Talking points on the report by the International Trade Commission
"Wheat Trading Practices:
Competitive Conditions Between
U.S. and Canadian Wheat"
- Price comparison of US and Canadian Wheat (p. xvii)
“Regarding contracted prices in the U.S. market during 1996/97 to 2000/01, reported Canadian Durum prices were above U.S. prices for all comparable months except one. For #1 CWRS/HRS wheat, price relationships were mixed with some Canadian prices equal to or above U.S. prices, and others below. Prices for #2 CWRS wheat were generally higher that those for #2 HRS wheat”.
NAMA comment: The petitioners allege the Canadian Wheat Board (CWB) engages in discriminatory pricing. In fact, according to the report, Canada's prices are nearly always higher than those for comparable wheat from the U.S.
- Export marketing practices (p. xvii)
“The analysis of protein delivery in exporter contracts for U.S. #2 HRS and #1 and #2 grade CWRS wheat shows that over-delivery of protein occurs in exports of both U.S. and Canadian wheat. Most over-delivery was found to be small, equal to or less than 0.2 percentage points over contract specifications, and this level of over-delivery occurred in both U.S. and Canadian contracts.”
NAMA comment: The petitioners allege the CWB gives away protein for free, inferring that puts U.S. sellers at a disadvantage. In fact, both countries give away protein in small amounts. This is to be expected as buyers contracts routinely specify financial penalties for under-delivery. Further, the report states (page xxi) 65 percent of U.S. shipments over-delivered protein while only 54 percent of Canadian shipments over-delivered protein.
- Trends in U.S. acreage, production and crop yields (p. 2-15)
“The U.S. harvested acreage in Hard Red Spring wheat fell by 28 percent, and yields rose by 9 percent, resulting in a nearly 21 percent decline in production.”
NAMA comment: This decline continues the trend in which the U.S. HRS production was less than usage in 12 of the last 15 years.
- Table 2-8 - Wheat and wheat-containing products: Composition of U.S. imports and U.S. exports (p. 2-17)
NAMA comment: It is worth noting that nearly one-fourth of total U.S. imports of Canadian wheat is in the form of flour or other products. Further, the data show no trend as the imports of wheat grain from Canada over the last five years were 71, 73, 80, 72 and 70 million bushels, respectively.
- Exchange Rates (p. 3-24)
“Elsewhere in the world, trade in wheat is generally valued in U.S. dollars, even CWB exports to third-country markets. Thus, exchange rate movements involving the currencies of third-country markets do not affect the prices received by U.S. exporters or paid by U.S. importers, but they do affect both the prices received by Canadian exporters and the prices paid by foreign buyers. Depending on the direction of change in the exchange rate, foreign buyers may opt to source their wheat from different exporters.”
NAMA comment: NAMA and its members have no knowledge of competitive factors influencing the purchasing decisions of the eight overseas markets studied in the report. However, its seems likely that exchange rate differences between the U.S. and Canada contributed to the decline in purchases from the U.S. by those countries, and increases from Canada.
- Shifts in purchasing patterns of Canadian wheat (p. 4-3)
“Five firms reported they increased their purchases of Canadian wheat during 1996/97 to 2000/01. Whereas seven firms reported they decreased their purchases, 11 reported no change and three reported fluctuating purchases.”
NAMA comment: Since more than 80 percent of those firms who purchased wheat from Canada reported they have not increased those purchases, attempts, if any, to engage in predatory pricing apparently failed.
- Table 4-3 – Purchasers: Imports and purchases of Durum wheat; Reasons attributed to shifts in purchase volumes of Canadian wheat
NAMA comment: Note that only eight of 32 firms responded that shifts in purchases from Canada were due to price alone, compared with 11 who shifted purchases due to product quality reasons or short supply of the U.S. crop. In fact, at least some of the purchase shifts were away from Canada due to price considerations.
Read more:
Back to Top