For decades the United States has been the dominant player in the global wheat market, leading the way in exports by offering a consistently reliable supply of high quality wheat to buyers.

A driving force in this push for wheat trading supremacy has been the U.S. Wheat Associates (U.S. Wheat). Based in Washington, U.S. Wheat maintains 17 offices strategically located around the world to pave the way for U.S. export growth.

While the United States remains the largest wheat exporter as well as the second largest producer behind China, the global market has become increasingly competitive in recent years, with the margin between the United States and its competitors narrowing considerably.

“Sometimes we get caught up a little bit in bravado about the U.S. being the largest exporter of wheat in the world, which is still true today,” Vince Peterson, vice-president of overseas operations for U.S. Wheat, told World Grain, a sister publication of Milling & Baking News. “But when you look at the world market share and where we roughly had a 40% market share 30 years ago, today we’ve got somewhere between 22% to 25% depending on the year.”

The good news, he said, is that the countries importing U.S. wheat are paying premium prices for the product, which grades high in terms of quality compared to other leading exporters such as Russia, Australia and Argentina.

The United States, which is projected to export 27.42 million tonnes of wheat in 2012-13, received a major boost with larger-than-usual exports to China, which purchased nearly 3.7 million tonnes, and Brazil, which imported 2.2 million tonnes of U.S. wheat.

“China rapidly accelerated from anything we’ve done in recent years, and the other one that really stands out is Brazil,” Mr. Peterson said. “There were production problems in Brazil and lack of supply from Argentina, which opened up Brazil to a much bigger number than normal. In China, the circumstances were not really crop related, it was more government policy driven.”

While the major increases in trade with China and Brazil aren’t expected to continue on a consistent basis, Mr. Peterson said U.S. Wheat is making inroads into markets where the increase in trade should be more of a long-term trend.

He pointed to Indonesia, one of the world’s most populated countries and home to a rapidly expanding flour milling industry, as a market that is consistently demanding more wheat from the United States.

“We’re getting to the point where we’re doing between 600,000 and 800,000 tonnes of wheat sales in Indonesia in any given year,” he said. “When you consider that Indonesia sits right by the northern coast of Australia, it would be an Australian market 100% if it was just about logistics.

“We’re reaching quite a long way to get into a market like that. I think that’s quality and end product driven purchases where they’re buying U.S. spring wheat and even higher protein hard red winter wheat for bread markets and blending opportunities. They’re also buying soft white winter wheat primarily for biscuits and crackers because it’s not necessarily available in those quality ranges in Australia.”

Closer to the United States, a greater market share has been gained in several South and Central American countries, including Ecuador, Colombia, Peru and Guatemala.

U.S. Wheat is helping commercial milling, baking and food companies in Guatemala reduce costs and improve quality using U.S. wheat. As a result, Guatemala has all but stopped importing Canadian wheat and now imports five classes of U.S. wheat, including 6.3 million bus of hard red winter wheat already this marketing year, he said.

“There’s been a huge shift in Guatemala,” Mr. Peterson said. “For many years it was tied to Canadian wheat supplies but it has shifted over almost exclusively to U.S. wheat in the last three to four years.”

Recently, representatives from U.S. Wheat’s offices around the world gathered for a world staff conference. The meeting presented an opportunity to share experiences and review the market situation for U.S. wheat. Here are a few notes of interest from some of the offices:

• Lagos, Nigeria: Nigeria continues to be the leading customer of U.S. hard red winter wheat. In the 2012-13 marketing year, Nigerian millers purchased 93 million bus of hard red winter wheat, reaching a 73% market share. The United States does face several new challenges in the Nigerian market. Violence in the region has caused Nigeria to close its borders into Niger and Chad, two countries to which Nigeria would typically export flour. Also, in an effort to support local cassava farmers, the Nigerian government has imposed a 15% levy on wheat imports and is requiring millers to blend 10% cassava flour with wheat flour.

• Philippines: The United States has an 80% share of the Philippines’ wheat market, which leads U.S. Wheat to focus significant energy on increasing consumption. U.S. Wheat, together with local miller associations, started the “Celebrate Bread!” campaign. The campaign educates consumers about the nutritional benefits of bread and baked goods through events like “World Bread Day.” Demand for wheat foods in this large region continues to grow and U.S. Wheat is working with flour millers to help them meet that demand using U.S. wheat.

• Santiago, Chile: Colombia is the largest South American customer with imports of around 22 million bus annually. The U.S.-Colombia free trade agreement was implemented May 15, 2012, permanently eliminating import duties on wheat, allowing U.S. market share to increase to 44%.

As pleased as U.S. Wheat is with the gains made in these regions, there is disappointment in the loss of market share in the Middle East and North Africa, which not long ago were strongholds for U.S. wheat.

