FOREIGN COUNTRIES' POLICIES AND PROGRAMS
Canadian Barley Sector Adjusts to Loss of Export Markets
Canadian 1998/99 total barley exports are forecast down to a 30- year low of 1.4 million tons. The drop in forecast total barley exports comes largely at the expense of feed barley which has found new markets domestically due to substantial new growth in feed use from the expansion of cattle and hog industries. Malting barley exports will fare better, but likely will also be down from last year. Canada is expected to have a reduced role to play in the world feed barley market even as world prices return to more normal levels.
Prevailing low world barley prices can largely be attributed to the actions of the European Union. The European Union has doubled its exports from 3.2 million tons in 1997/98 to a forecast 7.3 million tons this year, thanks to subsidies of up to $85/ton, exceeding the cost of grain to buyers. Equally aggressive, Turkey fought a bidding war against the EU last fall that helped it post record exports, forecast at 1.4 million tons, but at great cost to its TMO (Turkish Grain Agency) budget, with subsidies approaching $95 per ton to sell off large stocks.
The Canadian barley sector is in a strong position to weather the price undercutting practices of the EU and Turkey. In the last decade, Canadas domestic feed use of barley has grown almost 30 percent to over 10 million tons. The feed industry is expected to use 80 percent of the domestic barley crop in 1998/99, up from around 60 percent ten years ago.
In the meantime, Canadian malting barley exports have done relatively well. Canada has created brand name, select grades such as two-row Harrington that cater to preferences for malting barley in Asia and also is able to supply North American maltsters with that markets preferred six row barley. By emphasizing its ability to deliver specific barley types to maltsters, Canada has differentiated its product from others in the market helping to maintain malting barley exports.
Canada also appears to have focused on expanding malt exports and has increased its share of world trade from 9 percent five years ago to an estimated 15 percent in 1997/98. Canadian maltsters usually have ample supplies of quality malting barley available since Canada grows predominantly malting varieties, as well as the added advantage of procuring supplies from the Canadian Wheat Board, the sole seller of malting barley in Canada, at favorable prices. Canadian exports of malt have doubled over the last 10 years and now exceed 600,000 tons annually (grain equivalent basis).
For more information, please contact Eric Wenberg at (202) 720-2231.
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Argentina and Uruguay Look to Expand Rice Export Markets in 1999
Record rice production in South America in 1998/99 is expected to result in lower regional import requirements and increased export competition for the United States. The situation is a dramatic turn-around from 1998, when El Niņo-reduced crops throughout South America caused many regional importers to turn to the United States for supplies. In 1998, over 27 percent of U.S. rice exports went to South American destinations.
However, the South American crop shortfall last year resulted in a tremendous production response in Argentina, Brazil, and Uruguay. Argentine rice production has been growing rapidly for several years due to increases in both area and yields, and in 1998/99 is estimated to exceed the previous years level by over 30 percent. A similar situation has developed in Uruguay. In addition, Brazil, which is the primary export destination for Argentine and Uruguayan rice, is forecast to increase its own rice production by an estimated 28 percent.
The situation in Brazil is further complicated by the devaluation of the Real. While devaluation has apparently made rice a better value as compared to other products and consumption is likely to increase somewhat, consumers are left with lower disposable income, thereby constricting their ability to purchase high-quality Argentine rice, at least at pre-crisis prices. According to industry sources, Brazil has canceled or delayed rice shipments from Argentina, or forced prices to be renegotiated from about US$500 per ton to as low as US$360 per ton for milled product. Although prices around the latter figure may prove to be low enough for Brazil to continue purchases, they would scarcely cover costs for Argentine farmers.
As a result, Argentina and Uruguay are expected to aggressively pursue new rice export markets. To that end, Argentine government officials and industry leaders have been traveling to Peru, Costa Rica, Colombia and Mexico to seek out diversified markets for this years rice crop.
Efforts by the Argentine and Uruguayan rice sectors to sell into a wider range of markets is not unprecedented, nor without success. During the last few years, they have increased sales to Latin American markets to dispose of the greatly expanded output of the last decade, and have more recently made in-roads to several European and African destinations.
For further information, please contact Randy Hager, Agricultural Attache, U.S. Embassy, Buenos Aires, Argentina at 011-5411-4777-8054, or Linda Kotschwar, at 202-690-1147.
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Tightening French Grain Storage Could Change EU Market Dynamics
Frances ability to store grain is not keeping up with expanding supplies. Total storage capacity has reportedly not been expanded in 5 years even as crops have grown by 15 million tons which means increasing amounts of grain (especially wheat and barley) cannot find available elevators at harvest time. Instead, the grain is stored in poor facilities that risk deterioration in quality or enters market channels immediately following harvest, depressing prices in either case.
