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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 18 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. Changing Dynamics of U.S. Wheat Exports
2. U.S. Wheat Industry Encourages Discussion on Border Issues with Canada
3. USW Board Teams Will Allow Farmers to Follow Their Wheat Overseas
4. Korea and Taiwan Earn First and Second Place in the World Baking Cup
5. California Wheat Commission Names New Executive Director
6. Wheat Industry News

Online Edition: Wheat Letter – February 25, 2016 (See attached file: Wheat Letter - February 25, 2016.pdf)

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


1. Changing Dynamics of U.S. Wheat Exports
By Stephanie Bryant-Erdmann, USW Market Analyst

Over the past twenty years, roughly 10 million metric tons (MMT) of U.S. wheat exports have shifted from price sensitive markets to quality-driven markets. Consumption in quality-driven markets in Southeast Asia and Latin America increased an average 2 percent annually over the past ten years, according to USDA. However, the strength of the U.S. dollar continues to weigh on U.S. exports, transforming the relatively low prices U.S. farmers are receiving for their wheat domestically into prices that are equal to or greater than those paid in prior years by international buyers.

In 1995/96, the top ten destinations for U.S. wheat included Egypt, Pakistan and Sri Lanka, whose respective governments purchased large quantities of wheat for subsidized food programs and strategic reserves. Thus, these markets were very price sensitive. While some liberalization has occurred in these markets, subsidized food programs and strategic reserves are still the primary uses for imported wheat.

Rounding out the top destinations in 1995/96 were markets that value quality: Japan, Mexico, the Philippines, South Korea, Taiwan, Nigeria and the European Union. These markets continue to be top ten destinations for U.S. wheat. Over the past five years, U.S. wheat exports to these seven countries averaged 12.9 MMT compared to 9.78 MMT in 1995/96, an increase of 32 percent, while total consumption increased 26 percent, indicating increased usage and preference for U.S. wheat despite prices often higher than from other sources.

Since 1995/96, wheat consumption in other quality-driven markets has also grown. Southeast Asian markets, including Indonesia, Thailand, Vietnam and Malaysia1, have grown an average 5 percent annually. U.S. exports to the region grew 27 percent to 1.47 MMT in 2014/15, according to Global Trade Atlas data. U.S. wheat exports also increased 44 percent to Latin and South America with 5-year average sales of 5.87 MMT compared to 4.07 MMT in 1995/96.

In 2014/15, countries from Southeast Asia and South America — Indonesia, Thailand and Brazil — became top ten destinations for U.S. wheat. In total, the top ten destinations represented 48 percent of U.S. wheat sales during that marketing year. Countries in Central America, including Colombia, Guatemala, Peru, Venezuela and the Dominican Republic, were in the top 20 destinations for U.S. wheat and accounted for another 11 percent. See the latest USW Commercial Sales report for the resulting increases in wheat exports to the increasingly quality-driven markets in Southeast Asia, Latin and South America.

Despite the value these markets place on quality, the strength of the U.S. dollar makes U.S. goods relatively more expensive for consumers in other countries. Japan is historically the number one buyer of soft white (SW) wheat. The average price for 9.5 max protein SW is down 1 percent from 2014/15 at $300 per metric ton (MT). However, the Japanese yen weakened against the U.S. dollar year over year resulting in Japanese importers paying an average 6 percent more for 9.5 max protein SW this year. Similarly, average 12.0 protein hard red winter (HRW) prices from the Gulf have fallen 18 percent, but U.S. HRW prices have increased an average 14 percent in Brazil due to the weakness of the Brazilian real.

The goal for any company selling a high-quality product is to make demand for that product inelastic — an increase in price does not have an equal decrease in quantity demanded. Put another way, consumers have such a strong preference for the good that increases in price result in very small decreases in quantity demanded. Creating inelastic demand takes a combination of the right consumers, the right product, hard work, and, in many cases, time.

U.S. farmers continue to work on product quality, investing an average $12 million annually on wheat research through their state checkoff programs, according to a study done by the National Wheat Improvement Committee in 2012. USW has also put more focus on its marketing efforts in markets that are traditionally quality conscious and experiencing growth, such as Japan, Mexico and the Philippines; now, U.S. wheat farmers just need the U.S. dollar to cooperate.

1The Philippines is normally included in the Southeast Asia region, but due to the prior reference, its exports sales were excluded from this region’s analysis.


2. U.S. Wheat Industry Encourages Discussion on Border Issues with Canada
By Elizabeth Westendorf, USW Policy Specialist

Two weeks ago, government officials from Canada and the United States met for the biannual Consultative Committee on Agriculture — a committee designed to facilitate cross border trade flows and cooperation. In preparation for this meeting, USW sent a letter to the USDA highlighting the need for Canada to correct its discriminatory treatment of foreign grain. Both countries have a strong commitment to cross-border collaboration and open trade, but Canada’s protectionist measures go against these principles and deny U.S. wheat farmers access to a market that is right next door.

