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December 21, 2001
News Release 01-149
Inv. No. 332-429
ITC Releases Report On Conditions Of Competition Between U.S. And Canadian Wheat Industries
The U.S. International Trade Commission (ITC) today released Wheat Trading Practices: Competitive Conditions between U.S. and Canadian Wheat, a survey of U.S. and Canadian Durum and Hard Red Spring (HRS) wheat sold in the United States and key third-country markets during 1996-2001.
The ITC, an independent, nonpartisan, fact finding federal agency, conducted the investigation for the United States Trade Representative (USTR), who asked the ITC to provide a survey of U.S. purchasers of U.S. HRS and Durum wheat purchasers; a separate survey of U.S. exporters to key foreign markets; and a summary of conditions of wheat trade between the United States and Canada. Representatives of U.S. wheat growers filed a petition with USTR in October 2000 under section 301 of the Trade Act of 1974 alleging certain trade distorting practices of the Canadian Wheat Board (CWB) and the Government of Canada. Highlights of the ITC report follow:
* The United States was the leading and Canada the second-leading world wheat exporter during the period covered by the investigation (marketing years 1996/97 to 2000/01); however, Canada was the leading Durum wheat exporter with nearly 60 percent of world exports (compared to the U.S. 20 percent share). U.S. wheat exports to eight key markets (Algeria, Brazil, Colombia, Guatemala, Peru, the Philippines, South Africa, and Venezuela) fell during the period covered by 48 percent to $435 million. The eight countries bought one-fifth of world wheat imports during the five years.
* The United States imported Durum and HRS wheat almost entirely from Canada; Canada itself imported almost no wheat. In marketing year 2000/01, U.S. imports of Durum and HRS wheat totaled $212 million ($51 million and $161 million, respectively) and accounted for 29 percent and 18 percent of U.S. consumption of Durum and HRS wheat, respectively.
* Respondents to the Commission purchasers' questionnaire accounted for nearly all U.S. imports of Durum and HRS wheat in marketing year 2000/01, and respondents to a separate exporters' questionnaire accounted for nearly all U.S. Durum and HRS wheat exports to the eight foreign markets and for nearly two-thirds of Canadian HRS wheat exports.
* The market structure for Durum wheat (used in pasta) is quite different from that for HRS wheat (used in bread and baked goods), the former being thinly traded and more dependent on Canadian wheat. The CWB is a state trading enterprise controlling Canadian Durum and HRS wheat exports and has major competitive advantages to contract sales of Durum wheat for future delivery, since no viable futures contract for Durum wheat is available on U.S. grain exchanges.
* Respondents said pricing of Canadian wheat sold in the United States was based on U.S. cash (spot) or the futures price (for HRS wheat) on the Minneapolis Exchange. Reported contracted prices at Minneapolis for No. 1 grade Canadian Durum wheat were above all comparable U.S. No. 1 Durum prices, except for a single month during the five years. Monthly prices of Canadian No.1 grade HRS wheat were mixed, varying above and below comparable U.S. prices.
* Terms of sale of U.S. and Canadian wheat sold in the United States were close, though Canadian wheat was more often contracted for future (forward) delivery than domestic wheat. Delivered U.S. and Canadian wheat tended to exceed the minimum contracted protein level, with 65 percent of the U.S. shipments of HRS and Durum wheat and 54 percent of the Canadian shipments having higher protein levels than required. CWB wheat was delivered at lower dockage rates than contracted for, requiring less cleaning at the mill.
* Canadian exports to the eight foreign markets overtook U.S. exports by marketing year 2000/01, and six reporting U.S. exporters lost sales of U.S. wheat to Canadian wheat. Over-delivery of protein levels tended to be higher in Canadian than U.S. HRS wheat sold abroad.
* Canadian wheat sold in third-country markets benefited from lower rail rates for shipping from Canadian country elevators to export terminals on the Great Lakes or to Pacific ports. Canadian law places a ceiling or "cap" on the charges railroads collect on transported CWB wheat; moreover, the CWB and the Canadian government provided thousands of railcars without charge to Canadian railroads. Meanwhile, Canadian trade policies and programs particularly the varietal registration program and end-use certificates adversely affected potential U.S. wheat exports to Canada, according to U.S. wheat exporters.
Wheat Trading Practices: Competitive Conditions between U.S. and Canadian Wheat (Investigation No. 332-429, USITC Publication 3465, December 2001) will be posted in the Publications section of the ITC's Internet site at www.usitc.gov. A printed copy may be requested by calling 202-205-1809 or by writing the Office of the Secretary, U.S. International Trade Commission, 500 E Street SW, Washington, D.C. 20436. Requests may be faxed to 202-205-2104.
ITC general fact finding investigations, such as this one, cover matters related to tariffs or trade and are generally conducted at the request of the U.S. Trade Representative, the Senate Committee on Finance, or the House Committee on Ways and Means. The resulting reports convey the Commission's objective findings and independent analyses on the subjects investigated. The Commission makes no recommendations on policy or other matters in its general fact finding reports. Upon completion of each investigation, the ITC submits its findings and analyses to the requestor. General fact finding investigation reports are subsequently released to the public, unless they are classified by the requestor for national security reasons.
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