FOREIGN COUNTRIES' POLICIES AND PROGRAMS
Polish Reforms Encourage Corn Imports, Stimulate Grain Production
Polish economic reforms have led to income growth and a larger consumer demand for livestock products. They have also freed agricultural production, enabling improved farming practices, and increased output of wheat and barley, as well as livestock products.
Rebounding pork and poultry production and gravitation to quality feeds has stimulated demand for soymeal and corn in Poland. While current corn demand is largely satisfied through imports from nearby countries such as Hungary, future growth resulting in part from a shift from on-farm feeding to mixed feeds may necessitate imports from outside Europe (which has limited corn supplies). Strong demand for soymeal is already boosting imports from the United States and South America, leading several ports to build specialized storage capacity in anticipation of further growth.
New farming practices in Poland could mean larger wheat and barley crops through improved yields, potentially creating exportable surpluses to compete with EU exports. Western investment in breweries is helping to create a premium malting barley market in Poland, which has meant expansion of contract farming to raise yields and promote consistent quality. In addition, German and other West European farmers have moved into Poland in search of cheaper land and market opportunities, leading to the introduction of new plant varieties and production techniques. For example, a German wheat variety tested in western Poland reportedly doubled yields to 6 tons per hectare, saving 20-30 percent on production costs. EU accession will likely accelerate technology and efficiency gains, while giving Polish farmers a financial incentive to expand production.
For further information, please contact Jay Mitchell at (202) 720-6722.
Thailand to Tighten Corn Imports As Local Demand Slackens
In the last few years Thailand has been relatively open to corn imports, but the pressure from a possible glut in corn supply and depressed prices has led policy makers to shape a more restrictive corn trade policy in MY 1998/99 (October - September). Although there are substantial differences in estimates among feedmills, traders, and government agencies of the corn crop in MY 1998/99, all call for a significant increase from recent years. Since local corn consumption has slackened with the financial woes gripping the country, domestic production will likely exceed total demand in this marketing year. As the fear of a glut in supply hangs over the market, domestic corn prices have dropped significantly in recent months. In late August, a group of upcountry traders and growers protested to the Government about the depressed prices. Other traders and growers in several provinces began to pressure the Government to intervene in the market. The Ministry of Commerce organized meetings with interested parties, and the Government decided in early September to implement intervention measures to support corn prices.
The corn intervention policy will focus on a loan scheme for MY 1998/99, which will include the following provisions: a target price for corn (at the farm level) has been set at 4.00 baht/kg (approx. US$ 98/ton) with the moisture level not exceeding 14.5 percent; and a budget of 179.6 million baht will be paid to three participating groups as compensation to receive and store 500,000 tons of corn. These three groups include Bank for Agriculture and Agricultural Cooperatives (BAAC), Public Warehouse Organization (PWO), and private entrepreneurs who have silos/godowns.
Farmers who put their corn under the loan scheme will receive a loan of 3.80 baht/kg at farm, or 4.00 baht/kg at specified silos. The period of the loan will not exceed 4 months, and farmers will be charged 3 percent per annum interest on this loan. Farmers are allowed to abandon their mortgaged corn with no interest charge if market prices are below the mortgage price. On the other hand, farmers may redeem their mortgaged corn prior to the loan due date and sell it at market prices, when these prices are above the mortgage rate. The amount of mortgaged corn will be divided into 100,000 tons for BAAC, 100,000 tons for PWO, and 300,000 tons for private enterprises.
In addition, it was agreed that in 1999, Thailand would allow corn imports under the tariff-rate-quota in a quantity, and at a tariff rate which just satisfies its commitment with the WTO. This is in contrast to 1997 and 1998, when supply conditions necessitated a much more liberal quota. Thus, the import quota in 1999 will be 53,253 tons at a 20 percent tariff rate; above- quota corn imports will be subject to a 77.8 percent tariff rate. Although the Government has not clearly determined what they would do with mortgaged corn, it is likely that they may want to encourage exports of a portion of any surplus. Government sources indicate that export subsidies would not be used, leaving it unclear how exports would be promoted.
Considering the factors mentioned above, it is unlikely that Thailand will import corn in 1999. Even for eligible in-quota imports, the application of a 20 percent tariff will raise the import costs too high to compete with an abundant supply of domestic corn, which will be available at relatively low prices.
Based on a report prepared by Sakchai Preechajarn, Agricultural Specialist in the Office of Agricultural Affairs, American Embassy, Bangkok. For further information, please call Rick OMeara at (202) 4933.
NAFTA Improves Access in an Expanding Regional Grain Market
The United States grain sector has benefitted in many ways from the implementation of NAFTA and the outlook is good for a continued expansion of grain trade among the three NAFTA nations. Improved access to the Mexican grain market especially has been good news for U.S. farmers. However, at the same time some U.S. producers have complained about the increasing level of Canadian grain and grain products sales into the United States (although rising sales were already underway as the result of a separate, pre-NAFTA agreement). On balance, though, the freeing of grain marketing within North America holds great promise for the three nations as a stimulant to trade flows. It also represents a step toward economic integration, not only within the continent, but throughout all of the Americas, as called for under a planned Free Trade of the Americas Agreement (FTAA).