While Canada is one of the United States’ largest trading partners, USW continues to have concerns about the closed nature of its bulk grain handling system, which will not allow U.S. wheat to receive an official grade commensurate with its quality. Though Canada privatized the Canadian Wheat Board in 2012, it has not completely liberalized its wheat industry. Instead of letting U.S. wheat into its bulk grain handling system, Canada downgrades all foreign wheat to the lowest grade, feed wheat. U.S. wheat is of comparable quality to Canadian wheat, so this downgrading of all foreign wheat is a blatantly protectionist action. It denies U.S. farmers access to the market across the border, access that Canadian farmers have if they choose to bring their wheat to U.S. elevators during harvest. This lack of access means that when there is a price premium at Canadian elevators near the border, as we saw in the late summer and fall of 2015, U.S. farmers cannot take advantage of those higher prices.

USW hopes that Canada’s new government will commit to reform its Grains Act and allow foreign grain to receive the same treatment as domestic. The United States repealed Country of Origin Labeling (COOL) for meat in December 2015 as Canada requested, but Canada’s discriminatory wheat treatment does much of the same thing as COOL. Now that the United States has domestically addressed its treatment of Canadian livestock, it seems only fair that Canada fix its treatment of U.S. wheat. This will ensure a healthy continuation of the long-term partnership between the two countries. Governments should never be responsible for segregation that market forces could manage more efficiently. USW is happy to see our Canadian industry counterparts calling for reform alongside us, and we look forward to Canada continuing to break down barriers to the free trade of wheat.


3. USW Board Teams Will Allow Farmers to Follow Their Wheat Overseas

Every year USW plans two board team trips overseas, giving U.S. wheat farmers and state wheat commission staff the opportunity to travel to the markets to which they supply wheat. The intense, regional visits help educate participants about the day-to-day work of USW’s overseas offices and connect them to their customers and industry stakeholders.

“Board teams help build personal connections between our overseas customers and U.S. wheat farmers,” says USW Vice President of Overseas Operations Vince Peterson. “U.S. wheat is the world’s most reliable source of high quality wheat, and part of that quality is in the people who grow it. We consistently hear how much the customer appreciates getting to know the farmer.”

USW Policy Specialist Elizabeth Westendorf will lead the 2016 North Asia Board Team to Japan and Korea in early March. The team includes Darren Padget, a wheat farmer from Grass Valley, OR, and a current USW director representing the Oregon Wheat Commission; Greg LeBlanc, a wheat farmer from Crookston, MN, and a director of the Minnesota Wheat Research and Promotion Council; Clark Hamilton, a wheat farmer from Ririe, ID, and a current USW director representing the Idaho Wheat Commission; and Gary Bailey, a wheat farmer from St. John, WA and a current USW director representing the Washington Grain Commission.

The team will first meet at the USW West Coast Office in Portland, OR for orientation before traveling overseas. During its three days in Japan, the team will visit government contacts at the U.S. Embassy and the Ministry of Agriculture, Forestry and Fisheries, and meet with millers and bakers. The second leg of the trip features three days in Korea, which includes visiting the largest fried noodle manufacturing facility in Korea, mill tours and a meeting with the Korea Flour Mills Industrial Association.

USW Program Manager Erica Oakley will lead the 2016 EU/MEENA Board Team to Morocco, Italy and Israel in early March. The team includes Michael Edgar, a wheat farmer from Yuma, AZ, and a current USW director representing the Arizona Grain Research and Promotion Council; Ken Davis, a wheat farmer from Grandview, TX, and a current USW director representing the Texas Wheat Producers Board; and Michael Peters, a wheat farmer from Okarche, OK, and the secretary/treasurer of the Oklahoma Wheat Commission.

The team will first meet at the USW Headquarters Office in Arlington, VA for orientation before traveling overseas. During its three days in Morocco, the team will meet with government contacts, tour a couscous plant and two durum mills, and meet with the Moroccan Miller’s Federation and the Moroccan Importers Federation. The team will then travel to Italy and be accompanied by Regional Director Ian Flagg and Marketing Specialist Rutger Koekoek from the USW Rotterdam Office on tours of multiple pasta plants and semolina mills. In Israel, on the last leg of the trip, the team and Koekoek will visit the Port of Haifa, two mills and a bakery.

Both teams will post regular travel updates and photographs, and will report to the USW board. Follow their progress on the USW Facebook page at www.facebook/uswheat and on Twitter at @uswheatassoc.


4. Korea and Taiwan Earn First and Second Place in the World Baking Cup

Baking is both an art and a science, and every four years, bakers from around the world compete at the prestigious Coupe du Monde de la Boutlangerie (World Baking Cup) to see who has best mastered those skills. This year, twelve teams gathered in Paris, France, Feb. 5 to 9 for the competition that focuses on advancing the baking profession and promoting the quality and value of bread.

Competing live in front of an audience of judges and other professionals, the team from Korea beat the pressure to take home the top award, followed by Taiwan and France, respectively. The Korean team included Chang-Min Lee, Jong-Ho Kim and Yong-Joo Park. The Taiwan team included Chung-Yu Hsieh, Yu-Chih Chen, and Peng-Chieh Wang.

