The consistent high quality of hard red winter (HRW) wheat allows Kansas wheat farmers to maintain market share in countries like Peru, where competition for imports is fierce and opportunities to expand are abundant.
Competing for Market Share
Peru, the third largest country in South America, produces only a small amount of wheat on isolated mountain tops. This wheat is consumed locally, meaning that Peru's 14 milling companies are nearly 100 percent dependent on imported supplies.
In the 1970s, the Peruvian government mandated that only HRW be imported, giving millers "a habit and a convenience in grinding HRW," according to Osvaldo Seco, assistant regional director for the U.S. Wheat Associates (USW) South American region, based in Santiago, Chile. "Many mill owners, wheat buyers, production managers and millers have traveled to Kansas to learn more about HRW."
As a result, Peru is the second largest importer of U.S. wheat in South America, averaging a 32 percent market share during the last 10 years. Of that, 80 to 90 percent is HRW imports from the Gulf of Mexico, equaling the fifth largest overseas market for HRW at an average of 20.1 million bushels (547,000 metric tons). However, Seco explained that Kansas wheat farmers battle for market share with traditional competitors Canada and Argentina as well as Russia, Ukraine and Mexico.
"Buyers are very price sensitive and wheat imports shift based on availability, price and quality," Seco said. "Still, Peru has always bought HRW because millers and bakers highly appreciate its consistent quality and high adaptability to any product."
Shift in Bread Favors U.S. HRW
Most important to Kansas wheat farmers, 58 percent of total wheat imports are used for bread products. Here, innovation rather than tradition provides more opportunities for expanding sales.
Traditionally, most bread in Peru is sold at small, neighborhood bakeries. Unfortunately, this bread is sold on a piece basis rather than weight, favoring very light, low quality bread. Additionally, as these bakers compete on price, they tend to use more additives to increase bread volume. In turn, the poor production methods affect taste, which hinders increases in per capita bread consumption.
However, supermarket bakeries are growing in number and popularity. These bakeries use better production methods and sell their loaves by weight - leading to additional opportunities for sales of high quality U.S. HRW wheat. Alicorp, the largest milling company in Peru, has even signed an agreement with Bimbo, the world's largest bakery chain, to undertake a joint venture to produce industrial pan breads.
"In recent years, sales of bread through supermarkets have greatly increased, and now represent 20 percent of sales," Seco said. "USW sees an opportunity to stimulate an increase in consumption by working with these supermarkets; helping them improve ever more the quality of their bread and work with them to produce new bread products."
As the wheat industry's export market development partner, USW will help ensure that Peruvian millers and bakers know where they can find the wheat they need to expand their businesses. That means Kansas wheat farmers can concentrate on what they do best - producing the world's most reliable source of high quality wheat.