US Wheat Associates, the group representing the United States wheat industry, is eying an 80% chunk of Brazil's 750,000-tonne tariff-free wheat import quota, Vince Peterson, the group's president, told Reuters on Wednesday. Peterson is leading a delegation of US wheat producers and merchants visiting Brazilian wheat mills and food processors this week to gauge sales potential for coming months once a tariff-free quota is implemented.
Brazilian President Jair Bolsonaro announced the tariff-free quota during his visit to Washington last month. It will also apply to other suppliers such as Russia.
Currently, any US wheat sale to Brazil, one of the world's largest importers of the cereal, is subject to a 10 percent import tariff, while Argentine sales enter free of tax since as Brazil's partner in Mercosur free trade bloc.
"It does make a difference. Ten percent in a 250-dollar-a-tonne commodity is a pretty significant differential for buyers," Peterson said.
The United States is a long-time Brazilian wheat supplier. It used to sell very large amounts in the 1960s and 70s.
At that time, Peterson says, the South American nation used to buy so much hard wheat (HRW, hard red winter) that the product was known in the market as the "Brazil spec."
Argentina's growing production later on, associated with the Mercosur advantage, took most of that business.
Currently, US supplies around 300,000-400,000 tonnes in a normal year. That can rise a lot if the Brazilian or the Argentine crops have problems.
"In 2013 we sold 4 million tonnes to Brazil," said Peterson.
Brazil imports around 6 million tonnes of wheat every year, roughly half its consumption. Despite being an agricultural powerhouse, the country lacks enough areas with the temperate climate ideal for wheat growing.
Peterson expects competition for that tariff-free quota, particularly from Russia, which has expanded its global wheat market presence in recent years with rising production and relative low prices.
He thinks the US product, however, has advantages both on logistics and quality. "Brazilian mills are used to our product, they know very well how to work with its specifications," he said.
Brazil's economy ministry is finishing regulation on the quota. Abitrigo, a local association of wheat mills, hopes it can be implemented soon, so Brazilian processors can have more options in the market.
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