Wheat Letter - November 10, 2011
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.” 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.
In This Issue:
1. WASDE Slightly Increases World Wheat Trade on Black Sea and EU Production
2. Wheat Buyers See Value in GSM-102 Program
3. USW 2011 Crop Quality Report Details Improved Wheat Quality
4. Nigerian Pasta Manufacturers Learn Instant Noodle Technology in United States
5. Wheat Industry News
Online Edition: Wheat Letter – November 10, 2011 (http://bit.ly/vD5zn8)
PDF Edition:  Wheat Letter - November 10, 2011.pdf
1. WASDE Slightly Increases World Wheat Trade on Black Sea and EU Production
By Casey Chumrau, USW Market Analyst
The U.S. Department of Agriculture (USDA) provided no surprises on Wednesday with the release of its monthly World Agricultural Supply and Demand Estimates (WASDE). The report made minor adjustments to the world wheat outlook, all of which were within analysts’ expectations.
The estimate of world supply increased 2.6 million metric tons (MMT) in November to 879 MMT, a 3.5 percent increase from 2010/11. Both factors that contribute to world supply—carry-in stocks and production—increased. The world production forecast increased 2.1 MMT to 683 MMT, which would be the second largest crop on record if realized. Kazakhstan’s production estimate, now forecast at 21.0 MMT, accounted for 2.0 MMT of the total increase. The European Union’s production estimate also increased, up 1.2 MMT from last month and 1 percent greater than last year. Argentina’s production forecast declined 500,000 metric tons (MT) to 13.0 MMT, 16 percent lower than last year.
Increased consumption and trade estimates offset the increase in supply, resulting in virtually no change in world ending stocks, estimated at 203 MMT. Estimated world feed use increased 900,000 MT this month to 126 MMT, a 12 percent increase from last year and the highest demand for feed since 1990/91. The increased feed use estimate contributed to the increase in total world consumption, up 2.4 MMT to 677 MMT, which would set a record for the fourth straight year. The world trade estimate increased 2.0 MMT this month to 137 MMT, the second highest trading volume ever and 5 percent greater than last year, if realized. Increased imports into China, North Africa and Brazil account for much of the increased global demand with the European Union and Russia expected to meet most of that incremental trade.
The U.S. wheat supply and demand outlook remained mostly unchanged from last month. The production estimate, reduced by 240,000 MT to 54.4 MMT was the only change and decreased ending stocks by the same margin to 22.6 MMT. USDA re-surveyed spring wheat and durum producers in five states in the Northern Plains and Pacific Northwest following the September 30 Small Grains Report. Farmers there harvested a substantial portion of the crop later than usual due to weather-related plating delays. The survey results prompted USDA to reduce the hard red spring (HRS) estimate by 190,000 MT to 10.8 MMT and the durum estimate by 50,000 MT to 1.36 MMT. Durum production is at its second lowest level in 30 years, down 53 percent from last year and 43 percent below the 10-year average. An increased white wheat production estimate helped slightly to offset reductions in HRS and durum. The white wheat estimate increased 30,000 MT to 8.55 MMT, 20 percent greater than the 10-year average thanks to nearly ideal growing conditions from planting to harvest.
U.S. Wheat Associates (USW) updates its Supply and Demand Report every month with the latest USDA estimates. Click here to review the new report.
2. Wheat Buyers See Value in GSM-102 Program
The GSM-102 export credit guarantee program continues to be a useful tool for some U.S. wheat importers. Administered by USDA’s Foreign Agricultural Service (FAS), GSM-102 offers credit guarantees for up to three years for U.S. agricultural commodity importers. Under the program, importers acquire credit from private banks and up to 98 percent of the importer’s note is guaranteed by the program. USDA charges a fee for the guarantee based on the length of the repayment period, or tenor, and the level of risk associated with the importing country.
