June 25, 2009
U.S. Wheat Associates is the industry’s market development organization working in 90 countries on behalf of America's wheat producers. The activities of U.S. Wheat Associates are made possible by producer checkoff dollars managed by 18 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.
In This Issue:
1. South Asian Buyers Gather at USW Trade Conference
2. Commercial Relationships Offer Mutual Benefit to Wheat Producers, Importers
3. USW Will Help Wheat Buyers Succeed
4. Weather Challenges U.S., Canadian Wheat Progress
5. News from the Harvest
6. USW Closes Tunis Office
7. Futures Markets Must Work for All
8. Wheat Industry News
PDF Version:  (Attached)
Online Version: Wheat Letter - June 25, 2008 (http://www.uswheat.org/wheatLetter)
1. South Asian Buyers Gather at USW Trade Conference
More than 190 people associated with the wheat trade in 11 countries attended the South Asian Wheat Marketing Conference in Phuket, Thailand, June 16 to 19, 2009. U.S. Wheat Associates (USW) sponsored the conference with support from the U.S. Foreign Agricultural Service (http://www.fas.usda.gov/). Additional sponsors included the Washington Wheat Commission (http://bit.ly/11nqmY) and CME Group (http://www.cmegroup.com/).
“The buyers that attended this year's conference represent over 85 percent of the milling capacity in the ASEAN block,” said USW South Asian Region Vice President Mark Samson. The conference offered a wide-ranging overview of the current global and U.S. wheat market situation, detailed reports on studies comparing the performance and return on investment from producing blended flour milled from U.S. wheat, and immediate feedback from the participants using “digi-vote technology.”
“We know that 30 percent of the participants said they purchased or negotiated for U.S. wheat during the conference,” Samson said. “Over 90 percent rated the use of electronic reference materials and the digi-vote technology as excellent.” The conference agenda and biographies of speakers are posted in the online version of Wheat Letter.
USW Chairman Michael Edgar and USW President Alan Tracy set the tone for the South Asian Wheat Marketing Conference. Their opening remarks are reprinted here.
2. Commercial Relationships Offer Mutual Benefit to Wheat Producers, Importers
Remarks by USW Chairman Michael Edgar at the South Asian Wheat Marketing Conference
Thank you for making me feel so welcome here in South Asia. On behalf of America’s wheat producers, it is a great pleasure to welcome you to Phuket and to the U.S. Wheat Associates South Asian Wheat Marketing Conference.
It is my privilege to represent America’s wheat producers as Chairman of the U.S. Wheat Associates board of directors. On a personal note, in addition to serving as Chairman, I represent the state of Arizona on the board. And, yes, I know that when you think of wheat producing states, Arizona is not on that list.
I am in a unique position because not only does my company grow 1,500 to 2,000 acres of durum wheat every year, we also have a grain and seed business where we handle and merchandise Desert Durum® (http://www.desertdurum.com/). This year, we will trade over 200,000 tons. The premium, or identity-preserved, portion of the durum is traded into Italy.
This IP program started when USW brought a trade team to the desert Southwest back in 1983. I have traded durum and been involved in export market development since that year. My personal relationship with USW is now in its 26th year.
Earlier this year, at the Senate confirmation hearing of Hillary Clinton as nominee for Secretary of State in the Obama Administration, Sen. Jim DeMint of South Carolina made this statement: “I've seen, as I've traveled and talked to people from around the world, that very often, business, trade, and commerce is our best ambassador.”
Giving all due respect to the great work of U.S. diplomats, I agree with Sen. DeMint’s point. I have been lucky enough to see the value of what I will call commercial diplomacy over the past three years as an officer with USW. I have literally traveled around the world with USW staff to meet with wheat buyers and wheat food processors. When you strip those visits down to their most basic level, our purpose is to promote the reliability, choice, and value of the wheat produced in the United States.
However, the respect with which we are always treated illuminates the strong connections between you, the USW staff, and U.S. government officials posted in your countries. There is clearly mutual benefit in the commercial and personal relationships we see at every meeting like this. These relationships have developed over many years. Let me give you an example...
Last year USW held a world staff conference. At that meeting, Don Schieber, who grows wheat in Oklahoma and is Secretary-Treasurer of the organization, invited staff members who have been with U.S. wheat for more than 30 years to stand together in front of their colleagues. Seven individuals came up – and there were three more back at home who could not attend the conference. Out of a staff of more than 80 people, 20 have been with USW for more than 25 years – and 29 others have been with us for more than 20 years.
