WINNIPEG, Manitoba/CHICAGO (Reuters) - Canada is aiming to supplant the United States as the Western Hemisphere’s dominant wheat exporter, as its invigorated grain-exporting sector cashes in on weakening currency and cheap freight rates.

Tara Giles operates a combine as she harvests wheat on a 160-acre field located south of High River, Alberta, September 28, 2013. REUTERS/Mike Sturk

Canada overtook the United States in 2014/15 in wheat export volumes for the first time, exporting 24.1 million tonnes. It is forecast to fall short of eclipsing U.S. shippers in 2015/16, with both countries trailing top exporter Russia.

A once large gap is steadily narrowing, however, with U.S. wheat exports forecast this year at a 44-year low, and Canadian shipments up nearly 30 percent during the past decade.

Favorable dollar exchange currently allows Canadian exporters such as Richardson International, Glencore-owned Viterra Inc [VILC.UL] GLEN.L and Cargill Ltd [CARGIL.UL], to undercut U.S. prices in some markets, traders say. Record-low ocean freight rates .BADI have also extended Canada's reach.

“I do think we will see the current trends in both countries continue, which would result in Canada being the leading exporter more years than not,” said Cam Dahl, president of industry group Cereals Canada.

The United States also faces stiffer competition from Argentina, whose wheat prices tumbled last month after the country devalued its peso and scrapped export taxes.

As currencies weaken against the greenback, some buyers are turning to Canada and other suppliers first, and the United States only if necessary, said Rhyl Doyle, director of export trading at Canadian grain handler Paterson Grain.

“They are gradually becoming the emergency storehouse,” Doyle said.Mexico, Peru and some Caribbean countries have shifted purchases to favor more lower-quality wheat from the Black Sea region for blending with high-quality Canadian wheat, resulting in cheaper supply than U.S. hard red winter wheat to produce bread, Doyle said.

But export-focused industry group U.S. Wheat Associates, doubts Canada will consistently out-ship the United States, and says a build-up of Canadian stocks may be behind last year’s anomaly.

“Overall, they are not going to exceed us as a wheat exporter,” said Alan Tracy, U.S. Wheat Associates president, adding that the U.S. system is more efficient.

Recent investments by Canadian grain handlers aim to change that. Grain handler G3 Global Grain Group BG.N is planning a new grain terminal at Port Metro Vancouver, while Cargill, Richardson and Viterra are upgrading port facilities there to ship more grains and oilseeds to Asia.

By contrast, expansion of grain export terminals in the U.S. Pacific Northwest has slowed since the 2011 opening of a $200-million Longview, Washington, grain terminal owned by EGT, LLC. It is the only new grain export terminal built in the United States in the past 30 years.

The region has seen no grain terminal expansions since 2013, said one PNW exporter, who was not authorized to speak publicly.

After Canada in 2012 scrapped the Canadian Wheat Board’s marketing monopoly, grain handlers who handle a variety of commodities are now directing export sales, not the board.

That has allowed companies to combine different crops on bigger vessels headed to a common region, adding to freight savings, said Terry James, vice-president of export marketing at Richardson International.

“I think the buyers are becoming more accustomed to this out of Canada, and they are reacting accordingly by putting cargoes to us,” James said.