KANSAS CITY — An expansion of wheat imports into the United States in recent months has generated concern among some industry stakeholders. While the volume of wheat imported by ocean vessel from Europe has been and is expected to remain small, the forces prompting the inflow are manifold and potent.
Agricultural imports into the United States, including wheat, are not a new phenomenon. US hard red spring and durum wheat supplies have been quietly supplemented for many years by wheat shipped from Canada. Additionally, the United States has imported corn and soybean meal from South America in past years.
In part, the recent wheat imports reflect short-term supply difficulties. Hard red winter wheat yields in the Southwest have been severely depressed the last two years because of unfavorable weather. The June forecast for Kansas wheat production was 191.4 million bus, the smallest since 1963. Millers and bakers reliant on hard red winter wheat have scrambled at times in recent months to secure needed wheat/flour supply. Researchers at Tufts University recently predicted that such crop problems, once extremely rare, will occur more frequently in the years ahead.
Beyond the weather trends, there has been an unabated move in the United States away from the planting of hard red winter wheat. Average hard winter plantings in the late 1980s were 36.9 million acres; in the 1990s, 34.7 million acres; 2000s, 30.6 million; 2010s, 27.1 million; and early 2020s, 23.5 million. All told, over the last 36 years, plantings of hard red winter wheat in the United States have decreased 36%.
Looking at Kansas, again, growers in 1980 harvested 420 million bus of wheat, 116.6 million bus of corn and 24 million bus of soybeans. In 2020 growers in the state harvested 281 million bus of wheat, 766.5 million bus of corn and 194.7 million bus of soybeans. From a peak of 17.1 million acres in 1937, Kansas growers have planted an average of less than 7 million acres of wheat over the past five years.
Many forces have encouraged the shift away from wheat plantings in the Southwest, including advances in seed technology that have allowed growers to profitably cultivate corn and soybeans. Rapid growth in US production of renewable fuels also is a contributing factor to the shift away from wheat planting. About a quarter of the US soybean crop is used for fuel production currently, up from 12% a decade ago. The growth rate is accelerating.
Freight costs add a crucial additional dimension to drivers of wheat imports. Many transportation customers, including destination flour mills, continue to rely on rail and have been challenged by escalating rates and service reliability issues. After annual increases of 4% to 7% over the past two years, forecasts project tariff rate inflation of 2% to 4% going forward. By contrast, ocean freight rates have fallen sharply from COVID-19 peaks and currently hover at levels prevailing in 2018. Recent analysis by US Wheat Associates estimated US rail tariffs and fuel charges to transport wheat (to destination flour mills) are close to twice the ocean freight cost.
Access to grain shipped by ocean freight offers destination mills an alternative to rail, and potentially competitive leverage. When similarly positioned corn and soybean processors began importing feedstock by ocean vessels in recent years, rail carriers lowered rates to keep the business. Flour millers similarly have expressed the hope importing even a small percentage of a facility’s grind may curb or even reverse rail rate increases. Using the competitive leverage of international supplies has potential benefit for bakers and millers, as well as growers.
Rightly noting that the United States produces more than enough wheat in aggregate to meet aggregate domestic requirements, state wheat commissions have voiced disappointment over the imports of European wheat. Still, US Wheat Associates acknowledged that transportation cost spreads indicate rail rates have been and continue to be a burden on the value of delivered wheat for domestic and export markets. The expense is borne by growers, millers, bakers and exporters.
It has been many years since the United States was the leading global exporter of wheat. For 2023-24, the USDA is projecting the United States to rank fifth globally in wheat exports with a 9% share, behind Russia, the European Union, Canada and Australia. Insulating the United States from imports is not the solution for wheat growers looking to reestablish US wheat’s competitive position around the world.
Bakers also have expressed apprehension and need to be cautious about incorporating flour from imported wheat into their formulations. In the age of social media, makers of branded products need to pause when considering actions that may rile up consumers and damage a brand’s value. That wheat, the leading food grain in the United States, is perceived differently than other grains was made clear during the protracted debate about introducing bioengineered wheat. Introducing imported wheat is different from introducing GMO wheat, but the comparison calls attention to the potential sensitivity of the issue. On a more practical level, bakers who make “Made in the USA” claims on packaging or who supply government programs that require US-origin ingredients also need to proceed carefully. Similarly, bakers have expressed concern about pricing transparency for flour from imported wheat and have cautioned that adapting to new wheat, even high-quality wheat, takes time and care.
For all the grain-based foods industry’s hand wringing in recent years over discouraging trends in demand for its products, far less attention has been devoted to a more imminent and alarming threat regarding US wheat supplies. For decades, US millers and bakers have been confident in their ability to draw on an adequate supply of good quality, affordable domestic hard red winter wheat, year after year. Unfavorable weather conditions and the long-term decline in United States wheat acreage have shaken that confidence.
The modest volume of spring wheat imported into the United States has not upended the wheat economy in the Upper Midwest, and the same will be true in the Southwest for imports of hard milling wheat from Europe. It is hoped the episode will be a catalyst for actions needed to ensure US wheat regains competitiveness everywhere in the United States and in the world beyond.