court of Justice (ECJ) published a legal opinion from its Advocate General that gene editing techniques like CRISPR-Cas9 should not be included in the EU’s regulation of genetically modified organisms (GMOs). While the ECJ is not required to follow this legal opinion, in practice they often do. The ECJ will rule on the issue in the coming months.

This news is important because when the regulatory status of plant breeding innovations that are different from biotechnology is uncertain, scientists have trouble moving forward with new trait development. While transgenic biotechnology (GM or GMO) involves inserting foreign DNA into the target plant, these new techniques allow for gene deletion or modification without the presence of foreign DNA.

Innovation is an important evolution in the plant breeding process in that it involves precise changes in a plant’s genome in a controlled manner. Over-regulation of these technologies could stifle scientific advancements that the agricultural community needs to continually improve food supply in a sustainable way. If these advanced breeding methods were automatically regulated as GMOs, this would make it nearly impossible for non-commercial researchers and small companies to use them to develop new varieties for the market.

For wheat, the effect of not having commercialized advanced breeding traits can be seen in the concerning decline in both planted area compared to other crops and in research funding. Wheat yields have not increased at the same rate as other crops, and the potential for quality improvements has not been realized.

Additionally, these new breeding innovations would allow scientists to develop traits that are consumer-facing, with the potential to improve everything from milling quality to nutrition and health benefits that would be good for the entire supply chain.

Plant breeding innovations like gene editing have the potential to create new varieties of wheat that meet pressing needs both for farmers and customers, so it is important that any regulation of these new technologies be science-based.

To read more, visit https://seedinginnovation.org/.

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The Year Ahead in Trade Policy

By Ben Conner, USW Director of Policy

U.S. Wheat Associates (USW) prioritizes trade policies that support reducing the cost of getting wheat from U.S. farmers to their customers around the world. A time-tested method for doing that is through trade negotiations and agreements. USW will be looking for a more forward-looking trade negotiating agenda from the United States in the coming year, while holding our ground when we believe certain actions might raise the costs of wheat trade.

The biggest item on the trade policy agenda remains the negotiations to modernize the North American Free Trade Agreement (NAFTA). There are some notable improvements that can be made to the agreement through a modernization process, but the absolute priority for USW and most of U.S. agriculture is to prevent dissolution of the agreement – a potentially devastating blow to the U.S. farm sector and potentially to their customers in Mexico and Canada.

The agreement with South Korea (KORUS) is also on the agenda, but it is expected that the scope will be much more limited than the NAFTA negotiations. Hopefully the modification process for KORUS will help stave off a concerning push by some to withdraw entirely.

A serious problem to date is the lack of new bilateral trade agreement negotiations with potential trade agreement partners. KORUS was the last completed trade agreement the United States negotiated, and it was first signed in 2007. The United States continues to fall behind in trade negotiations with competitors in the European Union, Canada and elsewhere. Emphasizing this challenge will be an important priority of USW in 2018.

At the World Trade Organization (WTO), there will be continued fallout from the United States’ successful efforts to prevent a severe weakening of WTO rules in agriculture, which had the predictable but unfortunate effect of shutting down virtually all positive negotiations in this forum. In our view, this was a necessary development if the WTO can ever return to being a dynamic forum for trade negotiations. There will also be progress on the dispute settlement cases against some of China’s policies restricting wheat trade.

If nothing else, 2018 is shaping up to be another roller coaster year for trade policy. In addition to weighing in on the high-profile negotiations discussed above, USW will continue to work on a number of issues with individual markets on behalf of wheat farmers and buyers.

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Let’s Level the Playing Field for Wheat

By Gordon Stoner, President of the National Association of Wheat Growers (NAWG) and a wheat farmer from Outlook, Mont. This op-ed first appeared in “The Hill.”

The United States is known for producing the highest quality wheat in the world, yet when U.S. farmers market their wheat at a Canadian elevator, it is automatically labeled as “foreign wheat” and given the lowest possible grade (a way to measure grain quality). Cross-border wheat faces major hurdles in Canadian marketing channels, primarily due to the country’s grain grading system. Conversely, Canadian wheat has full access to the U.S. bulk grain handling system. U.S. wheat farmers should be treated the same when delivering to Canadian grain elevators as their neighbors to the north are when delivering to U.S. elevators. The modernization of the North American Free Trade Agreement (NAFTA) is a ripe opportunity to level the playing field.

