Wheat Letter - March 31, 2011
USW is the industry’s market development organization working in more than 100 countries on behalf of America's wheat producers. 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.
1. USDA Projects Large Increase in Wheat Planted Area, Surpassing Trade Expectations
2. Crop Conditions Vary Throughout HRW Belt
3. Presidential Visit Highlights the Important U.S. and Latin America Trade Relationship
4. Ninety Days to Massive Market Losses in Colombia
5. Despite River System Closing, PNW Wheat Exports Outpace 2009/10
6. Improving Crop Quality Information for U.S. Wheat Customers
7. Korean Team Tests Whole Wheat Bread Blends at the Wheat Marketing Center
8. Wheat Industry News
Online Edition: Wheat Letter - March 17, 2011 (http://bit.ly/h1Efd1)
PDF Edition:  Wheat Letter - March 31, 2011.pdf
1. USDA Projects Large Increase in Wheat Planted Area, Surpassing Trade Expectations
by Chad Weigand, USW Market Analyst
The U.S. Department of Agriculture (USDA) Prospective Plantings report released today pegged 2011 U.S. wheat plantings at 58.0 million acres, an eight percent increase over last year’s 53.6 million acres. The forecast was one million acres more than USDA’s projection presented at its 2011 Outlook Forum in January and exceeded average trade estimates of 57.3 million acres.
Spring wheat planted area, which USDA estimated at 14.4 million acres, exceeded trade estimates of 13.7 million acres and would be five percent greater than 2010 plantings. Of this total, hard red spring (HRS) accounted for 13.6 million acres, up from 13 million acres a year ago. USDA noted that this year’s high protein premiums will likely encourage farmers to plant more HRS. USDA estimated an increase of nearly 11 percent, to 7.1 million acres, for the largest HRS producer, North Dakota, while projecting durum acreage for the state to fall from 1.8 to 1.6 million acres. Durum was the only wheat class with a decline in acreage from last year. USDA projected durum acreage at 2.4 million acres, an eight percent decline from 2010 and below trade expectations of 2.6 million acres.
Estimated winter wheat plantings of 41.2 million acres are up 10 percent from 2010 and 239,000 acres greater than USDA’s January estimate. Soft red winter (SRW) plantings increased significantly from 2009/10 when heavy rainfall and a delayed row crop harvest led to record low acreage. At an estimated 8.2 million acres, SRW plantings are up 55 percent from a year ago. Estimated SRW acreage in Illinois more than doubled from last year, from 330,000 acres to 760,000 acres. Missouri SRW plantings increased from 370,000 acres last year to 830,000 acres for the 2011/12 crop.
Hard red winter (HRW) planted area, while higher than last year’s 28.6 million acres, came in slightly lower than USDA’s January estimate. USDA reported HRW plantings at 29.4 million acres, down 0.2 million acres from January. USDA decreased its acreage estimates for last year’s second and third largest HRW producers, Texas and Oklahoma. USDA estimated Texas HRW acreage at 5.65 million acres, down 100,000 acres from January, while Oklahoma’s projected acreage fell from 5.4 million acres in January to 5.2 million acres. Kody Bessent of the Texas Wheat Producers Association said that the Texas panhandle south through the southern plains has not received any showers since October. He warned that if poor conditions persist producers could switch from wheat to cotton this May, leading to a further decline in acreage. Currently, 62 percent of the Texas HRW crop is rated in either poor or very poor condition, compared to eight percent a year ago.
USDA reported increased acreage for the Pacific Northwest states where the majority of soft white (SW) wheat is produced. Washington state wheat plantings increased by five percent, to 2.5 million acres. Idaho and Oregon also planted more wheat, up by six percent and three percent respectively, to 1.5 and 1 million acres.
Read USDA’s Prospective Plantings report online at: http://www.usda.gov/nass/PUBS/TODAYRPT/pspl0311.pdf
U.S. Wheat Planted Area
*Based on USDA Prospective Plantings report, released March 31, 2011.
2. Crop Conditions Vary Throughout HRW Belt
Excerpted from Kansas Wheat Scoop, by Bill Spiegel, Communications Specialist
Wheat growers throughout the United States found that 2010 was a banner year in most locations. The status of the 2011 crop, however, is in doubt, according to producers responding to a query by the International Grains Program at Kansas State University and Plains Grains, Inc. during a "Producer Market Awareness Seminar," held March 29 to 30 in Manhattan, KS. The event featured crop updates from several states.
U.S. HRW production for 2011/12 has been hit hard by drought. According to Jim Shroyer, Research and Extension Agronomist with Kansas State University, about 10.1 inches (25.65 cm) of evapotranspiration (ET = soil moisture plus precipitation) are required to produce the first bushel of wheat in a given acre. After that, each inch (2.54 cm) of ET produces about 5.5 bushels.
