Turkey's Grain Imports

by Teresa Acklin
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Import tariffs on wheat and coarse grains raised sharply.

   The government of Turkey effective June 29 significantly increased import duties on milling wheat and coarse grains, marking the second time in less than a year that the government has increased tariffs on basic grains.

   Import duties per metric tonne on a c.i.f. basis were increased as follows: milling wheat 35%, compared with the previous 15% duty; durum 30%, compared with 15%; maize 35%, compared with 15%; sorghum 30%, compared with 3%; and barley 20%, compared with 1%.

   Last September, the government increased tariffs on wheat and maize to 15% from 3%. As before, sources indicate the government took this action to encourage consumption of the local crop, which currently is priced well above world market levels, and to discourage imports, according to the U.S. agricultural attache in Ankara.

   In recent years, Turkey imported wheat mainly to improve the quality of its flour exports. As a result, Turkey's wheat supply generally has been balanced, with wheat imports about equal to flour exports. But for the past two years, Turkey has been a major net wheat importer despite good crops, with additional imports destined for the domestic market.

   Several factors have contributed to this shift, including fragmentation of the local wheat market, the changing structure of the milling industry, declining wheat quality and the reversal in government policy to reduce support prices.

   Beginning in marketing year 1995-96, Turkish grain procurement and subsequently market prices were increased well above world levels. During the past two years, the Turkish Grain Board (T.M.O.) has set milling wheat procurement prices at about U.S.$240 per tonne in early June, at the same time that world production prospects were improving and world price levels were declining.

   The large difference between prices for local and imported wheat has created an incentive to import for local consumption, as occurred on a large scale in 1996-97. Since last year's tariff increase proved insufficient to stem the tide of unexpectedly large imports of cheap Argentine wheat, this year's increase was more robust.

   Despite the higher tariff and prospects for another large wheat crop, reportedly of mediocre quality, sources expect Turkey will continue to be a major wheat importer, but they are uncertain of the extent to which the higher tariffs will reduce trade. Because wheat imported for processing is exempt from duty if both the flour and bran are re-exported within six months — a so-called drawback system — the impact on wheat imported for the flour export business is expected to be minimal.

   The main impact of the tariff will be on wheat imported for local consumption, which is highly price sensitive. Even though the new tariff can add U.S.$30 or more per tonne to the cost of importing wheat, imports could remain price competitive if T.M.O. remains a significant buyer and supports local prices. As of mid-July, T.M.O. planned a U.S.$475 million procurement operation pending government funding.

   The lack of official trade data makes it difficult to track trends. Traders unofficially estimate Turkey's 1996-97 imports at well over 2 million tonnes, and forecasts for 1997-98 imports range from 1 million to 2 million. Thus far, Turkey reportedly has import commitments of more than 300,000 tonnes, including French, Canadian, Australian and U.S. wheat. Such large commitments during Turkey's own wheat harvest were unheard of even a few years ago and are indicative of the changing nature of Turkey's wheat trade.

   The situation for maize is different in that Turkey historically has been a net maize importer. Although it is clear that the leadership favored a policy of import substitution by encouraging increased maize production, most observers think Turkey's capacity to expand maize is limited and not without costs to other sectors, particularly cotton.

   Higher maize tariffs are expected to discourage investment in industrial maize processing, for which there is no drawback system, and constrain growth in poultry consumption by increasing production costs.