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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. Digging Deeper: How Global Supplies Will Tighten in 2017/18
2. Freeze, Snow Effects Likely Cut into World’s High Quality Wheat Supply
3. Japanese Executive Millers Focus on Trade Issues and Quality on Annual U.S. Wheat Tour
4. Profiling U.S. Wheat Sustainability: Mark Linnebur, Hard White Wheat Farmer
5. U.S. Wheat Organizations Comment on New Trade Policy Initiatives
6. Wheat Industry News

PDF Edition: (See attached file: Wheat Letter - May 18, 2017.pdf)

USW Supply & Demand Report: http://www.uswheat.org/supplyDemand

USW Harvest Report: http://www.uswheat.org/harvest

1. Digging Deeper: How Global Supplies Will Tighten in 2017/18
By Stephanie Bryant-Erdmann, USW Market Analyst

While markets focused on USDA’s latest global supply and demand values, a deeper look provides perspective for wheat buyers. Breaking the supply values down into three categories — importer, exporter and China — shows some interesting trends. USDA expects world wheat supply in 2017/18 to fall 2 million metric tons (MMT) year over year to 993 MMT due to a 2 percent decline in its estimated production of 738 MMT. If realized, it would be the first production decline since 2012/13. The anticipated decrease in exporter and importer supplies will be larger, but that decrease is masked by estimated increases for China. Removing China’s 2017/18 projected beginning stocks and production from global wheat supply reveals an 18.2 MMT or approximately 2 percent decline in global supplies.

Importing countries. Ending stocks in major wheat importing countries for 2016/17 — soon to be 2017/18 beginning stocks — are expected to fall to a 6-year low of 68.0 MMT. Production in the importing countries is expected to increase 5 percent year over year, lifted by a 10 MMT increase in India after two poor crops there. Total importing country supplies are expected to remain stable at 300 MMT, with beginning stocks falling and production increasing only marginally in importing countries. However, it should be noted that 107 MMT, roughly 35 percent, of that supply will remain in India.

Exporting countries. USDA forecasts supplies in the top wheat exporting countries of Argentina, Australia, Canada, the European Union (EU), Kazakhstan, Russia, Ukraine and the United States to decrease by 4 percent or roughly 19 MMT year over year to 451 MMT. A 10.5 MMT year over year increase in exporter beginning stocks partially offsets the anticipated 7 percent decrease in production. Of the major eight exporters, only the EU and Argentina expect to see increases compared to last year.

China. USDA expects Chinese beginning stocks to climb to 111 MMT, up 14 percent over 2016/17. If realized, China will hold 43 percent of 2017/18 total global wheat beginning stocks. Chinese wheat production is also expected to rise in 2017/18 to 131 MMT, up 2.15 MMT from 2016/17, yet Chinese wheat consumption is expected to decline 2 percent to 116 MMT due to an anticipated decrease in wheat feeding. With supply up and consumption down, 2017/18 Chinese ending stocks are expected to grow to 128 MMT, up 15 percent from last year and a new record. If realized, Chinese ending stocks would account for 49 percent of all global wheat ending stocks for 2017/18.

Global supply and demand estimates give broad perspective for purchasing decisions, but customers should take care to remove Chinese stocks from the equations because the entire volume will stay in China. Thus, China’s ending stocks skew the total global stocks-to-use ratio higher to 35 percent. Without China, the global ratio would be 21 percent.

Buyers should also note that USDA’s first estimates for 2017/18 wheat production use trendline yields and average harvested area. As last year demonstrated, weather can significantly affect yield potential, abandoned acres, quality and total production. For example, the actual effect of the late April freeze and snow, as well as increasing plant disease pressure, on hard red winter (HRW) production and quality will not be revealed until harvest (see below). Buyers should continue to monitor conditions around the world, and recognize that global wheat supplies are much tighter than traditional global supply and demand estimates show.

To keep up to date on the 2017/18 U.S. wheat harvest and initial quality analysis, it is easy to subscribe to USW Weekly Harvest Reports. To read the first report, click here.


2. Freeze, Snow Effects Likely Cut into World’s High Quality Wheat Supply

It is still too early to project specific effects on wheat yields for marketing year 2017/18 from the late-season cold and snow event in Kansas and parts of Colorado, Texas and Nebraska. However, those close to the situation suggest the freeze and snow only add fuel to an already established trend.

