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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.” The activities of USW are made possible by producer checkoff dollars managed by 19 state wheat commissions and through cost-share funding provided by USDA’s Foreign Agricultural Service. For more information, visit www.uswheat.org or contact your state wheat commission. Original articles from Wheat Letter may be reprinted without permission; source attribution is requested. Click here to subscribe or unsubscribe to Wheat Letter.

In This Issue:
1. A Mid-Year Look at World Wheat Supply
2. USW Works for Science-Based Sanitary and Phytosanitary Regulations
3. Asia Board Team Explores Chinese, Japanese Markets
4. Board Team Heading to Africa, Europe
5. Canadian and U.S. Grain Sectors Release Cross-Border Trade Study
6. Wheat Industry News

Online Edition: Wheat Letter – January 9, 2014

Crop Quality Information: USW 2013 Crop Quality Report (http://www.uswheat.org/cropQuality)


1. A Mid-Year Look at World Wheat Supply
By Casey Chumrau, USW Market Analyst

A massive cold weather system traversed most of U.S. wheat country this week, sending temperatures well below 0˚F (-18˚C) in many areas. While there is potential for damage to winter wheat in some smaller areas, the market remained focused on an abundant world wheat supply.

For the United States, USDA will release estimates on U.S. winter wheat seedings on Friday, Jan. 10. Ahead of that report, find below a mid-year look of current expectations for 2013/14 production in the world’s other major wheat exporters.

Argentina. After receiving better information from field workers, the Argentine Agriculture Ministry increased its official production forecast in December from 8.5 million metric tons (MMT) to 9.0 MMT. If realized, it would be 500,000 metric tons lower than last year and well below the five-year average of 13.0 MMT. In the meantime, several large Brazilian mills signaled that Argentina failed to deliver on wheat contracts in December and they may have to source wheat from other origins. The Argentine government regulates exports in order to protect domestic wheat prices and has limited or prevented exports for much of the last year. This low production estimate increases the likelihood that Argentina’s exportable wheat supply will continue to be limited.

Australia. Favorable late season weather in Australia sent yields soaring and helped farmers achieve the third largest wheat crop on record. High yields combined with larger harvested area put total Australian output at 26.2 MMT, according to the Australian Bureau of Agriculture and Resource Economics and Sciences (ABARES). Above average rainfall in August and September negatively affected the crop’s overall quality and protein levels are below average.

Canada. Canadian wheat production of 37.5 MMT in 2013/14 shattered the previous production record of 31.9 MMT set in 1991/92. An 11 percent increase in seeded area and a stunning 46 percent yield improvement over 2012/13 to a record 52.8 bu/acre (3.59 MT/Ha) helped production to exceed early forecasts. Overall, the quality of the Canadian crop was slightly above average, but average protein levels were slightly below normal, as is typical with a large crop. There has been some discussion of storage and logistics problems in moving the inland wheat to the ports. Due to the late harvest in 2013, Canadian winter wheat seeded area for the 2014/15 harvest fell 5 percent from the previous year to 0.86 million hectares. Winter wheat accounts for only 10 to15 percent of total Canadian wheat area.

Black Sea. As expected, Black Sea production rebounded significantly in 2013/14 after severe winter weather and drought devastated last year’s crop. In Russia, rain initially delayed harvest but unseasonable warm weather in late October and November provided excellent harvest conditions and boosted yields. USDA estimates put Russian production at 51.5 MMT, up 37 percent from 2012/13 and just below the five-year average of 52.2 MMT. Improved soil moisture helped lift yields in Kazakhstan and push production to 15.5 MMT, a 58 percent increase over last year and above the five-year average of 14.4 MMT. However, heavy rains at harvest lowered the average quality. Ukraine’s larger harvested area and improved yields helped increase production 40 percent year over year to 22.0 MMT, which exceeds the five-year average of 20.3 MMT, according to USDA. The International Grains Council (IGC) reports lower planted area in Russia and Ukraine for the 2014/15 winter wheat crop because of wet conditions and planting delays. However, the unseasonably warm weather in both countries allowed for excellent plant growth before the onset of winter temperatures.

