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North Dakota Wheat Producers Concerned About Trade Impacts In Japan

Posted: Mar 01 2019

North Dakota and U.S. wheat producers have benefitted greatly from the trade and relationships they have established with the wheat milling industry in Japan.  It is a market which provides premium prices for the quality wheat grown by the producers in our state.  Greg Svenningsen, North Dakota Wheat Commission Board member from Valley City was recently in Japan as part of a U.S. Wheat Associates marketing program.  Svenningsen says, “Japan is a valued asset in today’s world wheat export market because of its focus on quality over price, and the steady demand they provide for wheat grown here.  It is important that we continue to make all efforts possible to maintain our competitive position in this market.”
 
Svenningsen and other wheat producers are concerned that the recently signed Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), could lead to market share loss for U.S. wheat producers. 
Japan, Canada, Australia, and eight other countries are part of the CPTPP, and starting on April 1, the U.S. will be at a $0.38 per bushel price disadvantage in Japan.  That price disadvantage has the potential to grow to nearly $2.00 per bushel by 2026, as each year provides for an incremental decrease in tariffs on wheat for member countries.  The agreement was formerly the Trans Pacific Partnership, but the U.S. dropped out of in 2017, with the Administration targeting a bilateral agreement with Japan.
 
Japan is currently the number two buyer of U.S. hard red spring wheat (HRS), but it has often been our top buyer.  The success in the Japanese market is the result of over 60 years of export market development work, and the fact that wheat millers, bakers, noodle manufacturers and other end-users have worked directly with U.S. wheat breeders, researchers and producers to synch our wheat quality traits with their demand needs.  U.S. HRS meets a unique quality need in Japan, and that may help temper market share erosion in the short-term.  However, as the tariff advantage of being a member of the CPTPP grows, the price advantage for Canada and Australia may become too large for buyers to ignore.
 
The North Dakota Wheat Commission, along with U.S. Wheat Associates and its other member states, began urging the Administration in the summer of 2018 to vigorously pursue and complete a bilateral trade agreement with Japan to avoid substantial market losses.  Over the past five years, average U.S. HRS exports to Japan have been 38 million bushels, or roughly 15 percent of our total HRS exports.  Any market share loss there cannot be equally offset in other markets at comparable price levels.  “It is paramount that we secure a bilateral agreement that keeps us on an equal price position with Canada and Australia, so that we can continue to win sales on customer service strengths and delivery of quality wheat,” states Svenningsen.
 
The NDWC commends the Administration for making a bilateral agreement with Japan a priority, and is encouraging them to accelerate negotiations where possible.  The Administration is seeking to achieve similar tariff terms as the CPTPP for U.S. wheat in any bilateral agreement.  The NDWC will continue to press for a quick resolution.  “Obviously we need the trade environment to improve soon.  Japan is a large, high value market, and we need to preserve our share of that market for the benefit it brings to local prices,” concludes Svenningsen.
 

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