Brazil suspends tariff on wheat from non-Mercosur member countries as its main suppliers suffered from reduced production and are now in their off-season.
BRAZIL announced on June 24 that it is suspending the 10% applied tariff again this year through Aug. 15 for up to 1 million metric tons of wheat from non-Mercosur bloc sources "to ensure supply in the Brazilian market."
According to Kansas Wheat, the measure was adopted because Mercosur member countries, which are Brazil's main suppliers of wheat, suffered from reduced production over the past couple of years and are currently in their off-season.
Mercosur member countries, including Brazil, Argentina, Uruguay, Paraguay and Venezuela, have a customs agreement whereby grain trade among them occurs tariff free. Imports of wheat from outside the Mercosur zone have been mainly hard red winter wheat from the U.S.
Before the early 1990s, Brazil originated most of its wheat from the U.S. However, the Mercosur free trade agreement established a 10% tariff on wheat from non-Mercosur countries like the U.S.
Brazil imports, on average, around 260 million bu. (7.1 mmt) of wheat, putting it among the list of the world's top wheat buyers. Argentina typically exports that amount or more.
While Argentina normally supplies most of Brazil's imported wheat, it could not supply enough to Brazil in 2012 and 2013. Argentina's production has decreased in recent years because of internal price controls and poor weather conditions. This has led Brazilian millers to request that the government open quotas.
In past years, Brazil's government has periodically expanded the quota and the window for imports as needed. In 2013, Brazil allowed a 3 mmt duty-free quota of non-Mercosur wheat, most of which was sourced from the U.S.
The recent announcement came only weeks after a group of five executives representing the largest flour mills in Brazil were in Kansas to learn more about the condition of the U.S. hard red winter wheat crop as well as the wheat supply system.
The team's June 5-6 visit was well timed as Brazilian millers, including the companies represented on this team, were the second-largest importers of U.S. wheat this past marketing year, purchasing nearly 155 million bu. (4.2 mmt).
"We were very pleased to bring these millers to the U.S. because we have a unique window of opportunity to build demand for U.S. wheat in this market," said Osvaldo Seco, U.S. Wheat Associates (USW) assistant regional director for South America, who traveled with the team.
After having success milling U.S. wheat, this trade team's visit demonstrated why they should continue importing more U.S. wheat in the future.
When Argentina severely restricted wheat export licenses in 2013, USW helped Brazilian millers successfully petition their government to temporarily suspend the wheat tariff, which allowed USW to promote the value of U.S. wheat. The group has also been pushing hard for a permanent duty-free wheat quota in Brazil.
The trade group visited Gavilon Grain in Haysville, Kan., and toured Kansas wheat commissioner Scott Van Allen's farm near Clearwater, Kan.
By visiting farms in Kansas, meeting with commercial elevator managers and seeing the U.S. Department of Agriculture grain inspection system, these executives were able to go back to their mills with a greater knowledge of how to get the best quality and value from the U.S. hard red wheat supply, Seco said.
As a result, he added, they will have the confidence to consider buying more wheat from the U.S., even when more production from Argentina is available, in part because the demand for higher-quality wheat foods, including whole-wheat products, is growing in Brazil.