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U.S. Wheat Associates (USW) is the industry’s market development organization working in more than 100 countries. Its mission is to “develop, maintain and expand international markets to enhance the profitability of U.S. wheat producers and their customers.” USW activities are funded by producer checkoff dollars managed by 19 state wheat commissions and USDA Foreign Agricultural Service cost-share programs. For more information, visit www.uswheat.org or contact your state wheat commission. Stakeholders may reprint original articles from Wheat Letter with source attribution. Click here to subscribe or unsubscribe to Wheat Letter.

In This Issue:
1. Winter Weather and Strong U.S. Grain Demand Add Up to Unusual Port Delays
2. Mexico Stands as a Leading U.S. Wheat Buyer
3. Improving the Policy Environment for Agricultural and Food Trade in the Asia-Pacific Region
4. U.S. and Canadian Wheat Farmer Leaders Call for Open Wheat Trade in Op-Ed
5. U.S. Wheat Farmer Leaders Meet in Washington, DC
6. SRW Grower Doug Goyings Elected to Serve as USW Secretary-Treasurer for 2017/18
7. Wheat Industry News

PDF Edition: (See attached file: Wheat Letter - Febuary 9, 2017.pdf)

Online Edition: http://bit.ly/2kTs0ru

USW Price Reports: http://www.uswheat.org/prices



1. Winter Weather and Strong U.S. Grain Demand Add Up to Unusual Port Delays
By Stephanie Bryant-Erdmann, USW Market Analyst

The sharp inverse in export basis between March delivery and April delivery for U.S. wheat at both Gulf and Pacific Northwest (PNW) ports indicates that exporters have faced logistical challenges during a brutally cold and snowy winter. It also provides a savings opportunity for those customers who can wait for delivery until April or May.

USDA data shows that in January, U.S. grain export inspections increased 18 percent year over year and are on par with the 5-year average. The bad winter weather began slowing rail and barge arrivals at both Gulf and PNW ports in December. Those delays worsened as January brought frigid temperatures and snow to the U.S. Northern Plains, Midwest and, unusually so, to PNW ports. This year’s snowfall is the largest in Portland, OR, since 1995.

Railcar supply tightened in December and January, as the bad weather slowed train movement across the Northern Plains. In severe cold, railroads must decrease the number of cars pulled by each locomotive for safety reasons. During January, the U.S. rail system round trip rate slowed according to Surface Transportation Board data. In turn, the higher demand for rail freight pushed secondary rail freight rates dramatically higher.

In calendar 2016, barges delivered 43.2 million metric tone (MMT) of grain to U.S. Gulf ports, the largest volume recorded since USDA began tracking in 2003. This year, demand for barge space continued into January rather than tapering off after fall harvest. Year to date in 2017, barges moved 2.81 MMT of grain on the Mississippi River, up 18 percent year over year and 21 percent above the 5-year average.

While U.S. export facilities have some storage on-site, a consistent flow of grain from the interior is needed to keep up with vessel loading. Since 2010, PNW export terminal storage capacity has increased 27 percent to 1.08 MMT, yet PNW export terminals turn their inventory about every 12 days. Gulf export terminals have roughly 2.2 MMT of capacity and on average turn over their inventory about every 10 days.

With the delays in grain delivery, vessels waiting to load have increased significantly. In its Feb. 2 Grain Transportation Report, USDA said 65 vessels were at port in the U.S. Gulf, compared to the 2016 weekly average of 43 vessels. Throughout January, the U.S. Gulf had an average 58 vessels either loading or waiting, up 14 percent from January 2016 and 25 percent above the 5-year average. As of Feb. 2, there were 37 vessels at port in the PNW, up 85 percent from the same time last year.

Looking ahead, exporters believe they can work through the backlog by the end of March barring any additional severe weather events. In January, an average 43 vessels per week loaded in the Gulf, compared to an average 40 vessels per week in 2016. Though PNW vessel loading slowed to an average 10 vessels per week for the first three weeks of 2017, Federal Grain Inspection data showed 31 vessels were loaded between Jan. 26 and Feb. 2.