I am certain those colleagues agree that they have dedicated so much of their professional lives to providing trade service, technical assistance, and market information in large part because it is a great privilege to work with such talented and dedicated officials, millers, bakers, and processors as you. I am also certain that they look forward to many more years working with you as ambassadors for U.S. wheat producers.
This long-term partnership is very important. Someone once said that you cannot reach your goals if you do not share them with others. That is why we asked you to complete the quality survey as part of this wheat marketing conference – and why we value information from you so much. We cannot meet your needs unless we completely understand your challenges and concerns.
The dramatic market volatility we have seen the past few years has created a whole new set of challenges – for you and for wheat producers. We want to help you understand the dynamic market situation and, together, find ways to meet those challenges that will help your enterprise grow. This conference is centered on doing just that.
So, I want to thank you for your partnership.
I also want to thank you for your business. In the face of difficult circumstances, you purchased nearly three million metric tons of U.S. wheat in the past marketing year – and nearly seven million tons in the past two marketing years. Let me assure you that America’s wheat producers appreciate that very much – it is why they continue to give so much of their earnings to support our partnership.
As Sen. DeMint pointed out, let us hope that our trade and commerce continues to be an example of true diplomacy between our countries, because together we can build opportunity around the world.
I look forward to meeting you personally over the next few days. Thank you for being here and please enjoy the conference!
3. USW Will Help Wheat Buyers Succeed
Remarks by USW President Alan Tracy at the South Asian Wheat Marketing Conference
Thank you – and on behalf of the U.S. Wheat Associates Board of Directors, our partners at the U.S. Foreign Agricultural Service and more than 80 men and women from USW who work in more than 90 countries around the world, welcome to the 2009 South Asian Wheat Marketing Conference.
We gather here at a time of unprecedented market volatility. All of us who participate in the global wheat market have been on a roller coaster ride. And I am certain that along the way all of us have felt at least a little bit sick.
We would love to tell you that the market is going to stabilize – that your risk is going to ease – but we cannot do that with any degree of certainty.
What we can do here this week is give you some of the information you need to help manage that risk, to identify possible answers to your concerns and, of course, to demonstrate how to benefit fully from the true quality, reliability, and value of U.S. wheat.
In spite of the uncertainty you face, I believe that U.S. wheat represents a unique buying opportunity, based on what you are going to learn here. For example …
First, U.S. wheat prices are near or less than the cost to produce it. USDA last week noted that average U.S. farmgate prices are projected between $4.90 to $5.90 per bushel – that is $180 to almost $217 per metric ton – in 2009/10. Yet U.S. wheat costs more than $6.00 per bushel or $220 per metric ton to produce.
We do not believe that low prices are sustainable, however.
Producers worldwide are harvesting what will likely be the second-largest crop on record this year, following their largest-ever crop last season. At the same time, world wheat consumption is still increasing even in the face of a global recession. The remaining wheat stocks are still quite tight, and the stocks-to-use ratio, the important gauge of supply tightness, is expected to be 23 to 24 percent at the end of 2009/2010 compared with 19 percent in 2007/2008.
So weather-related problems in any major wheat-producing area will tip the balance and bring a price response.
Finally, the U.S. wheat industry remains the world’s most reliable supplier of high quality wheat to meet almost every need.
The President of Russia has just called for the world to rely on his country as a source of food security just a year after that country imposed a 40 percent export tariff to keep their wheat at home. In contrast, we were the only major supplier to keep our doors open when supplies got tight. With U.S. wheat, reliability is not just a word; it is a fact.
Putting it another way, the United States delivers the wheat you want from producers you can depend on.
The USW team here in South Asia that, I believe, serves you so well has put together another very thorough and professional Wheat Marketing Conference.
But this is not a one-way street. We want to learn from you and understand your challenges. That is, as Michael noted, one reason why we asked you to share your thoughts about U.S. wheat quality compared to wheats from other origins. And given the strong relationship that Michael just described, together we can succeed no matter what the market throws at us.
I believe one of the things that sets us apart is the experience of our people. Yet we also meet here at a time of transition for USW. Two of our very experienced and valued colleagues have announced their retirements. Mark Samson, our Regional Vice President in South Asia, and his family are heading back home to the United States later this summer. And Dr. John Oades, Vice President and long-time head of our West Coast Office in Portland, Oregon, recently started a gradual transition to retirement. Gentlemen, on behalf of U.S. Wheat and U.S. wheat producers, thank you for your dedication, sacrifice, and service. I am sure all your friends here wish you the best of luck.
