Farm Talk

Ag News from Around the Country

December 14, 2010

Agreement could be big for wheat growers

Parsons, Kansas — After months of negotiations, terms have been reached on a U.S.—Korea Free Trade Agreement, which could be a huge boon to wheat farmers.

South Korea is a top ten market for U.S. wheat producers, importing more than 40 million bushels of mostly Hard Red Spring and Hard Red Winter wheat each of the last five years. Once implemented, the Free Trade Agreement will help protect the market by eliminating a small tariff, which U.S. wheat faces there now.

In a joint statement released recently, Alan Tracy, president of the U.S. Wheat Associates and Dana Peterson, chief executive officer of the National Association of Wheat Growers, welcomed the successful conclusion of the negotiations.

"We applaud the Obama Administration for working hard to address the difficult challenges in this deal, and we look forward to its swift submission to and ratification by Congress," the leaders said.

And while this recent announcement will be good for the U.S. economy, it could be a harbinger of things to come, says Dalton Henry, government affairs specialist for Kansas Wheat.

"This agreement sends a message to the world that the U.S. is serious about establishing free trade agreements," he says. "Now, our goal should be to finalize free trade agreements with Colombia and Panama."

The U.S. does have pending trade agreements with Colombia and Panama. Close proximity to the U.S. and increasing demand for high-quality Hard Red Winter wheat could bring about big benefits to U.S. wheat producers if agreements with Colombia and Panama could be finalized.

Without bilateral and regional agreements such as the U.S.—Korea FTA, U.S. wheat producers face a competitive disadvantage in other key countries, particularly since other wheat exporters are moving ahead at a brisk pace to sign their own bilateral agreements in several key U.S. markets.

For example, U.S. Wheat Associates estimates that failure to ratify the U.S.-Colombia FTA could lead to an annual loss of more than $100 million for the U.S. wheat industry at current export prices.

This is in part because a ratified FTA between Canada and Colombia will allow Canadian wheat to enter Colombia duty free in early 2011.

Influential Colombian millers confirm that if they must pay duties on U.S. wheat, but not on Canadian wheat, U.S. market share will likely decline.

The results of a comprehensive new study by U.S. Wheat Associates and 11 other commodity groups show that active trade agreements directly increase U.S. agricultural exports, farm gate prices and job growth.

Yet the United States risks falling behind as its export competitors aggressively press ahead.

"We are pleased with the effort on the U.S.—Korea FTA, and we hope its forward movement signals the United States is willing to work as hard, with the same urgency, to finalize pending Colombia and Panama FTAs, negotiate the Trans-Pacific Partnership and seek a beneficial conclusion to World Trade Organization Doha Round negotiations," Tracy and Peterson concluded in the joint statement.

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