“Most of those countries are showing big goose eggs for sales this year,” Mr. Peterson said. “That’s really unusual. What we have is the reemergence of Russian/Black Sea region supplies this year, which were kind of restricted a bit last year because of production and export policy. This year they have a more normal crop and are back in the markets.”

The reason for the surge in Black Sea region sales, he said, is price as wheat from that part of the world is selling at $25 to $50 per tonne below U.S. prices and even those from wheat producing countries in Western Europe.

Mr. Peterson said demand for high quality wheat has waned in most parts of the Middle East and North Africa as economic issues and government policy has led countries such as Egypt, Tunisia, Lebanon and Jordan to seek lower-cost alternatives.

“The market that was there for higher quality wheat has kind of disappeared, and it is almost an all price-driven market, particularly in Egypt,” he said. “There is a big pool of subsidized cheap bread for that market. It’s a government food policy and they almost can’t afford to change it. You couple that with the economic circumstances there and it doesn’t seem like the situation is going to reverse itself anytime soon. There almost has to be a change from the supply side in that region before you’re going to do business there in a big way anymore.”

Removal of monopolies benefits U.S.

One of the biggest game changers in global wheat trade was the elimination of the trade monopolies of the Australian Wheat Board (A.W.B.) and the Canadian Wheat Board (C.W.B.). The opening up of free trade in those markets, which have occurred within the last five years, has benefited the United States.

“When the C.W.B. had monopoly selling ability it could sell spring wheat in Japan at a $15 or $20 per tonne premium to U.S. spring wheat, and at the same time it might sell it at $5 or $10 less into the Philippines or some other market,” Mr. Peterson said. “Those kind of distortions were really vexing, because U.S. exporters who were operating on a replacement cost basis weren’t able to do that. You can’t overprice in one market and underprice in another when you’ve got competition; it’s not going to let you do that. That one change is something that’s really leveled the playing field internationally. I think for the U.S. that’s probably the biggest gain out of the entire thing. It doesn’t sell anymore wheat for us, but it allows everyone to compete on the same level based on price, quality and all those kinds of factors.”

He said although the A.W.B. monopoly no longer exists, Australia has not yet evolved into a truly open market.

“What was left there was primarily some regional large operators that didn’t have much competition in Western Australia and some others left over from the board that owned export facilities, so the Australian market has become kind of an oligopoly,” Mr. Peterson said. “It’s still a bit different than what we have here in the U.S., which is a little more open and competitive.”

Biotech frustration

Perhaps no issue is more critical to the future of wheat production and trade than biotechnology.

For years wheat has been losing the acreage battle around the world to corn and soybeans, which have utilized bioengineering to increase yields and decrease fertilizer usage, making these crops more profitable and thus very attractive to producers.

While corn and soybeans primarily are consumed by animals or made into processed foods, most wheat is directly consumed by humans. Therefore, bioengineered wheat has not been developed commercially because of staunch opposition by consumers and governments in several key markets around the world.

The issue came to the forefront earlier this year when traces of bioengineered wheat were discovered in a shipment from Oregon. It was later discovered that even though Monsanto has not worked on commercial development of bioengineered wheat since 2004, a few Monsanto Roundup Ready plants were found in an Oregon field.

“It was pretty evident which particular countries overseas had raised the alarm flags immediately while others kind of shrugged their shoulders and didn’t much care about it,” Mr. Peterson said. “You had the Europeans, Japanese, the Koreans to a lesser extent and to a lesser extent than that Taiwan. Beyond those places, it really wasn’t that big of a concern. But those markets that had concerns are anchor markets, particularly the Europeans, because they influence North Africa and other places that feed off that market.”

U.S. Wheat is currently having conversations with foreign customers about approval processes and low-level tolerances in the event that bioengineered wheat is eventually commercialized on the global market.

“There are going to have to be tolerances in place once G.M. wheat is introduced to the market, so that’s the first place to start,” Mr. Peterson said. “We need to work on getting those in place so there’s no regulatory problem when these things occur.

“The consumer issues are completely another topic. There are a lot of surveys out there that say there’s a little bit of softening toward G.M. wheat, but at the same time there are a lot of special interest groups that like to stir things up.”

With annual world wheat trade projected to double by 2050, up from the current 120 million tonnes to more than 240 million, due to population growth, it’s hard to imagine being able to adequately feed the world without bioengineered wheat being commercialized.

But don’t expect that to occur anytime soon, Mr. Peterson said.

“For the last 7 to 10 years we’ve been saying it’s 7 to 10 years in the future, and it’s probably still about the same timeframe,” he said. “I don’t expect we’ll have a product ready for the market before that sort of timeframe.”