European Union. Larger crops in most European Union (EU) wheat producing countries, including the two largest France and Germany, helped the EU increase production by 8 percent compared to last year with 143 MMT, according to Strategie Grains. It would be above the five-year average of 140 MMT and the best output since the record crop of 152 MMT in 2008/09. In December, Strategie Grains released its preliminary forecast for 2014/15 wheat production based on planting intentions and other field-based information. Conditions were very good at the end of 2013 for winter wheat development even though conditions remain dry in the Iberian Peninsula and rain delayed planting in France and Italy. Rapid growth before dormancy does leave plants more susceptible to damage if temperatures drop before receiving adequate snowfall. However, there is no such temperature change in the forecast. Strategie Grains projects higher expected planted area of 26.6 million hectares, compared to 25.7 million hectares last year, which will help total EU production improve to an estimated 146 MMT in 2014/15.


2. USW Works for Science-Based Sanitary and Phytosanitary Regulations

The World Trade Organization (WTO) Uruguay Round agreement strengthened trade rules and procedures that governments use to ensure food safety and to protect animals and plants from pests and diseases.

Many SPS measures are fully justified and U.S. Wheat Associates (USW) encourages governments to implement measures that are no more trade-restrictive than required to protect against pests and disease. However, when the measures do not rely on science-based risk assessment, or when risk prevention measures go beyond those necessary to protect against risk, they can become de facto trade barriers that unnecessarily discourage importers and deprive consumers access to high-quality agricultural products such as U.S. wheat. SPS barriers have received more attention since there has been a noticeable increase in non-tariff barriers for agricultural exports as import tariffs have fallen.

Additionally, USW supports science based risk assessments and managing these risks in the least trade distortive manner. In the past year, the USW Board of Directors passed policy calling for science-based SPS measures, for greater transparency on SPS assessments and management and for more rigorous enforcement on the measures that go beyond the Uruguay Round agreement. These additional measures would apply to both the United States and other trade agreement members.

The U.S. wheat industry’s focus on these issues parallels the U.S. government’s commitment to mitigate SPS issues that pose a significant barrier to international trade. USW provides input to the U.S. government each year through its National Trade Estimates report on SPS barriers and works with the U.S. government on SPS issues affecting wheat. Moreover, as wheat production technology advances, the acceptance of science-based risk assessment will become increasingly important. Wheat buyers from around the world should know they have an opportunity to work with USW on these issues, to help them operate in a more open trade environment.


3. Asia Board Team Explores Chinese, Japanese Markets
By Shawn Campbell, USW Assistant Director, West Coast Office

From Dec. 5 to Dec. 15, I traveled with the USW Asia Board Team to China and Japan, learning about two major U.S. wheat importers and USW’s work in those markets. This was no pleasure cruise, but an intense educational tour meant to give our USW board members and state wheat commissioners a greater understanding of the importance of these markets and the work it takes to keep customers informed about reliability, quality and value.

Four travelers joined me on this trip: Bryan Cranston, a soft white (SW) farmer from Moro, OR, and chairman of the Oregon Wheat Commission; Gordon Gallup, a hard white (HW) farmer from Ririe, ID, USW board member and commissioner with the Idaho Wheat Commission; Tim Sedlacek, a hard red spring (HRS) farmer from Warren, MN, USW board member, and vice chairman of the Minnesota Wheat Research and Promotion Council; and Tana Simpson, associate administrator of the Oregon Wheat Commission.

The team met first in Portland, OR, where we received briefings from the USW West Coast Office, the Wheat Marketing Center and the Federal Grain Inspection Service. We also toured a grain export terminal in Portland owned by Temco, visited the laboratories of OMIC (the company that tests all Japanese wheat imports for chemical residues) and met with grain traders at Columbia Grain. After only a short time in Portland, the team boarded a plane for Shanghai, China.