The transition creates opportunity, too. Most of you know Mike Spier, currently Assistant Regional Director for South Asia. Mike will soon be moving to Singapore as Mark’s replacement. Before then, Mike will be working in Manila with his replacement Shane Townsend, who served in the Peace Corps (http://www.peacecorps.gov/) and worked at the Foreign Agricultural Service before joining USW last September. In addition, Steve Wirsching, a 17-year USW veteran, has already taken up residence in Portland as John Oades’ eventual successor. I want to say congratulations to them. To you I want to say that I am confident this transition will be seamless, given the talent and enthusiasm of our new team here in Asia.
Thank you for purchasing U.S. wheat…and thank you for taking time to be with us here. I look forward to meeting more of you and talking with you over the next few days.
4. Weather Challenges U.S., Canadian Wheat Progress
by USW Communications Intern Karoline Kastanek
Inclement weather is playing a big role in North American wheat production this year. Southern plains hard red winter (HRW) production is mixed but yields are expected to fall below average after a generally dry season. HRW conditions tend to improve moving north, but recent rains have slowed harvest progress. The hard red spring (HRS) crop is behind schedule in Minnesota and North Dakota but its progress is closer to average moving west into Montana. The western Canadian spring wheat crop is also under the gun. On June 18, the Canadian Wheat Board (CWB) said western Canadian production is expected to drop 20 percent compared to last year mainly from weather-related challenges. Soft white (SW) producers in the U.S. Pacific Northwest have not seen such challenging conditions.
The U. S. Department of Agriculture (http://bit.ly/AgT2) (USDA) will make its first by-class estimates of U.S. wheat production for 2009/10 in its July 10 World Agricultural Supply and Demand Estimates (WASDE) (http://bit.ly/VA9Dr) report.
Summer thunderstorms have been rolling over the plains and soft red winter (SRW) production areas recently. Quality concerns come naturally when rain delays wheat harvest. Initial reports of test weights and protein levels on HRW samples are generally within a normal range. Falling number values are also at risk in a rainy harvest. While the biggest concern is with SRW in the south, southeast and Midwest, falling numbers recorded from 81 SRW samples as of June 19 averaged around 300 – somewhat lower than the final average for 2008/09 but still within a normal range.
USW, in cooperation with its 18 state wheat commission members, wheat producer associations, and other organizations, gathers hundreds of samples from five U.S. wheat classes to report on crop quality. USW updates the available quality data in weekly “Harvest Reports” now posted every Friday on the USW web site at (http://bit.ly/CifeY). USW publishes a comprehensive Crop Quality Report (http://bit.ly/gIbn2) as soon as possible after all six classes are harvested.
Spring Wheat Progress. Spring wheat emergence appears to be on track in the U.S. North Dakota spring wheat received excess rainfall earlier in the season, which delayed planting and set back emergence to nine percent below the five-year average as of last week. However, the NASS Crop Progress Report (http://bit.ly/oJTee) for June 22 showed North Dakota wheat caught up to an average 98 percent emergence. North Dakota Wheat Commission’s Crop Progress Report (http://bit.ly/PKChW) released June 24 showed that virtually no HRS had headed in the state. Minnesota’s spring wheat is down 13 percentage points from its average with only eight percent of the crop headed. South Dakota spring wheat is 40 percent headed, six percentage points lower than the average, and Montana’s spring wheat is 11 percent headed at just two percentage points above the five-year average.
As HRW and SRW producers fight through rain delays, North Dakota spring wheat producers may have a different opponent to battle: pests. The Red River Farm Network (http://www.rrfn.com/) reported June 22 that late-planted wheat and other cereal grains may be vulnerable to cereal aphids. North Dakota State University Extension Service (http://www.ag.ndsu.edu/extension/) has already noticed the aphids at its Ag Experiment Station (http://bit.ly/MjMv2) farm near Fargo.
The table below summarizes HRW and SRW harvest progress as of June 22.
