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American Wheat Sales to Middle East Tumble by Scott A. Yates Capital Press, April 26, 2002

PULLMAN, Wash. -- With only six weeks left of the marketing year, U.S. wheat sales to the Middle East are down 27 percent.

Lower exports to the 12 countries that make up the Middle East produced a substantial drag on total U.S. commercial sales, which are off 7.5 percent for the year. That amounts to almost 2 million metric tons.

A weekly U.S. Wheat Associates newsletter outlined the drop in exports and some of the reasons behind the numbers. Although tensions in the Middle East might be responsible for some of the decline in U.S. market share, they do not appear to be a major contributor.

The newsletter mentioned some Egyptian bakeries that had been using "American Quality" logos on their products have stopped the practice due to anti-U.S. feelings. But the major reasons for the decline in market share are the value of the American dollar and an abundance of cheap wheat.

Wheat out of countries bordering the Black Sea is said to run $20 to $40 a ton less than U.S. hard wheat on a delivered basis. Tom Mick, chief executive officer of the Washington Wheat Commission, said the newsletter clearly points out what the industry is up against.

"It's not a lack of effort on the U.S. wheat industry's part in maintaining this market. Some factors we have no control over and we have to play the cards we are dealt," he said.

Egypt, a major buyer of U.S. wheat, has purchased about a million tons less so far this marketing year, 3.8 million metric tons compared with 4.7 million metric tons this time last year.

"U.S. wheat marketing experts report that the currency situation in Egypt is forcing private flour mills to use cheaper wheat from Hungary, Ukraine and Russia," the newsletter explained.

Egypt is especially important to the Northwest. The country can make or break soft white exports to the region. In the 2000/01 marketing year, Egypt took 1.1 million metric tons of soft white wheat. So far this year, Egypt has purchased a paltry 182,000 metric tons. Yemen, another important Northwest customer, purchased 576,000 metric tons last year and 477,000 tons this year.

Although the Middle East is important to many different classes of wheat grown in this country, the argument can be made that it is more critical to soft white wheat. Mick said the decline of market share in the region has a profound effect given the relatively small volume of soft white produced compared with other classes.

The declining fortunes of U.S. wheat in the region even extend to Israel, another indicator the issue is truly one of dollars and cents and not related to choosing sides in the volatile Middle East. Israel is America's second-largest customer in the region.

Wheat sales there are off 24 percent, down from 695,000 thousand metric tons last year to 528,000 metric tons so far this year. The country does not take any white wheat.

According to U.S. Wheat, the sales drop is the result of increased competition from alternative sources, mainly imports from EU countries, Australia and Argentina. The bulk of the feed wheat going into the country comes from Eastern Europe, the EU, the former Soviet Union and Canada.

Pricing is not the only reason wheat from countries around the Black Sea region is displacing U.S. wheat. Shipments as small as 3,000 to 6,000 tons can be made economically. Thirty-day credit provisions are also possible. Finally, quality is adequate for end-use products.

The newsletter said Middle East countries have taken to using low quality wheat, such as that from Pakistan and India, as filler. High protein hard red spring wheat or Australian wheat is being blended with these cheaper origins to maintain a suitable bread flour at lower cost. It's a trend that appears to be a market reality, the newsletter said.

Although the Northwest doesn't have market share in the North African market, states that do are enduring a 65 percent drop in sales from last year. Countries like Algeria, Libya, Morocco and Tunisia, which represent a 10 million to 12 million metric ton market, are estimating a 15 percent drop in total wheat imports. They are also replacing U.S. wheat with imports from Eastern Europe.