Each participating country appoints a team of three bakers, each of whom specializes in one of the competition’s categories: baguettes and breads of the world; viennoiserie and savory baking; and artistic creation. Elements of the competition include cooking with mystery ingredients randomly drawn at the last minute and creating a themed sculpture in baked goods, which in this case was to represent a national sport of the competing country.

USW is proud of the rich history we, and the U.S. wheat farmers we represent, share with the flour milling and baking industries in both Korea and Taiwan. Both countries are loyal U.S. wheat importers and are each home to a local USW office that provides trade service, technical support and other resources to the milling and baking industries.

“I want to offer my heartiest congratulations to the Korean team on their first place finish,” says Chang Yoon Kang, USW Country Director for Korea.

In Taiwan, USW, along with the Taipei Baking Association and the Taiwan Flour Millers Association, jointly established the Taiwan Baking Contest Association in 2006.
“The association trains bakers and helps raise money for them to enter contests like the Bakery World Cup around the world,” says Ron Lu, USW Country Director for Taiwan. “We are very proud of this team’s accomplishment and the continued success of the association.”

Watch videos on this year’s competition by clicking here and here. Read more about the competition and this year’s competitors by clicking here and here.


5. California Wheat Commission Names New Executive Director

The California Wheat Commission (CWC) is pleased to announce that Deanna Fernandez will become the new Executive Director of the Commission effective March 22, 2016.

Fernandez was the International Program Director at the Raisin Administrative Committee in Fresno, CA. She brings a breadth and depth of leadership with strategic and analytical thinking as well as innovative skills. She has experience planning, developing, and implementing successful programs for export markets as well as knowledge analyzing trade statistics and market research and development efforts. She has also developed and maintained relationship with U.S. growers, packers, U.S. government agencies, and international representatives working for the industry.

Roy Motter, CWC Chairman and USW Past Chairman said, “We are very pleased to announce Deanna Fernandez as the new Executive Director and welcome her to the California wheat industry."

"I am excited to begin work at the California Wheat Commission and looking forward to establishing California Wheat as the premium wheat on the market, both domestically and on a global scale," said Fernandez. "I look forward to working with the California Wheat Commission Board and the staff in Woodland, CA.”

USW extends its congratulations to Fernandez and looks forward to continuing its relationship with the CWC as a state commission member.


6. Wheat Industry News
  • USW Technical Managers Travel to Ohio to Gather Information on SRW Functionality. A team of USW technical managers, including Peter Lloyd, Regional Technical Director, USW/Casablanca; Marcelo Mitre, Technical Specialist, USW/Mexico City; and Tarik Gahi, Milling & Baking Technologist, USW/Casablanca, spent the morning of Feb. 24 at the Soft Wheat Quality Laboratory, established by USDA - Agricultural Research Service in Wooster, OH, 80 years ago. The Lab analyzes soundness and functionality of about 6,000 samples each year for public and private soft wheat breeding programs, is a partner in USW's Overseas Varietal Analysis program and conducts research projects aimed at improving various quality aspects of U.S. soft wheat varieties. View a picture of the group here.
  • Wheat Industry Weighs in on Wheat ‘Wish List.’ Representatives spanning the entire U.S. wheat chain took part in a forum during the Wheat Quality Council (WQC) annual meeting held Feb. 17 in Kansas City, MO. Panelists, including breeders, producers, millers and bakers, were asked to help develop a wish list for the future of the wheat industry. Read the full article here.
  • IAOM to Host Fundamentals of Milling Courses. The International Association of Millers will once again hosts courses at the Ocrim’s International School of Milling Technology in Cremona, Italy. Fundamentals of Milling I will be offered April 11 to 15, while the second installment of the course will be held April 18 to 22. These courses are intended for employees, supervisors and managers directly associated with flour milling plant operations. For more information visit www.iaom.info.
  • Condolences. Our thoughts are with USW Secretary-Treasurer and Washington wheat farmer Mike Miller and family, after the recent passing of his mother, Velda I. Miller, after a brief illness. Find service information and her obituary here.
  • Wheat Marketing Center Asian Noodle Technology and Ingredient Application Course. This hands-on course, scheduled for April 5 to 8, 2016, will focus on better understanding noodle formulation, processing technology, evaluation techniques, and the functionality of food ingredients in Asian noodle applications. For more information and to register visit http://wmcinc.org.
  • Northern Crops Institute Pasta Production and Technology Course. This course, scheduled for April 12 to 14, 2016, introduces the fundamental and applied aspects of manufacturing extruded pasta products. Raw material quality criteria, specifications and processing variables, and their impact on final pasta quality will be present in detail. The registration deadline is March 28. For more information and to register visit www.northern-crops.com/training-courses.
  • IGP Institute Grain Purchasing Short Course. This course, scheduled for April 4 to 15, 2016, will benefit 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 and ocean transportation. The registration deadline is March 16. For more information and to register visit www.igpevents.grains.ksu.edu.
  • Subscribe to USW Reports. USW has added a “Subscribe” menu at www.uswheat.org where visitors may subscribe to this newsletter, the weekly Price Report and the weekly Harvest Report (available May to October.) Click here to subscribe.


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Wheat Letter - February 25, 2016.pdf
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