CHICAGO, Ill. – Pouring billions of dollars in economic aid into Iraq is no guarantee that the United States will win grain business there, as it found out March 26.
The United Nations’ World Food Program, the world’s largest food aid agency, awarded Australia the lion’s share of its tender to buy 630,000 tonnes of wheat – about $100 million US worth – to make bread for Iraqis.
The U.S. took home the consolation prize.
“Their buying system in the past has basically been corrupt, and I don’t think the U.S. or a new (Iraqi) government wants to give the impression it’s ‘business as usual,’ ” said grain analyst Shawn McCambridge of Prudential Securities. “It’s going to be an open market type system in the agricultural sector.”
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Grain traders said the WFP took 165,000 tonnes from the U.S. and awarded 460,000 tonnes to Australia in the tender that closed March 25.
The outcome dashed the expectations of U.S. exporters, who had counted on another big sale after selling wheat to Iraq two weeks ago for the first time since 1998.
McCambridge said the U.S. wheat industry thought it had an advantage in landing the business due to the notion that the “U.S. was setting the parameters of the tender.”
McCambridge said the U.S. would have “to fight all the way” to wrest market share from entrenched Australia, which has been Baghdad’s main wheat supplier in recent years.
“The U.S. has to fight, just like any other market.”
The U.S., which led a military invasion to topple the regime of Saddam Hussein a year ago, was seen as the front-runner in clinching the deal after its exporters took a sizable portion of a March 4 tender issued by WFP.
The U.S. sold 160,000 tonnes of hard red winter wheat and Argentina 110,000 tonnes of hard wheat in that tender.
But grain exporters said Australia, the world’s second largest wheat exporting nation after the U.S., probably did not participate in the earlier tender.
Iraq’s government, which is set to take the country’s reins from the U.S. on June 30, has set another tender to buy 200,000 tonnes of wheat on April 14. Iraq imports about two million tonnes of wheat a year.
U.S. Wheat Associates, an export promotion group, said American wheat was making strong headway into the Iraqi market.
Spokesperson Dawn Forsythe said U.S. exporters had taken a nearly 40 percent share of the almost 900,000 tonnes of wheat purchased for Iraq by the WFP this month.
“Freight is playing such an important part in these tenders. Australia has freight advantage to certain ports where the wheat is to be discharged, and the United States is competitive at Mediterranean ports,” Forsythe said.
