U.S.-Japan trade agreement welcome news for wheat growers

A bilateral trade agreement between the United States and Japan provided some much needed good news for Adams County and Pacific Northwest wheat growers after several years of worsening global trade conditions.

The deal was announced by President Donald Trump and Japanese Prime Minister Shinzo Abe at the United Nations General Assembly in New York City on Sept. 25. The agreement lowers tariffs for agricultural goods, among other things.

The deal became necessary after the Trump Administration pulled the United States from the Trans-Pacific Partnership in 2017, putting Pacific Northwest wheat growers at a disadvantage against wheat markets in other countries that remained in the partnership. U.S. wheat represents about 50% of all the wheat Japan imports each year, currently valued at more than $600 million, which represents more than 10 percent of total annual U.S. wheat exports.

The news seemed to come somewhat as a surprise to the Washington wheat industry. Michelle Hennings, Executive Director for the Washington Association of Wheat Growers, told The Journal in August that she believed passage of the United States-Mexico-Canada Agreement by the U.S. Congress would then lead to a deal with Japan. Congress has yet to vote on the USMCA.

"So what happens is Japan looks at us, the United States, to see if we're able to conduct a trade agreement with our neighbors," said Hennings in August. "So we really want the USMCA to pass, not only because it's the No. 1 wheat market in Mexico, but also so that our other trading partners see that we can conduct trade agreements and those types of things."

Once the tariff agreement is implemented, Japan's effective tariff on imported U.S. wheat will once again drop to the same level Japanese flour millers currently pay for Canadian and Australian wheat.

Without this agreement, the National Association of Wheat Growers and U.S. Wheat Associates said in a statement that U.S. wheat imports "would have become less and less cost competitive to the point that Japan's flour millers would have no other choice than to buy more of the lower cost wheat" from member countries of a 2018 trade agreement between Japan and other countries that did not include the United States.

The Japanese milling and wheat foods processing industry relies on U.S. soft white wheat, which they use to produce cakes and pastries. According to a 2008 report from the Washington Grain Commission, soft white wheat accounted for 79% of total wheat production in Washington in 2008, and 46% of all U.S. white wheat came from Washington.

For Glen Squires, CEO of the WGC, the Japanese agreement is more important for eastern Washington farmers than the ongoing, rocky trade negotiations between the U.S. and China. China was the fifth largest export market of U.S. white wheat at 307,000 metric tons in 2017-18, but stopped buying U.S. wheat completely in 2018 due to trade disputes.

"Of course we're interested in a resolution of the China/U.S. tariff war, but China has always been a periodic purchaser, up one year, down the next five," said Squires in a statement. "Japan, on the other hand, has been an important buyer since 1949. And it's not just us breathing a sigh of relief. I'm certain our Japanese customers are as thrilled as we are that the deal is done."

Soft white wheat prices were up marginally at the Ritzville Warehouse following the news, at $5.20, while club premium prices were existent for the first time in several months, at $0.20. The prices are still below what many farmers need to cover the cost of production.

In a statement, WAWG President Jeff Shawver said that while he was pleased with the trade agreement, there is still plenty of work to be done.

"Farmers are just paying the bills, and some of them aren't doing that. We produce the highest quality wheat in the world," he said. "Let's keep the momentum going to finalize the remaining trade agreements to help stabilize our farm economy."

U.S. Senator Maria Cantwell said in a statement that she was glad that the U.S. and Japan "agreed to open up the Japanese market to some U.S. agricultural exports like wheat and wine and to grow digital trade." She also said that the U.S. needs to continue pushing for a comprehensive trade agreement with Japan and "end the trade war with China and tariffs costing American families more than $1,000 a year."