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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 wheat’s profitability for U.S. producers and its value for their customers.” USW activities are funded by producer checkoff dollars managed by 17 state wheat commissions and USDA Forei­gn Agricultural Service cost-share programs. For more information, visit www.uswheat.org or contact your state wheat commission.

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In This Issue:
1. U.S. Crop Conditions Fall as Drought Conditions Worsen
2. U.S. Wheat Farmers Also Need FTAs in Africa
3. U.S. Wheat Associates and National Association of Wheat Growers Meet
4. USW Participating in Wheat Education Event on Capitol Hill
5. Study Shows U.S. Lags Behind Competitive Investment in Developing Ag Exports
6. Wheat Industry News

PDF Edition (Attached): (See attached file: Wheat Letter - February 8, 2018.pdf)


1. U.S. Crop Conditions Fall as Drought Conditions Worsen
By Stephanie Bryant-Erdmann, USW Market Analyst

Farmers will tell you that winter wheat is a hardy plant; but for the current U.S. winter wheat crop, one of its most important inputs, water, is increasingly in short supply. The Feb. 1 U.S. Drought Monitor showed that drought ranging from abnormally dry to extreme, affects most of the winter wheat production area across the country. Specifically, 81 percent of Oklahoma is in a severe to extreme drought, while 65 percent of Kansas is in a moderate to extreme drought. In South Dakota and Colorado, 64 percent and 59 percent of the topsoil moisture was rated as short to very short, respectively.

USDA noted the drought’s impact on winter wheat crop conditions in its monthly winter wheat crop condition report* on Jan. 29, which showed 29 percent of the area assessed by the survey is in good to excellent condition, down from 41 percent good to excellent at the end of December. USDA rated 35 percent in fair condition and 37 percent in poor or very poor condition, up from 22 percent last month. The assessment covered 69 percent of the estimated 32.6 million acres (13.2 million hectares) planted for 2018/19.

Deteriorating crop conditions could multiply the effect of low planted area to decrease 2018/19 U.S. winter wheat production. USDA noted the 2018/19 winter wheat planted area is 15 percent below the 5-year average in its Jan. 12 Winter Wheat and Canola Seedings report, which is the second lowest number of planted winter wheat acres on record.

Of the winter wheat classes, hard red winter (HRW) is the most severely affected by drought. USDA reported 23 percent of HRW assessed acres are in good to excellent condition, compared to 35 percent in December. Forty-two percent of HRW acres were rated in poor or very poor condition, up from 25 percent one month prior. The only major HRW state not assessed last week was Texas, where 5 million acres (2.02 million hectares) of winter wheat were planted for 2018/19. However, precipitation maps show it has not rained in 110 days in Northern Texas (accounting for about 60 percent of Texas wheat production). In response to these reports, the Kansas City Board of Trade (KCBT) March wheat contract rallied 20 cents last week to $4.63/bu ($170/MT), the highest point since July 2017.

Soft red winter conditions are variable. USDA rated 58 percent of soft red winter (SRW) wheat assessed acres in good to excellent condition compared to 68 percent four weeks prior, and just 7 percent were rated in poor or very poor condition. However, SRW crop conditions were not uniformly positive. Better crop conditions in Ohio and Tennessee mask worsening moisture conditions in the Southeast and Mid-Atlantic regions. Ninety-five percent of Virginia, 61 percent of North Carolina and most of Maryland are abnormally dry or in moderate drought. Ratings were not available for several southern SRW states where drought conditions are more severe. Deteriorating crop conditions also helped push Chicago Board of Trade (CBOT) March wheat futures price to its highest point in five months at $4.47/bu ($164/MT).

Winter wheat crop conditions were not reported this month for Idaho, Oregon or Washington where exportable soft white wheat supplies are concentrated. However, the Feb. 1 Drought Monitor shows southern Idaho and nearly all of Oregon are abnormally dry. However, precipitation is expected in the next 5 to 10 days that should be beneficial for most of the estimated 3.56 million acres (1.44 million hectares) of white wheat.

Some rain this week pressured wheat prices, showing that the futures markets will likely be volatile until the spring green up tells the final story. It is a long way until harvest, but customers should closely watch weather conditions across the United States and be ready to take advantage of price moves in their favor.

If you have any questions about the current crop conditions or the U.S. marketing system, please contact your local USW representative.

To track U.S. wheat prices, drought conditions and more, subscribe to the USW Weekly Price Report, here.