As exporters continue to load vessels, U.S. wheat customers are likely very aware of demurrage and dispatch clauses in their contracts. All types of export contracts include incentives for exporters to load as quickly as possible to avoid incurring demurrage. U.S. law ensures customers’ contracts will be fulfilled as soon as physically possible because it is in the exporter’s financial interest to do so. According to traders, demurrage on current charters in the PNW and Gulf are averaging $12,000 per vessel per day.

This year’s weather has certainly been worse than normal, but the issues that come with such challenges are well-known. That is partly why U.S. railroads, ports and waterway associations continually invest in infrastructure to improve the flow of grain from U.S. farmers to overseas customers.

Customers who have adequate supplies can save between $6 to $20 per metric ton at current export basis levels depending on the class and port of origin by pushing new wheat business deliveries out to April or May. As always, the U.S. wheat store remains open and transparent. And, as always, U.S. Wheat Associates (USW) representatives are available to answer any questions customers may have about U.S. export logistics and how they can continue to get the best value possible from U.S. wheat.


2. Mexico Stands as a Leading U.S. Wheat Buyer
By Steve Mercer, USW Vice President of Communications

USW represents the interests of U.S. wheat farmers in international markets. The organization is grateful to all its overseas wheat buyers, flour millers and wheat food processors for their strong preference for U.S. wheat and for their friendship. At a time when new circumstances have generated some uncertainty about trade, USW believes it is important to provide perspective on the long-standing, loyal relationship U.S. wheat farmers have with one of those customers: our neighbor to the south, Mexico.

Simply put, Mexico is one of the largest U.S. wheat buyers in the world, importing just under 3.0 million metric tons (MMT) on average going back many years. Mexico’s U.S. wheat imports typically only fall just short of the volume Japan imports. Not this year, however. In the first 7 months of marketing year 2016/17 through Feb. 2, Mexico’s flour millers have imported 2.4 MMT of U.S. wheat, which is more than any other country. That volume is up 5 percent over last year at the same time.

Breaking down their purchases by class, flour millers in Mexico generate strong demand for U.S. hard red winter (HRW) wheat. In 2015/16, they were the leading HRW importers and are taking advantage of the favorable prices and high quality of the 2016/17 HRW crop. At a current volume of about 1.4 MMT, they have imported 71 percent more HRW this year and again lead buyers of that class. A rising number of industrial bakeries, along with traditional artisan bakeries, account for about 70 percent of wheat consumption according to CANIMOLT, the association representing Mexican millers. That puts HRW producers in a good position to meet that demand. Being closer to HRW production and having a highly functioning ability to import a large share of HRW directly via rail from the Plains states is an advantage for Mexico’s buyers.

In addition, Mexico is home to Bimbo, the world’s largest baked goods company, and an increasing number of cookie and cracker companies. The low protein content, soft endosperm and weaker gluten of U.S. soft red winter wheat (SRW) is well suited to the production of cookies, crackers and pastries, and serves as an excellent blending wheat. Millers supplying this growing market imported an average of 1.2 MMT of SRW between 2011/12 and 2015/16. With imports from the Gulf of more than 730,000 MT of SRW so far in 2016/17, Mexico is the top buyer of SRW again. USW and state wheat commissions from the PNW are also helping demonstrate how millers and bakers can reduce input costs by blending with U.S. soft white (SW).

As it does with all U.S. wheat importing customers, USW focuses on helping Mexico’s buyers, millers and food processors solve problems or increase their business opportunities with U.S. wheat classes. This effort, supported by wheat farmers and the partnership with USDA’s Foreign Agricultural Service, has fostered a productive relationship that has endured for decades through many challenges. More than 22 years of duty free access to the Mexican market under the North American Free Trade Agreement (NAFTA) certainly helped build the relationship.