Winter Wheat Harvest Trends |
State
(Winter Wheat Class) | % Harvested as of June 22, 2009 | % Point Change from 2008 | % Point Change from five-year average |
| Arkansas (HRW) | 82 | +1 | -5 |
| California (HRW) | 60 | +2 | +3 |
| Illinois (SRW) | 6 | +3 | -32 |
| Indiana (SRW) | 6 | +1 | -11 |
| Kansas (HRW) | 5 | 0 | -26 |
| Missouri (SRW) | 23 | +4 | -19 |
| North Carolina (SRW) | 60 | -20 | +1 |
| Oklahoma (HRW) | 63 | -9 | -12 |
| Texas (HRW) | 53 | -13 | -10 |
| Source: National Agricultural Statistics Service, June 22, 2009 Crop Progress Report |
5. News from the Harvest
Bob Hider, a friend of USW Secretary-Treasurer and Oklahoma wheat producer Don Schieber, is retired and decided he would spend part of his free time following and reporting on this year’s wheat harvest. On Monday this week, Hider spent the day with Schieber and sent the following report. In addition, High Plains Journal (http://www.hpj.com/)magazine is featuring an insider’s view of the U.S. wheat harvest from two correspondents who will share their experiences from the field while working on their family’s harvest crews as they make their way from Texas to the Dakotas. Click here to follow the harvest online at http://www.allaboardharvest.com/.
June 23, 2009, Ponca City, OK. We received heavy rains over the weekend in south central Kansas, and [growers were] not able to [harvest]. I said good-bye … and drove down to Ponca City, OK, to hang out with Don Schieber at his farm.
The wheat in northern Oklahoma is much better than where we cut in Minco [central Oklahoma]. These stalks are between two and two and one-half feet tall as compared with the shorter stalks in Minco … the wheat heads lean over at the top … from the weight of some 50 to 60 wheat berries in each head. “The heads at Minco were almost empty,” Don said.
We finally got out to the fields at about 1:00 p.m. The field was a one-half square mile (320 acres) belonging to his late brother-in-law that Don promised to help cut for the family. There were three combines on the field, cutting a 96-foot swath. The yield was about 35 bushels per acre, with moisture level averaging about 11.2 percent ... As I rode with Don, I could see other stalks between the wheat rows. Don explained that this was a corn field [last year] and his brother-in-law planted wheat last fall. I asked him if the fields were ploughed and he said no. They now use a “no-till” method of planting. The seeding machines slice a small rut, drop the seed, spray it with fertilizer and cover it up. Our friend Brady for example will cut the wheat and practically the next day [plant] soybeans for a fall harvest. Don said the ground is better for not being ploughed under; the roots of the prior crop hold the moisture better and keep the ground firmer.
They finished the field just at sundown, but Don went out and started a second field with his cousins ... I left, had dinner, and went back to my motel room.
June 24, 2009. The current price of wheat at the elevator is $5.58 for “hard red winter wheat” which most of the farmers out here grow. On the futures market in Kansas City, the price for July wheat is $6.04. A contract cutter who travels with a crew typically gets $20 an acre for cutting, plus 20 cents a bushel if the yield is over a certain number, typically 30. He also gets 20 cents a bushel to haul it to the elevator, unless the round trip is more than 20 to 30 miles. Then the rate is negotiated. So you can figure out the economics of farming.
6. USW Closes Tunis Office
The USW Tunis, Tunisia, office will close June 30, 2009. The decision to close this office is related to funding for the Tunis office, which came from the PL-480, Section 108 market development program. Section 108 provided cost-sharing assistance to USW and other organizations to support agricultural commodity market development in Tunisia and several other countries. Repayment to the U.S. was in local currencies. The repayment funds in Tunisian dinars, which had to be used in Tunisia, are no longer available to support a fully staffed USW office there.
At one time, four USW employees worked from the Tunis office, which opened in 2003. After a regional realignment, Regional Technical Director Peter Lloyd moved from Tunis to the USW North African office in Casablanca, Morocco. Marketing Consultant Salah Mahjoub will continue to work from his Tunis home for USW on a consulting basis. Executive Secretary Mongia Zalila and Messenger Chouaieb Zaghdane will end their employment with USW.
“The Tunis office staff was very active in administrating several activities – not only in the region but also around the world,” said Dick Prior, USW Vice President, Middle Eastern, North and East African Region. “We knew that the funds would be depleted eventually, but it is always difficult to say good-bye to such dedicated colleagues. We thank them for their service and wish Mongia and Chouaieb good health and the best of luck in the future.”
7. Futures Markets Must Work for All
On June 24, the U.S. Senate’s Permanent Subcommittee on Investigations (http://bit.ly/2ofgWb) released a report recommending new limits on index fund speculation in wheat and other commodity futures trading. The dramatic run-up in SRW futures prices on the Chicago Board of Trade (http://www.cbot.com/) in 2007/08 prompted the panel’s investigation.