"Since Sept. 1, in southwest Kansas we've had 38 percent of our normal moisture," says Shroyer, who adds that west central and northwest Kansas are not faring much better (40 percent and 52 percent of normal, respectively) and that much of the late-emerging wheat is leafing out underneath the surface in those areas.
"Now is the time for wheat to tiller, and we're running out of time and moisture for that to happen," he adds.
The wheat in northwest and west central Kansas could be better than expected, barring any unforeseen weather calamities. The central and eastern Kansas crops also look average to above average. In general, the difference between good-looking wheat and struggling wheat seems to be variability in planting date and the spotty nature of rainfall events throughout the state since last fall.
Reports from other states include:
- Texas: The good news is that there is minimal disease pressure; the bad news is that there isn't much wheat to begin with. There are some reports of leaf rust and stripe rust, but not enough to cause much concern. Every county in Texas — save four — are in some level of drought. At last check, the crop is 62 percent poor to very poor. Abandonment will be high.
- Oklahoma: Wheat along the I-35 corridor looks good, but wheat in southwest Oklahoma and in the Panhandle may not make anything and could be grazed out. The entire crop is rated 49 percent poor to very poor. There is some barley yellow dwarf but very little rust development.
- Nebraska: The northern Panhandle has received timely moisture and is one of the better areas of the state. The southern Panhandle is dry and has received very little moisture since January. Spotty stands are prevalent along the southern border. Farmers planted just 1.5 million acres of wheat in Nebraska, one of the lowest totals in memory.
- Colorado: Farmers dusted in their wheat last fall, although subsoil moisture at the time was good. Poor stands caused some winter injury. The crop was recently rated at 51 percent poor to very poor. The states' farmers planted 2.5 million acres.
In general, the majority of the hard red winter wheat-growing region needs additional rainfall…and soon. “If we get a little bit of moisture at the right time, we’ll have an average crop,” Nebraska Wheat Board Executive Director Royce Schaneman said. “If we miss the rain, we’ll fall a little short.”
3. Presidential Visit Highlights the Important U.S. and Latin America Trade Relationship
President Barack Obama’s visit to Brazil, Chile and El Salvador last week highlighted the special trade relationship that the United States shares with its Latin American neighbors. For example, Latin America accounted for more than 7 million metric tons (MMT) of U.S. wheat exports in 2009/10, roughly one-third of all U.S. wheat exports that marketing year.
In Brazil, the two governments signed a trade and economic cooperation agreement (TECA). This agreement establishes a United States-Brazil Commission on Economic and Trade Relations, which will work to reduce barriers to trade and promote economic growth. TECAs are often the first step in the process of exploring and negotiating free trade agreements (FTAs).
The U.S. wheat industry would welcome increased trade opportunities with Brazil, which is the largest importer of wheat in the region with potential to be a substantial market for high quality U.S. wheat. Argentina is currently the main provider of wheat to Brazil because of geography and preferential trade arrangements provided by the Mercosur agreement. The Mercosur common market only formally includes Argentina, Brazil, Paraguay and Uruguay. However, the agreement affects free trade for almost all of South America as most countries in the region are associate members with preferential access for goods produced in other Mercosur countries.
The United States has already seen the benefits of free trade agreements with Latin American countries. The United States and Chile have enjoyed the benefits of a FTA since 2004 and U.S. wheat exports to Chile grew from just 42,000 MT in 2001/02 to as much as 446,000 MT in 2008/09.
The Obama Administration highlighted the benefits of trade in a White House Joint Statement during the stop in Chile: "Both Presidents underscored that in the seven years since the U.S.-Chile FTA first entered into force, not only have the conditions of exchange of goods and services improved, but also new business opportunities have been formed, leading to the diversification of products and a greater access for agricultural products."
El Salvador is also a routine customer of the United States, due in part to enactment of an FTA in 2006. Additionally, though our free trade partnership with Peru has only been in force since 2009, reduced trade barriers are already providing benefits to both countries and to the U.S. wheat industry.
Implementation of the U.S.-Colombia FTA is another critical step in expanding the U.S.-Latin America trade relationship. The Colombian Constitutional Court finished its review of the Colombia-Canada FTA this week and ruled that it is consistent with the Colombian Constitution. This paves the way for both countries to implement the agreement by early July. If the United States fails to ratify the U.S.-Colombia agreement soon, U.S. wheat producers stand to lose substantial market share (see story below).
Latin America is a valued trading partner, and USW will continue working to help level the playing field so that U.S. wheat can compete there on the basis of quality and value.
