The Brazilian government has announced it will suspend the 10% applied tariff until Aug. 15. Up to 1 million metric tons of wheat can be imported tariff-free from non-Mercosur sources to ensure adequate supply.
Mercosur member countries include Brazil, Argentina, Uruguay, Paraguay and Venezuela. They have suffered from reduced production during the past couple of years and are currently off-season. Argentina in particular has decreased its production in recent years due to internal price controls and poor weather conditions.
Prior to the early 1990s, Brazil originated most of its wheat from the U.S. The Mercosur free trade agreement allowed for a duty-free import of Argentine grain. It also assigned a 10% tariff to non-Mercosur countries, including the U.S. Brazil is one of the world’s largest importers of grain. It brings in around 260 million bushels of wheat annually.
This won’t be the first such move by Brazil, either. In recent years, its government has periodically expanded its quotas and windows for imports as needed. Most recently in 2013, Brazil allowed the import of 3 million metric tons of duty-free grain. The U.S. exported the lion’s share of this grain.
Representatives with the U.S. Wheat Associates (USW) says a well-timed visit from Brazilian millers in early June helped showcase the U.S. crop as a viable import option. These millers have had success milling U.S. wheat, so the trade team visit helped demonstrate why Brazil should continue to import more U.S. wheat in the future, according to Osvaldo Seco, USW assistant regional director for South America.
"We were very pleased to bring these millers to the United States because we have a unique window of opportunity to build demand for U.S. wheat in this market," he says.
USW will continue to push for a permanent duty-free wheat quota in Brazil, Seco says.