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Canada Could Gain From Southern Trade Dispute

“Until this gets

resolved … I can’t see that we’re going to be able to sell to Brazil in the near future.”

– REBECCA BRATTER

Canadian wheat exports stand to gain from Brazil’s move to triple non-hard wheat tariffs against the United States, a Canadian Wheat Board official said March 10.

The Brazilian government published March 9 a list of U. S. goods subject to import tariffs that will go into effect in 30 days in retaliation to U. S. cotton subsidies. Tariffs on U. S. non-hard wheat would rise to 30 per cent, from 10 per cent.

That leaves Canada, the world’s No. 6 wheat producer, with an export opportunity, said Bruce Burnett, director of weather and market analysis at the wheat board, which has a monopoly on marketing Western Canada’s wheat and malting barley.

“Certainly in a year like this year when the wheat market is very competitive, it would be nice to have an advantage into that marketplace,” Burnett said in an interview with Reuters.

How much of an opportunity Canada has depends on when Brazil’s higher wheat tariff takes effect, Burnett said. Brazil’s government said there is still time for a negotiated solution with the United States.

Brazil’s offshore wheat demand fluctuates widely from year to year, depending on the size of its domestic crop and that of other South American countries such as Argentina that are part of the regional trade agreement Mercosur.

Big South American crops of corn and soybeans are expected to be harvested, but Argentina’s wheat crop is small, Burnett said.

Brazilian mills are concerned about the small volume of wheat available, which will keep Argentine wheat prices high, said a wheat trader in Sao Paulo.

“They may have to accelerate their purchases,” the trader said. “It will be necessary to turn to wheat from other origins.”

Brazil is most likely to import wheat from Poland, Russia and Canada, the trader said. A U. S. expor ter said Canada stands poised to fill whatever business the United States loses to Brazil over high tariffs.

Brazilian Agriculture Minister Reinhold Stephanes said on Tuesday that options for wheat imports include Canada, Russia and the European Union.

In 2008-09, Brazil imported just 143,000 tonnes from Canada in a year in which its domestic wheat production grew.

The previous year, Brazil imported 477,000 tonnes of wheat from Canada, making it the board’s No. 11 wheat export market in 2007-08 and its top South American market.

Canada’s wheat exports to Brazil may rise to between 350,000-400,000 tonnes in the current 2009-10 crop year, said Lawrence Yakielashek, general manager and vice-president of Alfred C. Toepfer (Canada) Ltd., an export company authorized to buy wheat board grain for resale.

“It definitely highlights that you’ve taken one (wheat country) origin out of play but I don’t think it’s going to bring a stampede of new business,” he said.

Canada has the inside track among offshore exporters, but its pricing needs to stay competitive with Russia in particular, Yakielashek said.

Canada is the world’s top exporter of spring wheat, used in baking, and durum wheat, used in making pasta. Brazil imports mainly spring wheat from Canada.

U. S. wheat exports have been slow due to high prices and global competition. Brazil was the United States’ No. 9 wheat buyer in 2008-09, taking 789,000 tonnes, according to U. S. Agriculture Department data.

U. S. Wheat Associates, the industry’s market development organization, is urging the U. S. government to negotiate a solution with Brazil.

“Until this gets resolved … I can’t see that we’re going to be able to sell to Brazil in the near future,” said Rebecca Bratter, policy director with the group.

The United States is a preferred wheat supply source on the basis of price, quality and proximity to consumers, particularly for northeast Brazil mills, said Abitrigo, Brazil’s wheat-milling association.

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