4. Ninety Days to Massive Market Losses in Colombia
News came this week that the Colombian Constitutional Court has completed its review of the Colombia-Canada Free Trade Agreement (FTA) and affirmed its constitutionality. This ruling marks the last procedural step needed to clear the way for the agreement to enter into force by July 2011. At that time, Canadian wheat and many other products will enjoy immediate duty-free access to the Colombian market. Colombia will also eliminate the use of its price band system on selected Canadian products, including wheat.
In just 90 days, years of effort to build a market for U.S. wheat in Colombia could be wiped away because the U.S. government has not ratified our pending FTA with Colombia. The existing tariff and price band system applied to U.S. wheat imports will, in effect, make Canadian wheat significantly cheaper than U.S. wheat. Colombian flour millers say they want to be able to keep buying U.S. wheat, but the tariff disadvantage will force them to buy wheat from Canada instead. The estimated loss to U.S. wheat producers is nearly $100 million per year.
USW is encouraged by recent news that negotiations on the U.S.-Colombia FTA have intensified, and the wheat producers we represent in international markets greatly appreciate the growing base of support in Congress for advancing the Colombia, Panama and South Korea FTAs. Colombia has routinely been the top import market in South America for U.S. wheat producers and we have been waiting since 2006 for the U.S.-Colombia agreement to be implemented. It is time to act now to advance our historic trade relationship as the clock is ticking towards a needless economic loss.
5. Despite River System Closing, PNW Wheat Exports Outpace 2009/10
Inland commercial navigation between Lewiston, ID, and Portland, OR, resumed March 25, 2011, with the official reopening of the navigation lock at Lower Monumental Lock and Dam on the Snake River, near Kahlotus, WA. U.S. Army Corps of Engineers officials closed the locks at The Dalles, John Day and Lower Monumental dams Dec. 10, 2010, in order to replace aging downstream lock gates. Portland District Commander Col. Steven R. Miles said repairs and maintenance performed during the extended lock outage on the Columbia-Snake River System (CSRS) will help keep the river transportation system open for years to come.
The CSRS is a critical link in the U.S. wheat export chain for dozens of Pacific Rim customers. Before the CSRS closure, U.S. wheat producers and overseas customers were most concerned about what impact it might have on soft white (SW) wheat exportable supplies. In fact, with two months remaining in 2010/11, SW inspected for export from Pacific Northwest (PNW) ports dependent on the CSRS stands at more than 3.7 MMT, which is just five percent less than the total amount of SW exported from PNW ports in all of 2009/10.
USW began informing customers about the closing soon after it was announced in 2009. For example, USW sponsored representatives of the Pacific Grain Exporters Association to present information on the situation at USW’s annual Crop Quality Seminars late that year. USW representatives continued meeting with customers well in advance of and during the closure.
“We took this situation seriously and tried to do everything necessary to help our customers,” said USW Vice President of Overseas Operations Vince Peterson as the repair work began last December.
“All the stakeholders in the supply chain, from wheat producers to our customers overseas, deserve a lot of credit for working together to identify mutually beneficial ways to manage the situation,” said USW West Coast Office Director Steve Wirsching.
6. Improving Crop Quality Information for U.S. Wheat Customers
The U.S. wheat industry strives for transparency in reporting supply, prices and quality of all six wheat classes available for export. Legacy organizations to USW first identified the need to quickly sample and analyze new crop data in 1960. Since then, wheat producers and public export market development programs have provided the money needed to test, analyze and publish a complete picture of each year’s crop, including data on grade and non-grade factors as well as flour, dough and baking characteristics.
Armed with this information and a thorough understanding of the U.S. wheat inspection system, wheat buyers can confidently tender for the U.S. wheat classes they need at the best prices possible. That is why USW met last week in Kansas City, MO, with its partner organizations to review and discuss ways to adjust the content and presentation of this data in weekly Harvest Reports, the 2011 Crop Quality Report and at Crop Quality Seminars.
“Our partners identified several ways to enhance this service,” said USW Vice President of Planning Jim Frahm. “For example, data from samples of HRW grown in Pacific Northwest (PNW) states will be included in PNW tributary results. We will also add dark hard vitreous data to weekly Harvest Reports for HRS and durum wheat, and provide additional information on Desert Durum®.”
USW reports on the condition of the U.S. wheat crop every Friday through the harvest season (June-October) at www.uswheat.org/reports/harvest and publishes the Crop Quality Report at www.uswheat.org/reports/cropQuality. By the time all Crop Quality Seminars are completed in December, USW will have presented up-to-date reports on U.S. wheat and flour quality to hundreds of buyers, millers and wheat food processors in more than 25 countries.