I grow hard amber durum wheat primarily used in pasta production. This high-quality wheat class is valued for its premium protein and gluten strength, within 10 miles of the Canadian border. When prices are higher in Canada, it would not be difficult for me to take advantage of those price premiums and drive across the border to deliver my wheat. But until this grading issue is resolved, that is not an option. My neighbors just on the other side of the border do not have this problem; if prices are higher at a U.S. elevator, they can easily drive south to deliver their wheat. This kind of disparity is frustrating for farmers in Northern Tier states, especially given declining wheat prices and thin profit margins in recent years.

Canada’s grain policies require all wheat not grown domestically to be segregated and classified as “foreign grain” and therefore automatically demoted to “general purpose” or feed wheat. Canada’s grading system even discriminates against wheat grown in the United States that is identical to varieties of wheat approved for planting in Canada (Canada regulates the varieties of wheat plants that can be graded, unlike the United States, where we only grade based on the intrinsic properties of the grain). Such classification results in a substantial price discount regardless of the quality of the wheat, and segregation costs provide little incentive for elevators to handle U.S. wheat of equal or better quality.

An updated NAFTA should remove Canada’s discriminatory grading treatment. All U.S. wheat moving into Canada should be evaluated on quality parameters without regard to country of origin. Canada’s policies are clearly national treatment issues, which Canada has a current obligation to resolve under its World Trade Organization commitments. However, NAFTA can also be the vehicle to fix the grading issue. Canada’s grain policies deprive U.S. wheat farmers near the border of significant marketing opportunities, while millions of bushels of Canadian wheat stream uninterrupted across the border.

Trade agreements have the potential to create a level playing field where individuals, families and companies can make their own decisions about what to buy and sell. The role of trade agreements is to provide that opportunity, and that benefits both U.S. wheat buyers and wheat producers. Industry groups on both side of the border agree that this is an issue that needs to be resolved.

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Hoping the Good News on EU Re-registration of Glyphosate is Not Meaningless

By Ben Conner, USW Director of Policy

Many European farmers breathed a sigh of relief this week as the European Commission chose to extend registration of the broad-spectrum herbicide glyphosate for five years. But farmers in Europe and elsewhere around the world are justifiably worried about the challenges represented by the European Union’s pesticide policy.

The extension of glyphosate approval is good news — even a bit surprising. The European Food Safety Authority has been emphatic in its position that glyphosate presents no human safety hazard when used in compliance with regulations. Yet the Commission only extended the registration for five years based only on a political compromise rather than sound scientific evidence or and accepted risk assessment standards. The activists trying to derail the glyphosate approval process are ignoring the integrity of that agency’s risk assessment process, which undermine the principles of scientific approaches to regulation.

The fight over glyphosate re-registration is symptomatic of broader concerns about pesticide policies in the European Union. Its so-called “hazard-based” approach to registration of certain pesticides and innovative plant breeding ignores scientific risk assessments that lead to standards for proper use of pesticides. This creates a greater risk of major trade disruptions, potentially including wheat and certainly including other food ingredients.

It should be noted that there are many well-meaning individuals who are sincerely concerned about the safety of their food supply and environment. As the father of two small children, I can certainly understand that. But to my mind, being able to put food on the table and ensure our planet can support future generations clearly outweighs immeasurably small odds of harm. My children deserve to live in a world that is willing to thoughtfully evaluate the risks and rewards of progress, based not on fear, but rather on accepted scientific evidence and standards.

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New Study Examines Shifts in Global Agricultural Trade

Participants at the U.S. Agricultural Export Development Council annual meeting, Nov. 14 and 15, 2017, in Baltimore, Md., got an early look at a new study indicating that developing countries have been competing quite effectively in global agricultural trade. In addition, the study showed that agricultural products are often classified as “sensitive products” in trade agreements, leading to a significant level of protection, especially by developing and advanced developing countries.