*From December through March, USDA assesses winter wheat crop conditions in select states on a monthly basis. Weekly crop progress reporting will resume in April.


2. U.S. Wheat Farmers Also Need FTAs in Africa

According to the United Nations, over a quarter of the world’s population will live in Africa by 2050. That will be something like 2.5 billion people. With less than 4 percent of the world’s wheat production, Africa will require significant imports to feed its growing population. A major factor in in ensuring a predictable, stable supply of a staple food like wheat is through predictable, rules-based trade policies.

That is one reason why the U.S. Trade Representative (USTR) should start transitioning countries from the one-sided preferential arrangement of the African Growth and Opportunity Act (AGOA) to a more reciprocal trading relationship based around free trade agreements (FTAs).

Gerald Theus has represented U.S. wheat farmers in Sub-Saharan Africa as U.S. Wheat Associates Interim Regional Director in Cape Town, South Africa for for nearly three decades. He highlighted the need for reciprocal trade,for the benefit of both U.S. farmers and African millers and consumers, in recent submission to the U.S. International Trade Commission.

The submission points out that the United States only has one FTA in Africa -- with Morocco -- and that FTA has significant limitations. There is a pressing need to negotiate new agreements with African countries so that trade policies can be reciprocal and those countries can benefit from both exports and imports.

Theus laments that the European Union (EU) has managed to outmaneuver the United States by converting its trade preferences into reciprocal access, pointing to the 300,000 ton duty-free quota enjoyed by its exporters into southern Africa, sidelining U.S. opportunities in that region.

If U.S. farmers are to be competitive in Africa, the U.S. government needs to negotiate new market access (the same holds true in Latin America, the Asia-Pacific region, and elsewhere). No new deals have been struck since 2007.

USTR Robert Lighthizer recently stated that it was his intention to negotiate a “model” FTA with an African country. That is an encouraging step, because the United States clearly needs to develop closer trading relationships with its African partners. As Theus notes, there should be strong affinity between the views expressed in his submission and the statements of USTR Lighthizer on reciprocal free trade.

There is plenty of opportunity in Africa. U.S. farmers hope to see their wheat play a part in a bright future for the continent.


3. U.S. Wheat Associates and National Association of Wheat Growers Meet

It is a busy week in Washington, D.C., for wheat industry leaders. They have gathered to participate in joint board meetings between U.S. Wheat Associates (USW) and the National Association of Wheat Growers (NAWG), and for an educational event on Capitol Hill Feb. 8 (see separate story).

Official USW business was called to order Feb. 7 at the organization’s headquarters office in Arlington, Va., with a budget committee meeting and a comprehensive orientation for new farmer directors. USW and NAWG farmer directors are meeting in joint committee meetings to learn more about plant breeding innovation and international trade policies that affect wheat farmers and their customers. USW’s individual committees are also meeting on long-range planning, sanitary and phytosanitary issues affecting wheat trade, hard white (HW) wheat production and export demand, and topics related to wheat quality.

Of significant interest is the status of three-country negotiations between the United States, Mexico and Canada on the North American Free Trade Agreement (NAFTA). USW and NAWG strongly support maintaining NAFTA rules that have benefitted U.S. wheat farmers as well as their customers primarily in Mexico, while improving parts of the agreement. Many directors are also learning more on the real concerns about the sustainability of U.S. wheat imports by Japan under the new Trans-Pacific Partnership recently negotiated by 11 of the original member countries without the United States.

Committee meetings continue on Feb. 9, followed by a joint meeting of USW and NAWG governing boards. USW will hold its own board meeting Feb. 10 to review committee actions and recommendations and to hold its annual election of officers for the 2018/19 fiscal year (July to June).


4. USW Participating in Wheat Education Event on Capitol Hill

Between record low commodity prices, extreme natural disasters and unfair trade practices in the global marketplace, wheat growers across the country have experienced a multitude of challenges the past couple of years. To educate the Administration, Members of Congress and their staff on just how expansive and important the entire wheat value chain is to the economy and to global food supplies, the National Wheat Foundation (NWF) is hosting a wheat industry educational event Feb. 8 in Washington, D.C.

“This event featuring organizations throughout the entire wheat value chain is the first of its kind for the Foundation and for Congressional staff,” stated Foundation Board Chairman Phil McLain. “We hope to give our policy makers and all attendees a better understanding of the how each component of the wheat value chain functions. We were also particularly pleased to be able to have USDA Deputy Secretary Censky, Chairman Roberts, and Ranking Member Stabenow walk through the event during a special preview.”