7. Korean Team Tests Whole Wheat Bread Blends at the Wheat Marketing Center
Which wheat blend works best for whole wheat bread? That’s the question two flour millers, a master baker and a research scientist from Korea sought to answer last week at the Wheat Marketing Center in Portland, OR. USW sponsored this Whole Wheat Hearth Bread Products Development Short Course March 21 to 25, 2011, to test blends of HRW, HRS and SW wheat.
In Korea, the artisan-style bread market is growing as consumers look for new, more nutritious food products, especially for bread made with whole grains. However, the Korean government has not established official standards for what constitutes “whole grain,” so products labeled as whole grain that may actually only contain one percent whole wheat could be misleading.
As a result, USW is helping assist Korean bakers develop production protocols for whole grain products. One member of the Korean team remarked, “We would like to expand our knowledge of hearth bread products as our consumers become more interested in a healthy diet.”
This is the third team from Korea to work on whole wheat products at the Wheat Marketing Center. USW’s Seoul Office organized two workshops in 2009 on whole wheat flour milling and whole wheat baking. Through such programs, the Korean baking industry is able to learn more about specific end products which may be relatively new to their domestic markets — like whole wheat bread. The short course last week was part of USW’s End Products Collaborative (EPC) program that works to increase understanding of U.S. wheat functional qualities by class.
In Korea, USW is utilizing the EPC to help the baking industry introduce whole-grain products. At the Wheat Marketing Center, the Korean team was instructed on dough mixing, fermentation, bread formulas, working with specialty flours and more. The team also participated in workshops on baking baguettes, French hard rolls and sourdough breads in order to test which blends of flour functioned best for their purposes.
In addition to the development activities, the participants toured local bakeries and interacted with a visiting group of 12 Montana wheat farmers. Sponsored by the Montana Wheat and Barley Committee, the farmers spent an afternoon with the Korean team working on artisan bread products. Both groups also shared a meal at the home of Wheat Marketing Center Executive Director Dr. David Shelton.
“It is always good to get wheat farmers and wheat processors together so that they can learn from each other,” Dr. Gary Hou, technical manager and Asian foods specialist at the Wheat Marketing Center, said. “I think making and breaking bread together is the best way to establish enduring relationships in business and in life.”
8. Wheat Industry News
- Australia Clears Cargill Acquisition of AWB Commodity Management. The Australian Competition and Consumer Commission approved Cargill’s purchase of the commodity management business from Agrium, Inc., which had acquired the enterprise from AWB Limited. For more information, please visit http://reut.rs/hwC4TW.
- WTO Calls for Proposals for 2011 Public Forum. The World Trade Organization (WTO) has called for proposals for sessions at its 2011 Public Forum, Sept. 19 to 21. The 2011 forum is titled “Seeking answers to global trade challenges” and will focus on food security, trade in natural resources, value-added trade and the future of the global trading system. For more information, please visit http://bit.ly/gSsOnL.
- GEAPS and Purdue University Offer Spanish-Language Course. The Grain Elevator and Processing Society (GEAPS) and Purdue University have opened registration for a five-week, 10-lecture course on grain quality management. The course begins in May 30 and all lectures, quizzes, communications and instructions will be conducted in Spanish. For more information, please visit http://bit.ly/gWwSfn.
- Gavilon Purchases Washington Elevators. Gavilon Grain and Union Elevator & Warehouse Company announced that Gavilon would acquire Union Elevator’s assets in eastern Washington state, including 16 grain elevators with a storage capacity of 8.4 million bushels. For more information, please visit http://bit.ly/gfbVH1.
- Cargill’s Lease Extended for Baton Rouge Grain Elevator. The Port of Greater Baton Rouge Commission unanimously approved an extension of Cargill’s lease of the port’s grain elevators. The extended lease will allow more time to transition elevator operations from Cargill to Louis Dreyfus Commodities, which won the port’s contract last month, without inhibiting an influx of wheat from harvest. For more information, please visit http://bit.ly/fEf7Pd.
- BIO Launches Ag Biotech Product Database. The Biotechnology Industry Organization (BIO) has created a searchable database of agricultural biotech products. The website will provide information on specific commodities, events, products, countries and companies. Visit the new website at http://www.BIOTradeStatus.com.
- Kansas Wheat Yield Contest Adds Quality Initiative. New in 2011, Kansas farmers can participate in a Quality Initiative as part of the Kansas Wheat Yield Contest, in which samples of wheat are evaluated by the Kansas Grain Inspection Service for dockage, test weight and protein. Top samples will be tested by Kansas State University’s Wheat Quality Laboratory for milling and baking quality. The top sample will receive a $250 cash prize. The contest is accepting entries until April 8. For more information, please visit http://bit.ly/ebVViw.
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