“The big story with hard red winter wheat in general before the blizzard headlines was about the reduction in planted area,” said Kansas Wheat CEO Justin Gilpin. “Lower planted area, now combined with higher abandonment in this crop, encouraged USDA to project a drop in hard red winter wheat production by 344 million bushels (9.36 MMT).”

Gilpin said he expects the situation in HRW will help reduce the total U.S. wheat stocks-to-use ratio by perhaps 10 percent — but carryover stocks still support a relatively high ratio of 40 percent.

“However, it needs to be pointed out that this does not reflect the balance sheet for the high quality milling wheat that buyers here in the United States and around the world should watch closely,” said Gilpin. “The available stocks-to-use number for quality supplies is projected to be to be much tighter on a global basis.”


3. Japanese Executive Millers Focus on Trade Issues and Quality on Annual U.S. Wheat Tour
By Amanda J. Spoo, USW Communications Specialist

When a new Administration takes office and appoints new leadership, new opportunities and challenges for U.S. agriculture and trade are inevitable. It becomes increasingly important for the U.S. wheat industry to continue to renew the relationships built over the years with overseas customers and clearly communicate how changes might affect them.

Every year, as a part of USW’s market development activities, several overseas teams of U.S. wheat customers are organized and invited to travel to the United States to learn firsthand about the benefits of a business relationship with the U.S. wheat industry. USW welcomed its first 2017 trade team, a group of five Japanese executive flour millers, to the United States April 18 to May 6. USW collaborated with the Oregon Wheat Commission (OWC), Washington Grain Commission (WGC), Idaho Wheat Commission (IWC) and North Dakota Wheat Commission (NDWC) to organize and host this trade team.

“The United States is the biggest wheat supplier for Japan, so it is important to maintain dialogue between representatives of Japan’s biggest wheat users and our U.S. wheat contacts,” said Mr. Masaaki Kadota, Executive Director of the Japan Flour Millers Association (JFMA). “Our focus for this trip was to exchange views on future trade issues and maintaining a stable supply of wheat to meet our needs.”

USW President Alan Tracy noted that JFMA and the U.S. wheat industry have maintained a mutually respectful relationship for many years.

“We want to thank Mr. Kadota for his friendship and many years of service,” Tracy said.       

The team began its trip in Portland, OR, meeting with U.S. wheat producers from Oregon and Idaho to discuss current crop conditions. Darren Padget, OWC Chairman, outlined the pressing decisions farmers have to make that affect the wheat crop and Bill Flory, Wheat Marketing Center (WMC) Chairman, hosted the group for a tour of the WMC laboratory. The team also met with the staff at the Overseas Merchandise Inspection Company (OMIC) grain and chemical residue testing laboratories and with the Japanese grain traders.

“At our office, we discussed the overall decrease in wheat seeded area, but we also assured them that the United States has ample carryover stocks and production conditions look pretty good for states that are tributary to Pacific Northwest ports,” said Steve Wirsching, USW Vice President and Director of the USW West Coast Office.

Next, the team traveled to Washington state, where they looked at the journey wheat takes from the farm to port, visiting with USW Vice Chairman Mike Miller while touring a warehouse and rail facility. They also learned more about plant breeding innovations at the Washington State University wheat breeding program and the USDA Agricultural Research Service (ARS) Western Wheat Quality Lab in Pullman.

During the next leg of their trip to Washington, DC, the team shifted its focus to the U.S. and global wheat market situation and trade policy, including meetings with the North American Export Grain Association, National Grain and Feed Association and USDA/FAS.

The team rounded out their trip in North Dakota where they met with U.S. wheat producers and focused on wheat quality and the North Dakota State University wheat breeding programs.

“Japanese consumers seek extremely high quality, safe and secure products,” said Mr. Junji Kokuryo, General Manager, Flour Milling Department, and Officer, Showa Sangyo Co. “It is our responsibility to convey those needs and message to U.S. wheat producers and breeders.”

Erica Olson, NDWC Marketing Specialist, said the team was very interested in hearing about planting progress and crop expectations in North Dakota.

“Japan is not only one of our oldest customers and quality focused buyers, but they are often the largest importer of hard red spring wheat,” said Olson “Hosting the team gives them the opportunity to share their questions and needs with producers. In return, our producers better understand the necessity of a quality product ­— that all wheat is not created equal and that they need to produce a crop that stands out amongst the growing competition.”