Regional Vice President Matt Weimar, Country Director Andy Zhao and Marketing Specialist Shirley Lu joined the team and provided the background on the Chinese wheat market. China is a rapidly expanding market for U.S. wheat, importing HRS, SW and SRW. While China is the largest wheat producer in the world, its domestic production has concentrated more on quantity rather than quality. As a result, Chinese millers need imported wheat to meet the country’s growing middle class demand for high quality wheat food products. However, the Chinese government controls wheat imports as a matter of national security.

The word of the day in China was “expansion.” The team spent most of its stay in the Qingdao region, heart of the Chinese wheat belt and the Chinese milling industry.

Even though demand for U.S. wheat from millers like these companies is very high, the Chinese government hampers private wheat imports. Every year, the Chinese government issues a wheat import tariff rate quota, or the right to import a certain amount of wheat at a lower tariff level (in this case, 1 percent ad valorum). The majority of the quota goes to the state trade entity, COFCO, and only a small portion goes to the private milling industry. Even with these challenges, U.S. wheat exports to China have been steadily growing over the past eight years.

Following six days in China, the Asia Board Team travelled to Tokyo, Japan. Japan is a very important market for U.S. wheat, with consistent, large bi-weekly tenders for HRS, HRW and SW. The USW Tokyo Office, led by Country Director Wataru “Charlie” Utsunomiya, has operated for close to 60 years. The long-term relationship between the Japanese industry and USW, built on mutual understanding and respect, has helped sustain U.S. wheat exports through many events.

The Japanese wheat market is one of the most developed in the world, so USW’s efforts there mostly focus on providing up-to-date market information, collaborating with Japanese and U.S. wheat industries and maintaining our market share against rivals like Australia and Canada. There have been some shifts in consumption, particularly with the younger generation putting a greater emphasis on frozen and convenience wheat food products.

While in Japan, the team met with representatives from the Japanese Flour Millers Association, the Japanese Grain Importers Association, OMIC and the Ministry of Agriculture, Fisheries, and Forestry (MAFF). MAFF carries out all wheat purchases in Japan and then sells the wheat to Japanese flour mills. The Japanese grain trade acts as intermediaries between MAFF and the overseas sellers, and OMIC provides testing and inspection services.

After 10 days of grueling travel and tight schedules, the team returned to the United States and caught their respective flights home. The team members were impressed with what they had seen on the trip and their new knowledge of the complexity of the wheat export market. They were also undoubtedly glad to be home amongst family and friends for the holidays.

For pictures from the trip and more information on the Asia Board Team, check out the USW Facebook page at www.facebook.com/uswheat.


4. Board Team Heading to Africa, Europe
By Julia Debes, USW Assistant Director of Communications

A wheat farmer each from California, Maryland and Nebraska will be joining me on this year’s USW Africa-Europe Board Team, kicking off Friday, Jan. 10 through Jan. 24. Our team will be traveling to Nigeria, Ghana, Italy and Spain.

USW board teams are intense, regional visits designed to educate USW board members and state wheat commissioners about the overseas buyers of their wheat and USW’s overseas office work as well as strengthen relationships with overseas customers. In just two short weeks, we will be meeting with flour millers, bakers, grain traders and government officials as well touring flour mills, port facilities and bakeries.

Board teams bring together both ends of the grain chain – the farmers who supply the world’s most reliable source of high quality wheat and the buyers and end users who utilize U.S. wheat to help improve their products and expand their businesses.

On one end, the teams help educate USW board members and state wheat commissioners about the day-to-day work of USW’s overseas offices to promote their wheat, solve problems which may disrupt the flow of wheat overseas, maintain U.S. market share and expand U.S. wheat exports. On the other, board teams also help thank and educate overseas buyers through direct contact with the farmers who grow the wheat they prefer.

