Emerging Country Subsidies May Cost U.S. Wheat Growers $1 Billion Annually

The practice of subsidizing wheat production by emerging countries, including Brazil and China, is negatively affecting U.S. wheat growers, potentially costing U.S. growers $1 billion per year in revenue, according to a study commissioned by the U.S. Wheat Associates and conducted by Iowa State University.

The study, led by agricultural economist Dermot Hayes, indicates that countries including Brazil, India, China and Turkey have significantly increased financial support for domestic wheat production over the past ten years, reaching levels that widely exceed World Trade Organization (WTO) agreements, and causing harm to global markets.

The study found that if all subsidies were removed in all four countries mentioned above, U.S. wheat production would increase by more than 53 million bushels per year, and farm gate prices would increase by approximately 30 cents per bushel, generating more than $947 million in annual revenue.

“The lower supply would lead to higher global wheat prices, which tend to benefit wheat exporting countries including the United States,” Hayes said.

The study also determined that with removed subsidies, and given increased consumption, Brazil, China, Turkey, and India would increase imports by 10 million tons per year, of which, the U.S. would be able to secure 20% or 2.2 million tons.

By removing these subsidies, global wheat prices would increase by more than 4% and global net trade would increase by 5%, but even partial revisions to the subsidy programs in these countries would improve global market conditions.