Shifting Destinations of U.S. Wheat Exports
By Stephanie Bryant-Erdmann, USW Market Analyst
Over the past twenty years, roughly 10 MMT of U.S. wheat exports have shifted from price sensitive markets to quality-driven markets. Consumption in quality-driven markets in Southeast Asia and Latin America increased an average 2 percent annually over the past ten years, according to USDA.
In 1995/96, the top ten destinations for U.S. wheat included Egypt, Pakistan and Sri Lanka, whose respective governments purchased large quantities of wheat for subsidized food programs and strategic reserves. Thus, these markets were very price sensitive. While some liberalization has occurred in these markets, subsidized food programs and strategic reserves are still the primary uses for imported wheat by these markets.
Rounding out the top destinations in 1995/96 were markets that value quality: Japan, Mexico, the Philippines, South Korea, Taiwan, Nigeria and the European Union. These markets continue to be top ten destinations for U.S. wheat. Over the past five years, U.S. wheat exports to these seven countries averaged 13.6 MMT compared to 9.78 MMT in 1995/96, an increase of 39 percent, while total consumption increased an average 7 percent over the same time period, indicating increased usage and preference for U.S. wheat despite prices often higher than from other sources.
Since 1995/96, wheat consumption in other quality-driven markets has also grown. Southeast Asian markets, including Indonesia, Thailand, Vietnam and Malaysia1, have grown an average 6 percent annually. U.S. exports to the region increased 93 percent to 2.23 MMT in 2016/17, according to Global Trade Atlas data. Year-to-date, U.S. wheat export sales to the region total 1.23 MMT, on pace with last year’s pace. U.S. wheat exports also increased 59 percent to Latin and South America with 5-year average sales of 6.48 MMT compared to 4.07 MMT in 1995/96.
In 2016/17, the top destinations for U.S. wheat are a veritable who’s who of the markets that value quality, dominated by Asian, Latin and South American markets. In total, the top ten destinations represented 64 percent of U.S. wheat sales during that marketing year. Countries in Central America and South America, including Chile, Guatemala, Honduras, Peru, Venezuela and the Dominican Republic, were in the top 20 destinations for U.S. wheat and accounted for another 9 percent. See the latest USW Commercial Sales report for the resulting increases in wheat exports to the increasingly quality-driven markets in Southeast Asia, Latin and South America.
The goal for any company selling a high-quality product is to make demand for that product inelastic — an increase in price does not have an equal decrease in quantity demanded. Put another way, consumers have such a strong preference for the good that increases in price result in very small decreases in quantity demanded. Creating inelastic demand takes a combination of the right consumers, the right product, hard work, and, in many cases, time.
It is a market development strategy that also provides value to U.S. farmers in the form of higher prices for their wheat compared to farmers in most competing countries. U.S. farmers also continue to work on product quality, investing an average $12 million annually on wheat research through their state checkoff programs, according to a study done by the National Wheat Improvement Committee in 2012. USW has also put more focus and resources into its marketing efforts in markets that are traditionally quality conscious and experiencing growth, such as Japan, Mexico and the Philippines.
1The Philippines is normally included in the Southeast Asia region, but due to the prior reference, its exports sales were excluded from this region’s analysis.
