A last-minute agreement by Brazil to suspend that country's pending tariffs against the United States gives the domestic wheat industry hope that it can meet Brazil's needs for Hard Red Winter wheat.
In 2005, Brazil won a World Trade Organization decision against the U.S, arguing that the U.S. cotton marketing loan and counter-cyclical programs and the GSM-102 export credit guarantee program were violations of WTO fair trade agreements. Brazil then stated its intentions to levy a package of tariffs against U.S. imports, including wheat.
The two countries have tried to resolve their dispute over cotton subsidies in the 2012 Farm Bill. As a result, Brazil announced June 17 that it will suspend $820 million in tariffs against U.S. imports. The tariffs were set to begin June 22.
Brazil is an important customer for U.S. Hard Red Winter wheat, which is a key component for many Brazilian bread and pastry products. It is one of the five largest importers of wheat in the world.
"Brazil represents an ideal market for U.S. Hard Red Winter wheat. Suspending this tariff, which added up to 30% to the price of wheat from the U.S., gives Brazil an opportunity to buy our wheat at basis levels not seen in the last 30 years," says Justin Gilpin, chief executive officer of Kansas Wheat.
Ron Suppes, past-chair of the farmer-funded U.S. Wheat Associates (USW), says opportunity for U.S. wheat exports depends in part on Argentina's ability to fulfill Brazil's wheat needs as part of the Mercosur Trade Agreement. Argentina is expected to have a short supply of wheat, according to USW research.
"It's been proven in the past that when Argentina can't fill those Brazilian needs, Brazil often turns to the U.S.," says Suppes, who farms near Dighton. "We will have competition from Canada, for certain. But we do have a big opportunity there."
Last week, USW Regional Marketing Specialist Osvaldo Seco met with Brazilian wheat buyers who will be among the participants learning more about the new U.S. wheat crop at the biennial Latin American Buyers Conference sponsored by USW in Aventura, Florida next week. In addition, a Trade Team of Brazilian wheat buyers will visit Western Kansas wheat farms the first week of July. The team is sponsored by USW.
"This will be an ideal time for this team to meet wheat producers and learn more about the Kansas wheat harvest and U.S. export marketing programs," Gilpin says.