In 2016, the USW Tokyo Office celebrated 60 years serving customers in Japan and since the office opened in 1956, bringing trade teams to the United States has become a tradition.

“Steady communication and transparency is the key to the U.S. wheat industry’s long term relationship with Japan,” said Wirsching. “Inviting our customers — and friends — here renews that commitment year-after-year and is an investment in both of our industries.”


4. Profiling U.S. Wheat Sustainability: Mark Linnebur, Hard White Wheat Farmer
By Elizabeth Westendorf, USW Policy Specialist

Mark Linnebur’s family and their community are always at the core of every decision made on their farm. The president of the Colorado Wheat Administrative Committee farms 25,000 acres of land in Colorado alongside five of his brothers and their families. He typically grows HRW or hard white (HW) wheat and corn in a wheat-corn-fallow rotation.

“Being a good steward of the land is what every farmer is trying to achieve,” said Linnebur. “We are not trying to mine the land for what we can get out of it in the near term, because we want to pass it on to our children.”

Linnebur is one of six U.S. wheat farmers featured in a USW series on wheat sustainability. There are six U.S. wheat classes, grown in distinct regions and local micro-climates. Aggregate measures of sustainability are important, but they fail to capture the nuances of a crop that is grown across many different climates, soil types and farm environments. These profiles show the differences in farming practices across the country and how those farming practices enhance the sustainability of U.S. agriculture.

The Linneburs switched to no-till farming twenty years ago to help protect their soil and better retain moisture, which is a scarce commodity in his region. In dry years, they now see 20 to 50 percent better yields than before the switch to no-till because they are conserving an average 25 to 30 percent of water resources every year.

“Sustainability is more than just environmental. The fact that we are raising our family on this farm is what keeps our love for the land in place. If we don’t love the land, we are not going to take care of it,” said Linnebur. “First and foremost, sustainability is economical and generational – which leads to environmental sustainability.”

That intergenerational focus has resulted in efforts to innovate and better protect the resources on his land. For example, Linnebur uses “bio-solids” from the nearby metropolitan area to fertilize about half of his land every year and sees better soil quality as a result, which helps increase protein levels of his wheat crops.

“It can be challenging trying to convince the wider population that we are taking care of the ground, because for us, it’s about passing it on to the next generation,” said Linnebur. “We’re building the soil, that’s our real goal.”

U.S. wheat farmers deal with unique challenges and growing conditions. For Linnebur, that challenge is conserving water resources for his dryland crops. The Linnebur family farm has thrived in part because they use no-till and innovative practices like fertilizing with bio-solids to maximize soil health and production together. This formula is one that all farmers strive to balance, and each go about it in ways that make the most sense in their region. Sustainability is not “one size fits all.”

Learn more about Linnebur and his farm at www.uswheat.org/factsheets. U.S. farmers, ranchers, fishermen and foresters also share their values, sustainability experiences and conservation practices at the U.S. Sustainability Alliance.


5. U.S. Wheat Organizations Comment on New Trade Policy Initiatives

USW and the National Association of Wheat Growers (NAWG) have been fully engaged in U.S. trade policy on several fronts this month.

The organizations welcomed the U.S. Senate’s confirmation of Robert Lighthizer May 11 as the next U.S. Trade Representative (USTR). During his confirmation process, Ambassador Lighthizer said, “ensuring that our trading partners meet international trade obligations, especially those of the World Trade Organization, is a core foundation for fairer and freer trade.”

“We wholeheartedly agree,” said Jason Scott, USW Chairman and a wheat farmer from Easton, MD. “A good example is the U.S. dispute case against China’s excessive domestic wheat subsidies that violate its WTO membership agreement. The case recognizes that China’s policy restrains wheat trade and costs farmers in exporting countries billions of dollars every year. It is the kind of enforcement that we think must and will continue in the new Office of the USTR.”

David Schemm, NAWG President and a wheat farmer from Sharon Springs, KS, added that NAWG and USW encourage him to quickly name a new U.S. Agricultural Trade Ambassador to represent farmers and their customers in the upcoming re-negotiation of the North American Free Trade Agreement (NAFTA) and trade negotiations with Asia-Pacific nations.

On the same day, the two organizations applauded the plan to create a new undersecretary for trade and foreign agricultural affairs at USDA. While the details of this new position are pending, we believe that it should give agriculture a stronger voice in future trade policy and negotiations, particularly in tandem with the new interagency Task Force on Agriculture and Rural Prosperity led by Secretary of Agriculture Sonny Perdue.

