If the United States doesn’t re-enter the Trans-Pacific Partnership, Northwest wheat exports to Japan could drop by half within a few years, says the leader of the Washington Grain Commission.
The Pacific Northwest currently exports roughly 800,000 metric tons of Western white wheat, a popular blend of soft white wheat and subclass club wheat, to Japan each year, commission CEO Glen Squires said.
Hard red winter and hard red spring wheat exports would also be impacted, affecting Montana and North Dakota, and other states exporting off the West Coast, Squires said.
Japan wants the U.S. in TPP, and is not interested in bilateral agreements, Squires said.
Wheat industry representatives met in Washington D.C. last week. Many legislators are aware of the concerns about the Trans-Pacific Partnership proceeding without the United States, Squires said. It will essentially amount to a tariff on U.S. wheat, putting the country at a price disadvantage in key markets compared to competing wheat-producing countries that are remain in the trade pact.
Changes under TPP will occur over nine years, but Squires said the impact on shipments could be much faster.
“This is a massively big deal,” he said.
Reduced demand would result in lower wheat prices, Squires said.
A national coalition of agricultural commodities is forming to address the situation, Squires said.
The industry will appeal to the Trump administration to rejoin the trade deal.
“President Trump is the guy who can negotiate, and get us back involved,” Squires said. “It’s clearly a big impact: It’s the equivalent of handing our competitors a $500 million check per year.”
“It’s the administration that’s got to determine how important this trade relationship is,” said Blaine Jacobson, executive director of the Idaho Wheat Commission.
The industry is working to educate people who have contact with the administration, he said, in hopes of reaching “critical mass,” recognizing TPP as a beneficial trade arrangement for the U.S.
“There’s widespread support for getting back into it, but whether or not we have reached the right people yet is still unknown,” Jacobson said.
Asian customers want soft white wheat from the Pacific Northwest, Jacobson said.
“They might be willing to pay a minor premium,” he said. “As time goes on, those customers will probably find a way to make use of wheat other than PNW wheat. In the short-term, a modest impact, but in the long-term, probably a major impact on markets.”
Squires warned of “ripple effects” throughout the industry, which could happen as soon as U.S. wheat becomes uncompetitive in overseas markets, he said
Without exports to Japan, the grain commission estimates volume would drop by 62.5 million bushels. That equals 19,000 fewer rail cars and nearly 70 bulk vessels each year. Impact would be felt by port facilities, barges, elevator longshoremen, ship handlers, and other industry members, Squires said.
Every $1 billion in farm exports supports more than 8,000 jobs in 2016. Wheat export losses of $500 million per year would lead to reductions in the work force across the supply chain, Squires said.
Squires is encouraged that people are beginning to realize that the situation is imminent.
“I think it can be done if the president puts his mind to it,” he said. “The bottom line is, we are heavily dependent on trade and trade is a benefit. We just want to be part of that trade. We believe the president can make that happen.”