Travelling with me on the board team this year are: Larry Hunn, third generation HRW farmer in northern California; Jason Scott, six generation SRW farmer from Maryland’s Eastern Shore and USW board member; and Brent Robertson, family HRW farmer from southwest Nebraska.

We will be posting regular updates and photographs of our travels. Follow the team’s progress on the USW Facebook page at www.facebook.com/uswheat.


5. Canadian and U.S. Grain Sectors Release Cross-Border Trade Study

A new study, released by the Canada-U.S. Task Group, a group of Canadian and U.S. non-profit and trade organizations, documents the commercial flow of grain from the United States to Canada. The study addresses U.S. and Canadian trade volume, handling and processing practices for more than 15 commodities traded between the United States and Canada. The analysis was provided to the Canadian and U.S. governments as input in the consultations for the development of phytosanitary measures under Canada’s proposed Grain Import Framework (D-12-05).

The study, located online at http://canada-usgrainandseedtrade.info, examined data from 2010 to 2012. On average, corn is the number one commodity moving north from the United States to Canada at 1.05 MMT per year. Average soybean exports to Canada are 245,000 MT while wheat exports are 69,000 MT. Additionally, the report indicates that 380,000 MT of screenings enter Canada on average, but this category mainly encompasses highly processed grain commodities that will be exempt from the proposed framework.

According to the study, 54 percent of all U.S. grain exports to Canada were transported by truck, followed by rail at 32 percent and water at 14 percent. The high percentage of truck movements highlighted a potential problem if inspections and certificates would be required on each shipment. However, based on the risk assessments of the various crops and taking into consideration their end-use in Canada, it is expected that only a small number of these U.S. shipments will require a phytosanitary certificate.

The study also found that Canadian processing practices generally minimize phytosanitary risks that may arise from U.S. shipments. The commodities are typically cleaned at the recipient’s facility and screenings are heated, hammered and turned into feed or sent to landfills, which mitigate phytosanitary risks.

Additionally, the Task Group has been engaged with the Canadian government to address concerns and will continue to participate in the governmental consultation process to improve Canada’s Grain Import Framework (D-12-05) implementation.


6. Wheat Industry News
  • Welcome to Collin Watters, the newly selected executive vice president of the Montana Wheat & Barley Committee. USW looks forward to working with Watters and thanks Kim Falcon for her years of service to the wheat industry. For more information, visit http://gftrib.com/K8XqDv.
  • USDA Invites Public Comment on Proposed Changes to GSM-102 Program. USDA has opened public comment for a proposed rule amending regulations of the Export Credit Guarantee (GSM-102) Program to incorporate operational changes that have been implemented since the publication of the current rule, and includes other revisions to enhance clarity and program integrity. For more information, visit http://1.usa.gov/19Xz4GW.
  • WMC Asian Noodle Technology and Ingredient Application Short Course. The Wheat Marketing Center (WMC) in Portland, OR, will hold its Asian Noodle Technology and Ingredient Application Short Course March 10 to 14, 2014. For more information or to register, visit http://www.wmcinc.org.
  • IGP Flour Milling Short Courses. The International Grains Program (IGP) in Manhattan, KS, will hold its distance version of the Overview of Milling Principles Jan. 13 to Feb. 21, 2014. The Manhattan-based KSU Introduction to Flour Milling short course will be Jan. 13 to 17, 2014. For more information or to register, visit http://www.grains.ksu.edu/igp/.
  • NCI Durum Wheat Milling Course. The Northern Crops Institute will hold its Durum Wheat Milling short course April 7 to 9, 2014. For more information or to register, visit http://www.northern-crops.com/.
  • Condolences to the family of Mark Gaede, former director of government affairs for environmental policy for the National Association of Wheat Growers, who passed away Dec. 24, 2013. For more information, visit http://bit.ly/1cwxgoy.

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