NAFTA mandates the eventual elimination of barriers affecting grain trade between its members. This relates mainly to trade with Mexico, since a similar structure governing trade between the United States and Canada already had been set in the 1989 United States - Canada Free Trade Agreement. Although through NAFTA Mexico also now enjoys relatively free access to both the United States and Canadian markets, it has little grain or grain products to export. However, Mexico is a major importer of wheat, corn and sorghum. Conversely, the United States and Canada are world leaders and competitors in the export of grain. While the United States remains the principal supplier of grain to Mexico, Canada is making inroads into the Mexican wheat market.
Before the implementation of NAFTA in 1994, Mexico controlled all its grain imports through restrictive licensing and high tariffs. However, under NAFTA the United States and Canada have enjoyed preferential treatment of their exports to Mexico. For wheat this meant that the import licensing requirement has been eliminated for the United States and Canada but remains in effect for all other suppliers (such as the European Union and Argentina). In addition, Mexico set an import tariff applying to wheat from the United States and Canada at 15 percent, a level which will be gradually reduced to zero over a ten year period. The tariff applying to wheat from other suppliers is 67 percent, effectively shutting them out of the market. Mexicos overall wheat imports are projected to be 2.35 million tons in the 1998/99 trade year (July - June).
As for other grains, a tariff rate quota (TRQ) with zero duty has been set up for corn of United States and Canadian origin. The minimum1998 TRQ was set at 2.8 million tons, but Mexico has decided to increase the TRQ to 4.5 million tons to help meet local demand for feed grain. The TRQ is allocated by the Mexican government according to sectors, with the largest portion going to the animal feed industry, the second-largest to starch manufactures and the remainder being distributed to food processors. The TRQ system will continue through 2008, with minium initial allocations subject to annual increases of three percent. Corn imports which exceed the TRQ are to be accessed a duty of 172 percent, a tariff which will be phased out for intra-NAFTA trade over a 15 year transition period. Imports of U.S. sorghum already are duty and quota free and Mexicos total imports are projected to reach 2.7 million tons in trade year 1998/99 (October - September). The United States has been the primary supplier of sorghum to Mexico, which generally is railed over the Texas border.
The outlook for United States grain exports to Mexico is promising. Local demand for feed grains continues to expand beyond wheat and domestic production capacity. At the Mexicos agricultural policy is moving away from same time, the concept of market orientation. This gives grain imports an self-sufficiency and toward a important role to play in Mexicos agricultural economy, while the preferential trading arrangements under NAFTA will help to assure that the United States retains its position as Mexicos leading grain supplier. Mexico consistently ranks as the largest foreign market for U.S. sorghum and the second or third largest market for U.S. corn. Mexico also is an important market for U.S. dry bean exports, which totaled 64,366 tons in 1997, valued at $39.3 million, and U.S. rice, annual exports of which have ranged between 200,000 and 300,000 tons in recent years.
The other side of the coin is the trade between the United States and Canada, both primary competitors in world grain markets. Grain trade between the two countries had already been increasing before the implementation of NAFTA. In 1997 the grain and grain products trade between the United States and Canada reached a record value of $2.7 billion. The Canadian share of $1.6 billion consisted mainly of wheat, malting barley, oats and a variety of processed products such as pet foods, breakfast cereals and bread. The $1.1 billion in United States sales mainly consisted of corn and processed items, also including pet foods and breakfast cereals.
The rising level of Canadian wheat and barley exports to the United States has been the cause of consternation for some farmers here, especially those along the northern tier of the Great Plains. As Canadas grain exports are controlled by the Canadian Wheat Board, they often draw the complaint that they benefit from hidden subsidies used to secure export sales. Canadas strict control over the movement of U.S. wheat into Canada also is a source of contention. Less concern exists regarding the trade in oats. Canadian oats are welcomed by United States processors, who cannot get enough of the product domestically. The United States production of oats has declined dramatically over the years to the point where now it meets just two-thirds of domestic consumption needs.
Looking ahead, progress toward the FTAA has been slow. Meanwhile, the South American nations are moving ahead with MERCOSUR, a regional free trade agreement of their own. Already this has put Argentina in an advantageous position as the primary grain supplier to a largely captive market. In addition, Canada has been active on the southern continent, negotiating a free trade agreement with Chile, for example, which provides Canada with duty preferences on wheat and other grain products imported by that nation. These developments already have placed U. S. grain exports to South America at a disadvantage, raising the stakes here at home for the successful negotiation of a FTAA which includes all the American nations.
For further information, please contact James Gartner at (202) 690-4130.
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