Yet our customers there have many other sources of milling wheat to which they can turn. In response to rising world grain prices in 2008, Mexico lifted a 67 percent import tariff on wheat from outside the United States and Canada. In 2009/10, France made the first non-NAFTA origin wheat sale to Mexico since the trade agreement was implemented in 1995. Russian and Ukrainian wheat has been imported, too. To date, the tariff has not been reapplied and the Mexican import market is currently tariff-free for wheat from all qualified origins. Just this week, the leaders of Brazil and Argentina, both large grain exporting nations, said they would pursue closer ties with Mexico and other Latin American nations.

Looking ahead, NAFTA will likely be renegotiated. USW and wheat farmers understand that there are a number of elements of the trade agreement that need to be re-examined and modernized. The successful story of how U.S. wheat farmers and their customers in Mexico have worked together in a mutually beneficial way must be shared as part of the effort to update NAFTA. For now, U.S. wheat continues to flow to our customers in Mexico. During upcoming trade negotiations and beyond the eventual outcomes, wheat farmers, through USW, will continue to help and support the buyers from Mexico, as they would help and support their own neighbors.


3. Improving the Policy Environment for Agricultural and Food Trade in the Asia-Pacific Region
By Ben Conner, USW Director of Policy

With the U.S. withdrawal from the Trans-Pacific Partnership (TPP), U.S. agriculture groups are looking for other ways to improve trade policy across the Asia-Pacific region. This week, USW joined 86 other food and agriculture organizations in a letter to President Donald Trump highlighting the importance of this region for U.S. agriculture.

Noting the large and growing markets in the Asia-Pacific region, the organizations wrote that reducing or eliminating tariffs and other restrictive agricultural policies would help consumers see more of the higher quality food and agricultural products they desire but cannot supply locally.

The letter also highlights the importance of free trade for agriculture, especially given the context of aggressive trade negotiations by competing countries looking for markets in the region.

“While many in our sector strongly supported the Trans-Pacific Partnership, we hope future agreements build upon the valuable aspects of that agreement to increase our market access in the Asia-Pacific,” the organizations wrote. “We welcome an opportunity to work with your Administration to ensure that America’s farmers, ranchers, processors and food companies do not fall behind … in this vitally important economic region.”

With unprofitable farm gate prices, a challenging volume of grain stocks and a strong U.S. dollar, remaining competitive in the growing overseas markets like those in the Asia-Pacific region is vital to the economic health of U.S. farmers. And USW believes healthy food and agriculture sectors are also a vital part of meeting demand around the world.

That is why the letter, with USW among the signatories, specifically expresses the willingness of these sectors to work with the Administration to “preserve and expand” trade policy gains, both for the sake of U.S. farmers and their customers who benefit from expanded access to quality products.


4. U.S. and Canadian Wheat Farmer Leaders Call for Open Wheat Trade in Op-Ed

In an op-ed published in Canada’s “News Hub Nation” Feb. 8, 2017, USW Chairman and wheat farmer Jason Scott and Western Canadian Wheat Growers Association President and wheat farmer Levi Wood have called on the Canadian government to take the steps needed to allow “a free flow of grain in both directions across the border to improve the efficiency of the grain handling systems in both countries and eliminate artificial price distortions that frustrate farmers.”

In the op-ed, Scott and Wood said: “Since the end of the Canadian Wheat Board’s government monopoly control over the marketing of western Canadian wheat … one of the most significant changes to come from marketing freedom for wheat farmers has been the growth in sales of Canadian wheat into the U.S. market."

“Currently, Canadian farmers delivering wheat into the U.S. receive equitable treatment with grain grown south of the border; however, because of legislation and regulation that existed for years before the marketing freedom changes came to western Canada, U.S. producers who currently deliver wheat into Canada automatically receive the lowest grade, regardless of the quality or variety of grain, even if the variety is registered in Canada … This inequity has created significant concerns in the Canadian and U.S. wheat industries, especially given the potential of re-opening [NAFTA].”

