A temporary tariff change in Brazil is signaling an opportunity for U.S. wheat farmers to regain competiveness in South America's largest wheat importing market, according to the U.S. Wheat Associates.
The Government of Brazil recently announced that it is waiving the 10% common external tariff for up to 1.0 million metric tons of wheat from April 1 through July 31, 2013. Brazil introduced the new duty free wheat quota due to a shortage of wheat from countries included in the Mercosur Agreement.
"We are happy to see Brazil lower the tariff for non-Mercosur countries and provide a market opportunity for U.S. wheat in addition to providing an affordable and high quality food supply to its citizens," U.S. Wheat Associates Vice President of Policy Shannon Schlecht said in a statement Thursday.
Brazil is one of the top three wheat-importing countries in the world but trades the commodity mostly with Mercosur members (Argentina, Paraguay and Uruguay) thanks to the free trade provisions in the agreement. Argentina has the vast majority of the market share, averaging around 80% according to the U.S. Department of Agriculture. However, the government has lifted the CET before in years when these countries had a shortage of wheat and Brazil chose to import a noticeable amount from the United States. For example, supported by frequent contact with USW, U.S. commercial sales to Brazil were about 907,000 MT between Jan. 1 and Aug. 31, 2008, while the CET was waived, yet sales only reached 25,000 MT in the entire, more average, marketing year of 2006-07 with the CET in effect.
Thanks to a good relationship between Brazilian millers and bakers and USW, this duty free wheat quota should encourage a similar pattern of increased U.S. wheat imports into Brazil.