The Wheat Between Us

When Katherine Lee Bates wrote the lyrics for ‘America, the Beautiful’ in 1893 (at the time called simply ‘America’), she probably didn’t realize her “amber waves of grain” would become one of the most iconic images of the United States and of American agriculture. But despite its important role in patriotic imagery, wheat often stands in the shadow of the more prominent grains. Today let’s give wheat its due, and explore the wheat industry in the United States and Latin America in order to better understand how the two are connected.

Back to Basics: What is Wheat?

Wheat is a cereal grain with origins in the Middle East. Today, its widespread presence as food and feedstuff means that it is raised in most corners of the globe. The USDA estimates that last year about 735 million metric tons of wheat were produced worldwide, making it one of the most important global crops by size, second only to corn. The top five global producers, in order, are the European Union, China, India, Russia, and the United States.

In the United States, wheat production is focused around the middle and northern regions of the country. Six classes of wheat are produced, according to the trade organization US Wheat Associates. These varieties are listed here along with their production locations and principal uses:

• Hard Red Winter – Produced in the Central US and mostly used for making bread.
• Hard Red Spring – Produced in the North Central region of the US, this class is used for making breads and bakery products.
• Soft Red Winter – Dispersed production throughout the Midwest and used for finer confectionary products such as cakes, muffins, and pie crusts.
• Durum – Also produced in the North Central region of the US, durum wheat is used for making pasta products.
• Hard White – This class is produced in the Pacific Northwest and is used in breweries.
• Soft White – Also from the Pacific Northwest, soft white wheat is prized for its color which does not require bleaching and is used in a number of bakery products.

Wheat is an unusual crop in that its production season is staggered. US Wheat Associates claim that wheat is being grown or harvested during every month of the year. In general, in the United States, winter wheat is planted during the fall months and harvested the following late spring and early summer. Spring wheat is (appropriately) planted in the spring and harvested in the late summer and early fall. The Durum and White classes have two planting seasons and are generally harvested during the summer months.

Wheat: An Export Sport 

In 2002, the FAO released a report called ‘Bread Wheat: Improvement and Production’ in which one of the authors states, “world trade [of wheat] is greater than for all other crops combined.” This simple statement gives a sense of the immensity of the global wheat trade. The USDA estimates that during this international trade year, July 2016 – June 2017, almost 170 million metric tons of wheat will be exported worldwide, or nearly a quarter of worldwide production.

For the first time ever, Russia is expected to be the top global wheat exporter, with 30 million metric tons. A bumper crop, driven largely by yield improvements, has led the country to the top spot. The European Union, a traditionally strong exporter, has dealt with a number of weather related challenges that have diminished production, and as a result, export expectations. Nevertheless, the EU is still expected to be the second largest exporter of the year with 27 million metric tons. The United States is projected to claim third place with 25.5 million metric tons. Production conditions in the US have been positive and are bolstering expectations of a strong crop.

Outside of these ‘big three’, other important wheat exporters include Canada and Australia, which are expected to export 21 million metric tons and 18.5 million metric tons, respectively. Ukraine, Kazakhstan, and Argentina are other notable global suppliers. With some select exceptions, this has been a good year for growing wheat, with production and exports up across the board.

On the other side of the equation, key wheat importers include Egypt, Algeria, Turkey, the Philippines, and Afghanistan. Despite also being key exporters, it is not uncommon for the European Union and the United States to import some wheat of varying quality grades to balance their domestic supplies.

Se Llama Trigo

If you are a fan of our blog posts, or are familiar with Quarterra, you will not be surprised to see us bring this conversation back to Latin America. In the case of wheat, the connection might not be obvious. Only Argentina appeared in the list of exporters, and contradicting the global trend, this is one country whose weather issues have dampened production expectations for the year. Furthermore, no Latin American country appeared on the list of key importers. So what’s the big deal?

Well, quite a lot, if we focus specifically on agricultural exports from the United States to the region. Using data provided by the FAO, in 2013 (the most recent year for which data is available), wheat was the second most important export to Latin America in value terms, following only a generic category called ‘Food Prep not elsewhere specified’. Wheat exports during that year totaled over $3.8 billion USD. Though this value has fluctuated over the years, as have the values of other commodities, it is clear that exports to Latin America are an important source of value for the US wheat industry.

Furthermore, again in 2013 value terms, wheat was the single most important agricultural export from the US to large, important markets like Brazil, Colombia, Chile, and Peru. Wheat ranks within the top three agricultural imports from the US for Mexico, Guatemala, Nicaragua, Venezuela, Bolivia, Ecuador, Costa Rica, and El Salvador. It is the fifth most important agricultural export to Panama. In fact, the only countries where it doesn’t make the top ten list are Argentina, Uruguay, and Paraguay. 

Many of these trading relationships have been assisted, if not fully enabled, by trade agreements that give US product preferential market access. In the region, the US has FTAs or TPAs with Chile, Colombia, Peru, and Panama – all countries with important wheat imports. In addition, the NAFTA and CAFTA-DR multilateral agreements have clearly also been valuable tools to promote wheat trade in the region. (Note: See our prior blog posts to learn more about the impact that bilateral and multilateral trade agreements have on agricultural commerce).

Summary

Even though wheat may not grab as many headlines as its corn and soybean counterparts, the role that wheat plays in the agriculture ecosystem is undeniable. In particular, wheat is a critical piece of the United States’ export portfolio – especially when it comes to Latin America. It will be critical for the US industry to defend this place of prominence by continuing to build market relationships and leverage existing and future trade agreements. If they do so, the wheat fields that come to mind when we think of America’s agricultural heartland, stalks bowing and swaying in the wind, will be an important fixture for years to come.