U.S. Wheat Associates will join other participating organizations in the event, including the NWF, American Bakers Association, American Seed Trade Association, Association of Equipment Manufacturers, BASF, Bayer, BNSF Railway, CropLife America, Farm Credit Council, Flowers Foods, Food Marketing Institute, General Mills, Grain Foods Foundation, Monsanto, North American Millers’ Association, Texas A&M University, Syngenta, U.S. Custom Harvesters, Wheat Foods Council, Wheat Marketing Center and Wheat Quality Council.


5. Study Shows U.S. Lags Behind Competitive Investment in Developing Ag Exports

The latest analysis of foreign export promotion program investment shows that several competing countries and the European Union spent close to $1 billion in public funds on agricultural export promotion in 2016, outspending the United States 4 to 1. That is an increase of 70 percent in real competitive public spending since 2011. U.S. public funding for the two largest agricultural export promotion programs is about $235 million per year and its real value has declined by 12 percent since 20111. The conclusions echo results of three similar competitive studies since 2013.

“As a cooperating organization in USDA’s Foreign Agricultural Service export market development programs, we have seen a similar decline in annual funding,” said U.S. Wheat Associates President Vince Peterson. “This has forced us to cut back on activities in certain markets even though our state wheat commission members have invested more to try to minimize the loss.”

This study, “An Analysis of EU and Other Selected Foreign Export Promotion Programs,” was commissioned by the Wine Institute and other agricultural associations and conducted by Informa Economics, IEG, with Market Access Program funding. With a focus on EU export development investment, Informa Economics also reviewed agricultural export promotion investment by major competitors from Australia, Chile, China, New Zealand and others.

“The total public investment alone from just the EU and four European countries are expected to exceed $550 million in 2019, which is more than twice what the U.S. government authorizes for agricultural export development under the farm bill,” said Mark Powers, president of the Northwest Horticultural Council and chairman of the Coalition to Promote U.S. Agricultural Exports.

The study showed the EU is investing about $300 million per year on wine export promotion alone. Canada and Italy doubled their total annual spending, and Brazil and China tripled their total annual export promotion budgets according to the study.

“Other governments are investing more in global food and agricultural markets while inflation, sequestration and administrative costs are chipping away at U.S. funding,” said Tom Sleight, CEO of U.S. Grains Council, which is a member of the Agribusiness Coalition for Foreign Market Development. “That also cuts into the ability of American family farmers, livestock and dairy producers, fishermen and small agri-food businesses to compete in growing export markets.”

Sleight said increasing competition is one of the reasons why organizations that participate in cost-share export programs with USDA’s Foreign Agricultural Service, as well as a number of members of Congress, are calling for more funding for U.S. programs.
He said by 2016, private funding from industry members provided 70 percent of the total annual investment in the Market Access Program (MAP) and the Foreign Market Development (FMD) program, both administered by USDA’s Foreign Agricultural Service. The remaining 30 percent from annual government funding has been stagnant at $200 million for MAP since 2006 and at $34.5 million for FMD since 2002.

Coalition members are asking that MAP and FMD funding be doubled by the last year of the new farm bill. That is also the goal called for in S.1839 and HR 2321, the “Cultivating Revitalization by Expanding American Agricultural Trade and Exports (CREAATE) Act,” introduced in 2017.

“All the members of our coalition are grateful for federal export promotion support over the years,” Powers said. “The investment has been very successful in boosting U.S. agricultural export volume and revenue at a rate that far exceeds its public expense. Because these programs also protect and create American jobs, and increase farm income2, there is no doubt they are highly successful public-private partnerships worth the increased investment.”

The executive summary of the Informa Economics competitive study, and more in-depth information about MAP and FMD programs and their outcomes, are posted online at www.AgExportsCount.org.

1An Analysis of EU and Other Selected Foreign Export Promotion Programs, Informa Economics, IEG, November 2017

2Economic Impact of USDA Export Market Development Programs, Informa Economics, IEG, July 2016.


6. Wheat Industry News
  • Quote of the Week: "One great advantage for Australia (not lost on our agricultural competitors in the US) is that we will have an extended period of low or no tariffs for our agricultural export to Japan, cementing supply chains set up after JAEPA came into effect two years ago." - Zoe McKenzie, Trade & Investment Advisory.


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