Recent Government attempts to make additional storage appear to be too little too late. While two million tons of new capacity was to be completed by May 1999, tighter safety standards and pre-construction approval procedures lasting 9-18 months have delayed even that modest schedule. The new regulations also make enlargement of existing elevators more expensive than building new ones, further limiting capacity increases. Even with about 1-2 million tons of additional storage available in neighboring Belgium, any new French grain storage facilities are clearly insufficient to handle burgeoning supplies.
Inadequate storage, abundant supplies are causing market distribution problems as grain clogs elevators at port and rail facilities as well as fills interior positions. This has undoubtedly contributed to recent sharp declines in grain prices and has prompted farmers and coops to call for policy changes that better support prices. In particular, pressure has been building on Brussels for over a year to boost exports as a means of removing some of these excess supplies from the market.
For further information, please contact Jay Mitchell at (202) 720-6722.
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Can the United States Get a "Pulse" in the Indian Market?
Pulses are an important component of the Indian diet, providing a major source of protein for a majority of the population, across income lines. However, per capita consumption has been declining as production has fallen short of the growing population. At about 30 pounds per year, Indias per capita consumption still ranks among the highest in the world, although it is just half of what it was in the 1960's. India is the worlds largest importer of pulses, and yet, the worlds largest producer, with production having stagnated at around 12.0 to 14.0 million tons. The success of high yielding wheat and rice varieties coupled with the government support prices they receive have encouraged farmers to switch planted area from pulses to wheat and rice. Consequently, India has consistently relied on the world market to meet large demand for peas, beans and lentils.
Because of its varied agro-climatic conditions and food preferences (varies from region to region, even state to state), India produces and imports over a dozen types of pulses. Primarily, production includes chickpeas/garbanzos (accounting for 35 percent of total pulse production), pigeon peas (accounting for 20 percent of production), and the collective of mung beans, black gram, and moth beans (accounting for 25 percent of production). Regarding imports, chickpeas/garbanzos have consistently been the single most important pulse imported, but in recent years, dried peas have emerged as the major import item. Other imports include mung beans, black gram, lentils, pigeon peas, black-eyed beans, and kidney beans.
In order to improve domestic availability of pulses, since 1979 the government of India (GOI) began to allow import of pulses under Open General License (without licensing or other quantitative restrictions). Although, since 1987 an import duty ranging from 5 to 35 percent was in place, the GOI altogether abolished the import duty on pulses in November 1998, following the steep price hike of pulses and other food items earlier in the year. Over time, in response to price shifts, annual imports of particular pulses have varied by tens of thousands of tons annually, with total pulse imports ranging between 300,000 MT and 800,000 MT annually. In 1996/97 (April/March), imports were 690,000 MT (valued at $250 million) and 660,000 MT (valued at $225 million) in 1997/98, making pulses the fourth largest agricultural import item in India following vegetable oils, wood, and wheat. The pulse import trade is mostly concentrated in Bombay. There are few importers, and they typically share container loads.
India was an important market for U.S. dry green peas with annual imports reaching as high as 40,000 tons back in 1988/89. However, competition from New Zealand, Hungary, and later Canada eroded the U.S. market share. The Indian pulse market is flexible and open to exploring non-traditional pulses and suppliers, if price is attractive and the product can fit into the Indian diet. Price competitiveness is key to determining market share because pulses are predominantly a food of low and low-middle income consumers.
The U.S. may be able to take advantage of the potential for growth in the market for various types of beans, particularly chickpeas, black-eyed beans and kidney beans, provided pricing and quality are competitive. Since India is expected to remain a major importer of pulses for years to come, the U.S. producer may want to consider expanding pulse cultivation in order to improve economy of scale, as Canada and Australia have done. Another suggestion which might improve U.S. competitiveness would be to explore the possibility of shipping in bulk rather than in containers in order to help bring down the delivered price in India.
Two markets in India where U.S. exporters may be able to get a "pulse" is the fledgling supermarket industry and the hotel industry. Upper and middle-income families in Indias metropolitan cities increasingly purchase their food needs at modern supermarkets rather than traditional corner grocery stores. Steady growth in the number of supermarkets is occurring in and around major cities like Delhi, Bombay, Madras, and Bangalore. This has opened up a niche market for various imported food items. This creates a potential for the sale of U.S. canned peas and beans to targeted upscale supermarket consumers. Indias hotel industry, as a key end-user for imported foods, ingredients and beverages, has emerged as an important niche market for high value foods. Though the growth of the hotel industry has slowed in recent years, overall hotel and restaurant demand has remained strong (imports are estimated at $10 million annually). This market offers U.S. pulse exporters the opportunity to supply some of the more highly specialized products that are not locally available in India.
Based on reports from the Office of Agricultural Affairs, American Embassy, New Delhi. For further information, please contact Vickie Hunter at (202) 690-4197.
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