To read the complete op-ed, please
click here.


5. U.S. Wheat Farmer Leaders Meet in Washington, DC

Wheat farmers came together in the nation’s capital last week to participate in joint meetings between the National Association of Wheat Growers (NAWG) and USW. These industry leaders discussed many issues facing wheat farmers and many of them visited their members of Congress to share long-term goals for the future of the crop and their farm livelihood.

Official business was called to order Tuesday, Jan. 31, and continued through Thursday, Feb. 2. USW and NAWG directors first met in joint committee meetings to learn more about plant breeding innovation and international trade policies that affect wheat farmers. USW’s individual committees also met, focusing on long-range planning, sanitary and phytosanitary issues affecting wheat trade, reports on hard white (HW) wheat production and export demand, and issues related to wheat quality.

An important topic at these meetings was the long-term status of the public-private partnership between the federal government and farmers supporting export market development activities. USDA’s Foreign Agricultural Service administers two programs that fund trade service, technical support and other activities that educate overseas customers about the value of U.S. agricultural products like wheat. The Market Access Program (MAP) and Foreign Market Development (FMD) have specific budgets that have not changed substantially since 2002; however, mandated cuts the past few years and inflation have reduced the effective value of the program budgets. Meanwhile, farmer contributions have increased.

USW, as a member of coalitions that advocate for MAP and FMD, explained to the farmer directors that more program funding is needed to continue serving our long-term customers and to introduce U.S. wheat quality and value to new customers.

“With new technology and farmers becoming more efficient, we are growing more and more wheat, even on less planted area,” said USW Chairman Jason Scott of Easton, MD. “But domestic consumption cannot keep pace with the production so the growing demand for wheat is overseas in the large population centers with rising disposable incomes.”

Scott said wheat growers need to join other farmers, ranchers and small agricultural businesses to voice support for increased MAP and FMD funding in the next Farm Bill to keep competing on an even playing field in the global market.

In other action, the USW board approved the organizations annual budget and elected the new 2017/18 board leadership for the upcoming fiscal year (See “SRW Grower Doug Goyings Elected…” below).


6. SRW Grower Doug Goyings Elected to Serve as USW Secretary-Treasurer for 2017/18

The USW Board of Directors elected new officers for the 2017/18 (July to June) fiscal year at their meeting Feb. 2, 2017, in Washington, DC. The board elected Doug Goyings of Paulding, OH, as Secretary-Treasurer, current Secretary-Treasurer Chris Kolstad of Ledger, MT, as Vice Chairman and current Vice Chairman Mike Miller of Ritzville, WA, as Chairman. These farmers will take their new leadership roles at the USW Board meeting in July 2017 in Annapolis, MD, when current Chairman Jason Scott, becomes Past Chairman.


“I think it’s important for growers to give back and U.S. Wheat Associates has had such a strong and positive influence on my family’s farming operation as well as many other farms across the nation,” said Goyings. “With many pressing issues for wheat, we need a strong, united industry guiding us forward and I am honored to be a part of the leadership team working to continue to positively affect U.S. wheat farmers.”

“I’m happy to congratulate Doug for winning the election and I think he’ll make an excellent Secretary-Treasurer,” said Scott. “U.S. Wheat Associates has a strong board, filled with dedicated farmers that willingly take time out from their own operations to represent wheat farmers. Without this type of leadership our wheat industry would not have the strong foundation it does today. I look forward to working with the team to continue to promote the U.S. wheat grower’s competitive advantage, which is the quality and reliability of supply.”

Doug Goyings’ family has been farming in northwestern Ohio since 1884. Together with his wife Diane, son Jeremy, daughter-in-law Jessica and his twin grandsons, Goyings grows SRW and has hosted numerous trade teams on their farm. With more than 35 years of experience representing wheat and Ohio agriculture, Goyings has been a member of the USW board while serving as a director for the Ohio Small Grains Checkoff Board since 2009 and is a past chairman of the USW Long-Range Planning Committee. He is also a past-president of his local Farm Bureau and has previously sat on the board of directors for the Ohio Veal Growers Inc., Creston Veal, Inc. and Paulding Landmark, Inc.