NAWG and USW also submitted comments on policy barriers erected by various countries that distort trade and artificially close off markets where there otherwise would be demand for U.S. wheat and other commodities. The comments were requested by the USTR and U.S. Department of Commerce as part of an upcoming public hearing on an Omnibus Report on Significant Trade Deficits.

Finally, today, we urged caution as the Trump Administration submitted to Congress its notice of intent to renegotiate NAFTA. The U.S. wheat industry welcomes the opportunity to improve the framework for cross border wheat trade between the United States, Canada, and Mexico, but would strongly oppose changes that might limit the current NAFTA’s benefits for wheat farmers and their customers, particularly in the Mexican food processing industries.

“I cannot emphasize enough how important our Mexican customers are to U.S. wheat farmers,” said Scott. “There is nothing wrong with modernizing a 23-year-old agreement, but that must be done in a way that benefits the food and agriculture sectors in both countries.”

Stakeholders and customers can follow USW’s policy activity online at http://www.uswheat.org/policy, and NAWG’s positions at http://www.wheatworld.org/policy-action/.


6. Wheat Industry News
  • National Academies Plot Ag Research Strategy. · The National Academies of Sciences, Engineering, and Medicine is launching an initiative to identify the greatest scientific opportunities in food and agriculture. “Breakthroughs 2030” will produce a blueprint for how research can solve a variety of challenges and dramatically increase food production worldwide. Kansas State University College of Agriculture Dean John Floros and University of California, Riverside, genetics Professor Susan Wessler will chair the initiative, sponsored by the Supporters of Agricultural Research (SoAR) Foundation and the Foundation for Food and Agriculture Research.
  • On the Passing of Don Potts. We were sad to learn that our friend and colleague Don Potts passed away recently and offer our sympathy to his family, friends and many colleagues. Don was Manager of the Eastern Washington State Grain Inspection Program, which acts as an agent for the Federal Grain Inspection Service at up-country and export elevators in Washington State. We have great respect for our independent grain inspectors and Don was a stand-out who, as state agriculture department officials said, "touched many lives, represented WSDA with the highest degree of professionalism and served our industry partners in ways too numerous to count." Here is a link to a USW video from 2014 featuring Don demonstrating the important U.S. wheat inspection process: https://www.youtube.com/watch?v=yFpSE6DXUcU&t=93.
  • Wheat All About It! Podcast: Wheat Monetization – Little by Little. In Episode 20 of the Washington Grain Commission podcast, Director of Communication and Producer Relations Scott Yates reviews his experience on the USW learning journey to Tanzania to focus on food aid. Listen to the episode here.
  • Congratulations on New Arrivals:
- USW Vice President of Overseas Operations (President-elect) Vince Peterson and his wife Sandy welcomed their sixth grandchild, grandson Hudson, born on May 5.
- Past USW colleague Shannon Schlecht and his wife Tina welcomed their first child, daughter Alyssa Lorraine on May 8. Shannon worked for USW for 15 years.
- Stacie McCracken, previously with Ohio Corn and Wheat and now doing free-lance agricultural communications, and her husband Derek welcomed their first child, daughter Sawyer Nicole on May 15.
  • The ICC Handbook of Cereals, Flour, Dough and Product Testing, Second Edition is now available for order. This is an enlarged and updated version of the original, respected reference that explains virtually all important test methods regarding grain-based foods, from in-field, post-harvest through mill intake to processed products, including breads, cookies, cakes, crackers, noodles and more. Throughout, an emphasis is placed on practical connections between testing, quality control and superior end-product properties. In addition, the book explains testing equipment, including specific devices and their applications. For more information or to purchase, visit www.destechpub.com.
  • IGP-KSU Risk Management Course. The IGP Institute will host this course in Manhattan, KS, Aug. 7 to 11, 2017. The course is split into two parts, Basic and Advanced, and will focus on principles of risk management and commodity price control through the principles of hedging and utilization of various hedging strategies. Registration is due July 31. Click here for more information and to register.
  • KSU-Buhler Spanish Executive Milling Course. The IGP Institute will collaborate with Buhler, Inc., to host this course in Manhattan, KS, Aug. 28 to Sept. 1, 2017. The course is designed for mill owners, directors and managers, and will be an introduction to flour milling and quality, grain cleaning and functionality. Registration is due July 20. Click here for more information and to register.


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