The U.S. wheat industry believes the futures markets need to work effectively and fairly for producers, buyers, and all participants in the market. The price discovery function of the futures markets is essential. The report clearly points out the magnitude of investment expansion by index funds in the market and the convergence problems that developed at the same time. Speculators serve a vital role in the market but they cannot be allowed to interfere with the market’s primary price discovery function.
The wheat industry is involved in this discussion – Vince Peterson, USW Vice President of Overseas Operations and a former grain trader is a member of a sub-committee advising the Commodity Futures Trading Commission (http://www.cftc.gov/) (CFTC) about the issue of convergence. Gary Gensler, the chairman of the CFTC, told Reuters on Wednesday that the agency will consider the recommendations made in the report and take a closer look at convergence. "It's a concern to us. It's a concern to the market place. It has not been happening," said Gensler.
For more information, review the Senate panel's press release at http://bit.ly/UhB18 or a summary by Kansas Wheat at http://bit.ly/1qG4C5.
8. Wheat Industry News
- Company is Coming. The USW is hosting trade teams from Nigeria and Chile this week. Nigerian delegates are learning about the wheat value chain in Kansas, Colorado, and Oregon from June 21 - 30, and Chilean delegates are in Minnesota, Oregon, and Kansas June 21 - 26. Next month USW will welcome trade teams from South Africa, Japan, South Korea, and Colombia. Trade team visits are a critical part of demonstrating the reliability and value of U.S. wheat. They are also a “team” effort between USW, state wheat commissions, U.S. wheat producers, government officials, and the grain trade.
- Specialty Grains Trade Show. The Midwest Shippers Association is hosting the sixth annual Midwest Specialty Grains Conference and Trade Show Sept. 1-3, 2009, at the Sheraton Hotel and Sioux Falls Convention Center in Sioux Falls, SD. Information on processing and export trade of specialty grains will be available at this event. To learn more and register, visit: http://www.mnshippers.com/conference/.
- NCI Courses. The Northern Crops Institute is offering the Raw Materials and Processing Technology Short Course focused on pasta production in Fargo, ND, July 20-24, 2009. USW is sponsoring several students for this course. The deadline to register is Monday, June 29, 2009. Another NCI short course, Grain Procurement Management for Importers, will be held in Fargo, ND, Sept. 21-30, 2009. Registration must be completed by Aug. 31, 2009. To register for either course, click on the following link: http://www.northern-crops.com/.
- Congratulations. Dianna Wara of Washington, IL, took home the grand prize of the first-ever National Festival of Breads bread-baking competition. Wara’s “Tomato, Basil, Garlic Filled Pane Bianco” was one of the eight recipes out of more than 500 to be baked-tested at the festival in Wichita, KS, sponsored by King Arthur Flour and Kansas Wheat. To read more about the competition and see the finalists’ recipes, visit: http://kansaswheat.org/.
- IGP Communicator. Kansas State University welcomes Jeff Wichman to its Ag Communications department June 15, 2009. As part of his new responsibilities, Wichman will work with Kansas State’s International Grains Program (IGP) to help this world-class educational resource reach out to potential students.
- USW Needs Your Photos! USW invites anyone who is part of the wheat industry to submit photographs for possible use in its 2010 calendar. The winning photographers will receive $100 each from USW. This year, USW is looking for noncommercial photographs that illustrate the theme "The Wheat You Want from Producers You Can Depend On." Entries must be submitted to USW by August 1, 2009. "This theme is part of our current international promotion campaign designed to link wheat producers more closely to the product," says Steve Mercer, USW Director of Communications. “We think producing a calendar that reinforces the theme will help educate international wheat buyers about the quality, value, and reliability of our crop.” For more information, visit: http://bit.ly/rjZIK.
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U.S. Wheat Associates prohibits discrimination in all its programs and activities on the basis of race, color, religion, national origin, gender, marital or family status, age, disability, political beliefs or sexual orientation. Persons with disabilities who require alternative means for communication of program information (Braille, large print, audiotape, etc.) should contact U.S. Wheat Associates at (202) 463-0999 (voice and TDD). To file a complaint of discrimination, write to Vice President of Finance, U.S. Wheat Associates, 3103 10th Street, North, Arlington, VA 22201, or call (202) 463-0999 (voice). U.S. Wheat Associates is an equal opportunity provider and employer. |