The report is “The Global Landscape of Agricultural Trade, 1995-2014,” just released by USDA’s Economic Research Service. The authors’ summary says the Uruguay Round Agreement on Agriculture (URAA) of 1994 imposed new disciplines on market access barriers, domestic support and export subsidies, and set up rules for non-tariff measures. In the two decades since the URAA, government interventions in agricultural trade have evolved, agricultural trade has expanded and BRIIC countries (Brazil, Russia, India, Indonesia, and China) and other emerging economies have become significant agricultural traders. The summary adds that although clear progress has been made in such areas as tariff reductions and elimination of export subsidies, there is room for further disciplines on tariffs, nontariff measures and domestic policy.

Specifically, the study showed that the value of global agricultural exports adjusted for inflation has doubled since 1994, indicating a significant increase in the total market size. Overall, as the BRIIC country share of total imports is increasing, North American and Western European countries are importing a smaller percentage of the total. Conversely, the total share of world agricultural exports from the United States is down from 20 percent to 14 percent, while BRIIC country share is up from 14 percent to 23 percent. Global wheat trade has displayed a similar pattern: as U.S. exports have remain fairly stable, the U.S. share of a growing total world wheat market has declined.

The report summary adds that major emerging economies have increased the support they provide to farmers, sometimes using methods like price supports or input subsidies that are more likely to distort trade. In some of these countries, the study showed, recent emphasis on agriculture support is a sharp departure from earlier policies that implicitly taxed agriculture. Read the entire report online here.

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Success in the U.S.-Morocco Free Trade Agreement

By Elizabeth Westendorf, USW Assistant Director of Policy

In 2006, the United States signed the U.S.-Morocco Free Trade Agreement, making it the first U.S. free trade agreement (FTA) that did not fully eliminate tariffs on wheat. Instead, the FTA included a tariff rate quota (TRQ) for U.S. wheat, which is now set at 360,000 metric tons (MT) per year. Over the years, this TRQ has presented a challenge to U.S. wheat exports to Morocco. It is typically only briefly opened once a year, which makes it difficult for Moroccan customers to gain preferential tariff access to high quality U.S. wheat.

U.S. government officials have consistently raised this issue with their Moroccan counterparts, and this year the TRQ administration was improved to allow access to U.S. wheat exports multiple times per year. The first tender of the year filled because of a poor wheat harvest in Morocco in 2016, but Morocco only tenders for 90 percent of the tender at once because buyers can bid 10 percent over that amount in the tender. In October, Morocco agreed to issue a second tender for the remaining 30,000 MT of the TRQ. That tender was filled, and the wheat will arrive in Morocco in December. With the exception of last year and early this year, when Morocco had a poor wheat crop and needed to import more wheat, this is the first time in years that a significant quantity of U.S. wheat has gone in under the TRQ, and these efforts ensure that U.S. wheat will have improved access to the Moroccan market in the future.

Trade agreements do not automatically work perfectly, but this cooperative solution to a problem in the U.S.-Morocco FTA is an important example of the benefits of working within the FTA framework. Trade agreements are a vital tool for opening and expanding new markets and help reduce costs for international wheat buyers. They are especially important in the increasingly competitive global wheat market.

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Vietnam Lifts Restrictions on U.S. Wheat Imports

Recently, Vietnam’s government advised the USDA that it would lift restrictions on imported U.S. food grains and feed grains. This change helped open an opportunity for Vietnamese flour millers who recently bought a large volume of U.S. soft white (SW) wheat, the first substantial sale of U.S. wheat to the Vietnam market in several months.

On Dec. 1, 2016, Vietnam implemented a requirement that all shipments of U.S. wheat, corn and distillers dried grain solids (DDGS) be fumigated with a product that U.S. export elevators are generally unable to use in bulk shipments. Vietnam now allows treatment with a generally accepted fumigation product throughout the global grain trade, to enter the country. An official phytosanitary certification from the USDA Animal and Plant Health Inspection Service will also be required.

USW continued to provide trade service to Vietnamese flour millers after this restriction was implemented. For example, Vietnamese flour milling executives recently joined a team of millers visiting the United States to learn more about U.S. wheat quality and the supply chain.

“Several of our staff worked with the grain trade, U.S. government agencies and our customers to develop workable solutions to this restriction,” said USW Vice President of Overseas Mark Fowler. “We appreciate their work and the cooperation of the U.S. and Vietnamese governments. We look forward to more normal trade with these customers.”

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