Chris Kolstad’s family farm is located in Montana’s “Golden Triangle” region. He and his wife Vicki have four children, including their son Cary who is a partner in their operation and the fifth generation of their family to farm. Kolstad grows HRW wheat, dark northern spring wheat and durum, barley and dry peas. As a commissioner of the Montana Wheat and Barley Committee, Kolstad has represented his state on the USW board since 2012. He is also an active member of the Montana Grain Growers Association and Montana Farm Bureau. His community leadership includes serving on his local school board, as treasurer for his family’s church and being a regular blood donor since 1972.


Mike Miller is a fourth generation farmer who operates a dryland wheat farm and grows multiple crops on a separate, irrigated farm in east central Washington. He has served on many local, state and national boards, and is in his third term on the Washington Grain Commission and his fifth year as a USW director representing Washington. Miller is also very active in supporting wheat research and development. He and his wife, Marci, have three children.


A sixth generation farmer from Maryland’s Eastern Shore, Jason Scott is the farm manager of Walnut Hill Farms where he produces SRW wheat, row crops and vegetables. Scott is also an Independent Sales Representative for Pioneer Hi-Bred Int'l, under the title Scott’s Seed, L.L.C. A founding member of the Dorchester County Young Farmers, past president of the Maryland Grain Producers Utilization Board and the Maryland Grain Producers Association, Scott is no stranger to industry leadership. In 2011, he was presented the Maryland Young Farmers Achievement Award. In his eight years on the USW Board, Scott has represented his state and USW on two board team delegations to Africa and Europe and served as Secretary-Treasurer, Vice Chairman and Chairman as well as on several USW committees. He and his wife Dr. Casey Scott have a young daughter and son.



7. Wheat Industry News
  • Quote of the Week: "Our ability to produce food and fiber is a strong basis for peace and stability in the world.” — U.S. Senator Pat Roberts (KS), in remarks to the USW and NAWG boards of directors after being recognized by NAWG’s “Wheat Leader of the Year.”
  • Follow the Farmers. USW Communications Specialist Amanda Spoo and wheat farmers Dustin Johnsrud of North Dakota, Denise Conover of Montana and Clint Vanneman of South Dakota have started a South Asia Board Team visit to Thailand and the Philippines through Feb. 19. Follow regular travel updates and photographs from the Team on the USW Facebook page at www.facebook/uswheat and on Twitter at @uswheatassoc.
  • Higher Yield Potential. The United Kingdom Department for Environment, Food and Rural Affairs has granted permission to Rothamsted Research to conduct field trials of wheat plants modified to carry out photosynthesis more efficiently. The field trial will evaluate the performance of the engineered plants in the field. For more details, read the news release from Rothamsted Research.
  • Cereal Sciences Events Calendar. Prof. Dr. M. Hikmet Boyacioglu, International Editor of “Milling and Grain,” continues to publish this useful calendar, posted at http://www.millingandgrain-tr.com/en/.
  • IGP-KSU Grain Purchasing Course. This April 2017 course benefits individuals who are responsible for buying U.S. food and feed grains. The course focuses on the mechanics of purchasing raw materials and features detailed discussions of cash and futures markets, financing, contract negotiation and ocean transportation. Click here to learn more and register: http://www.grains.k-state.edu/igp/.
  • Optimists. Even after several years of unprofitable prices, U.S. farmers are feeling more confident about the U.S. agriculture economy, according to the latest reading of the Ag Economy Barometer, based on a monthly survey of 400 agricultural producers from across the U.S. As the late American humorist Will Rogers once said, "The farmer has to be an optimist or he wouldn't be a farmer." More.


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Wheat Letter - Febuary 9, 2017.pdf
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