Crop trends 3

Combines harvest winter wheat on the Polson farm north of Waterville, Wash., in 2016. The U.S. and Japan have announced progress on a new trade deal that includes wheat.

Wheat farmers are cautious but optimistic in the wake of the announcement that the U.S. and Japan have agreed in principle to a new trade deal.

“Great news,” said Glen Squires, CEO of the Washington Grain Commission. “We certainly hope that (the agreement) is solidified and goes forward with no complications. We anticipate that it will.”

Steve Mercer, vice president of communications for U.S. Wheat Associates, the overseas marketing arm of the industry, said his organization has been told the agreement would put the U.S. on equal footing with Canada and Australia. Under the new Comprehensive and Progressive Trans-Pacific Partnership that the U.S. rejected, wheat from those countries has been priced $20 per ton lower than U.S. wheat.

“That’s important because that protects our position and eliminates the cost-competitive problem that was created in this situation,” Mercer said.

The Japanese legislature may have to review and approve the deal, likely within six weeks to two months, Mercer said.

The agreement does not require congressional approval in the U.S., which means it is likely to happen much faster, Mercer said.

“The Idaho wheat growers have invested much time and money developing a market for wheat in Japan,” said Blaine Jacobson, executive director of the Idaho Wheat Commission. “We are pleased that a trade deal seems imminent.”

It’s uncertain how far along the agreement is, observers say.

President Donald Trump said it’s a done deal, but Japanese Prime Minister Shinzo Abe said details remain to be worked out, said Randy Fortenbery, small grains economist for Washington State University.

“It’s not quite clear to me how far along it is and when we might expect it to actually be resolved and signed,” Fortenbery said.

Fortenbery said the hope is the deal would be similar to the Trans-Pacific Partnership. Trump withdrew the U.S. from TPP in 2017; the remaining countries proceeded with the Comprehensive and Progressive Trans-Pacific Partnership, which went into effect December 2018.

Without being in the TPP, U.S. farmers are at a trade disadvantage to competing wheat-producing countries Canada and Australia.

U.S. farmers haven’t been hurt yet from the U.S. withdrawal from TPP, Fortenbery said. They continue to do business in Asia with traditional customers.

“I find it hard to believe we could negotiate a better deal (than TPP) because that would probably make the current TPP partners a little unhappy,” Fortenbery said. “Without any details, it’s really hard to say.”

U.S. Wheat and the National Association of Wheat Growers released a statement recognizing Chief Agricultural Negotiator Gregg Doud and USDA Under Secretary Ted McKinney for their efforts.

“We are confident because we know the people that negotiated it would not have gotten the kind of support they did to get a deal done if they didn’t fully understand the challenge,” Mercer said.

Mercer also praised U.S. wheat customers in Japan who have actively been seeking a solution.

“They have been using our wheat for years and years,” he said. “If they had to change, it would be a real problem for them.”

“Japan is a significant market for United States agriculture exports, making today a good day for American agriculture,” U.S. Agriculture Secretary Sonny Perdue said in a statement. “By removing existing barriers for our products, we will be able to sell more to the Japanese markets. At the same time we will able to close gaps to better allow us to compete on a level playing field with our competitors.”

The wheat market isn’t likely to react with a big price increase because the deal isn’t going to mean potential new buyers, Fortenbery said.

“It’s really less about improving a bad situation, it’s about maintaining a good situation,” he said.

Fortenbery hasn’t seen any specific information about tariff rates or market access.

Without a clear signal from both sides that everything has been worked out, it is possible the deal could be walked back later, Fortenbery said.

“Until something actually is announced by both parties and signed, it’s a little difficult to know exactly where we stand,” he said.

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