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FOREIGN COUNTRIES' POLICIES AND PROGRAMS
Expansion In U.S. - Canada Durum and Durum Product Trade Heavily Favors Canada
In recent years there has been growing concern about the level of exports of Canadian wheat and more specifically durum coming into the U.S. market. During the past marketing year (June-May) the U.S. imported approximately 583,000 tons of durum wheat from Canada, an increase of over 150,000 tons from the previous year. During a time when the United States was experiencing its highest durum production level in five years, imports of Canadian durum were near record levels. At the same time, the U.S. has experienced an increase in exports of pasta, a value added product, to Canada. However, the value of trade flows between the two countries still favors Canada. As demonstrated in the chart below, the value of Canadian exports of durum and durum based pasta far exceeds the value of U.S. exports of pasta to Canada.
(Graph #1)
Canada far exceeds value in durum based goods compared to U.S. exports of pasta 1989/90-98/99
In fact, the value of durum wheat coming into the United States is double that of pasta leaving the United States. The U.S. does not export durum to Canada. In many instances, countries who import primary goods, process that good, and export the finished value added product reap the many economic benefits from the sale of the finished good. However, in the case of cross-border durum and durum products trade, Canada is still realizing a greater value.
In both the U.S. and in Canada, consumption of pasta has continued to remain strong over the past five years. This, in turn has led to an increase in cross border trade by flour millers and pasta producers for durum and semolina. This increased trade is illustrated by the sharp rise of pasta imports in both the United States and Canada (graphs #2 and #3). Pasta imports from Canada reached a record high in 1998/99, an increase of 67 percent over the level five years ago. This growth compares with an increase of US$42 million in the value of Canadian pasta exports to the United States.
(Graph #2)
U.S. Pasta Imports from Canada 1989/90-98/99
(Graph #3)
U.S. Pasta Exports to Canada 1989/90-1998/99
The issue of grain trade, particularly durum imports from Canada continues to be a topic of concern for many U.S. producers. While it may be true that the U.S. economy does reap some of the benefits from the value added to exported pasta, such as contributing to employment and increased sales, Canada appears to benefit the most from this cross-border trade in durum and durum products.
For further information, please contact Debbie Seidband at (202) 720-4204.
EU Rye Displaces Corn in South Korea
Each year, the EU produces some 2 MMT of surplus rye, mostly in Germany, that is either stored in government (intervention) facilities or exported to countries such as South Korea, Japan, and China. This year, the surplus is even larger with nearly 4 MMT of old-crop stocks, and a potential further build-up from new-crop supplies if export sales are not expanded.
Apparently, the EU has that opportunity to stimulate foreign sales. A shortfall in feed-quality wheat, normally available from Canada, Australia, and the Former Soviet Union (particularly Ukraine), has reduced exportable supplies and driven up prices. As a result, feed-quality wheat importers, notably South Korea, are looking for lower-priced grains like rye and corn.
South Korea has already purchased a substantial quantity of EU rye to partially replace the 2 MMT of annual, feed-quality wheat they normally buy (along with 8 MMT of corn, mostly from the U.S.). That rye has reportedly been sold for as low as $75/MT, at Korean ports, compared with $105/MT (C&F) for U.S. corn and $110/MT (C&F) for feed-quality wheat. The price relationship reflects rye’s lower feed value relative to those other grains. But that cheaper price is only possible with $65/MT export subsidies. At such discounted prices, it is entirely likely that South Korea will continue to buy rye at the expense of additional purchases of U.S. corn that might have replaced feed-quality wheat.
For more information, contact Cecilia Wheatley at (202) 690-4133.
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