Brazil waives wheat tariff… for now

ARLINGTON, Va. — A temporary tariff change in Brazil is signaling an opportunity for U.S. wheat farmers to regain competitiveness in South America’s largest wheat importing market.

The government of Brazil is waiving the 10 percent common external tariff (CET) for up to 1.0 million metric tons (MMT) 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.

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).

Opportunity for U.S.

“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,” said U.S. Wheat Associates Vice President of Policy Shannon Schlecht.

Of the Mercosur members, Argentina has the vast majority of the Brazilian market share, averaging around 80 percent, according to the U.S. Department of Agriculture (USDA).

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 reached only 25,000 MT in the entire, more average, marketing year of 2006/07 with the CET in effect.

Poised to export

Schlecht said this duty free wheat quota should encourage a similar pattern of increased U.S. wheat imports into Brazil.

Aside from the fiscal advantage of the duty free wheat quota, many of Brazil’s buyers are also in a good location to import U.S. wheat. Several important flour mills are located in northeast Brazil and its northeastern port is the same distance away from southern U.S. ports as it is from Argentina’s ports. This leaves U.S. wheat at no disadvantage when it comes to shipping costs and Brazil’s buyers are responding again.

Current figures

Commercial sales of hard red winter and soft red winter to Brazil as of March 28 for 2012/13 are more than 400,000 MT compared to commercial sales at the same time in 2011/12 of only about 112,000 MT.