U.S. wheat buyers are among the heaviest users of this program. In fiscal year 2011, which ended Sept. 30, USDA issued just over $1 billion in credit guarantees for U.S. wheat import contracts—almost double the 2010 level of $524 million. Corn is the only other eligible commodity to come close to this level. GSM-102 plays a small but significant role in providing a financing alternative for U.S. wheat exports, valued at around $11 billion during the same time period.
Almost every region utilizes this program. The South America region was a major participant with more than $350 million in guarantees issued. South Korea was the second largest recipient with more than $270 million in guarantees. The other region using more than $100 million in guarantees was the Africa and the Middle East region. In addition, customers and banks in Central America, Mexico, Southeast Asia, Turkey and the Caribbean also utilized the program.
As part of a bilateral agreement between the United States and Brazil, an evaluation of the GSM-102 program’s usage and fee schedule occurs every six months. If GSM-102 usage during the six-month period exceeds $1.5 billion, USDA must increase program fees by an average of 15 percent. In the latest review, USDA increased the fee premium per $100 of coverage for all payment terms due to use exceeding the $1.5 billion benchmark. New terms are on USDA’s website. These changes became effective on Oct. 24, 2011.
This program has been an effective tool for assisting our overseas customers in purchasing high-quality U.S. wheat. Buyers interested in exploring options for using GSM-102 should contact their local USW office or USDA/FAS office.
3. USW 2011 Crop Quality Report Details Improved Wheat Quality
The samples have been analyzed and tested; and once again, USW is reporting extensive data on the quality of all six classes of U.S. wheat in published form, in person and online.
The 2011 Crop Quality Report is now ready as an important reference for wheat buyers, millers and wheat food manufacturers around the world. USW representatives and many of our partners have started reviewing this information at our annual series of Crop Quality Seminars. The report is available at www.uswheat.org/reports/cropQuality. You may also order copies of the printed report by email at info@uswheat.org.
“World wheat supply is up this year and sometimes offered at lower prices than U.S wheat,” said USW President Alan Tracy. “But we are convinced that customers will see greater value from our wide range of wheat classes and, with careful consideration of this data, our undisputed history of reliability and dedication to service.”
Wheat Letter summarized final quality data on soft red winter (SRW) supplies earlier this year. Here we summarize data for the remaining five U.S. wheat classes.
Hard Red Winter (HRW)
The 2011 HRW crop can be characterized as much improved over 2010 supplies. It is sound with low dockage, very good kernel characteristics and very high protein content. Milling properties are good, with average flour extraction and slightly above average flour protein content. Dough properties include very good stability with average peak times and W values.
The average grade of survey samples is #1 HRW with average protein content of 12.3% (12% moisture basis). The 2011 crop exceeds 2010 in test weight (79.5 kg/hl), thousand kernel weight (29.6 gm) and kernel diameter. Millers will see lower moisture in both Gulf and Pacific Northwest (PNW) tributary supplies, and the crop has excellent falling numbers overall. Flour protein (11.0%), farinograph peak time (5.0 minutes) and stability (14.7 minutes) and alveograph W value (246) all exceed 2010 performance and are close to or above the five-year averages. While below the five-year average, loaf volume of 804 cc is comparable to 2010. The 2011 California harvest survey and USW export cargo survey show results similar to those found in 2010.
Hard Red Spring (HRS) and Durum
Despite a challenging year for HRS and northern-grown durum crops, which led to sharply lower production, both crops show improved protein levels, strong grade profiles and some good improvement in end-use performance over 2010, the North Dakota Wheat Commission (NDWC) reported recently. The HRS crop average grade is # 1 Dark Northern Spring (DNS). The crop has abundant protein, averaging 14.6 percent, lower than average moisture and sound falling number values, but has smaller than average kernel size and higher levels of damage and DON compared to recent years.
According to NDWC Marketing Director Jim Peterson, "International and domestic buyers should be pleased with the high protein and above average grades in 2011, which are resulting in a slight improvement in dough performance and bigger gains in bake qualities."
The northern U.S. durum crop averages # 2 Hard Amber Durum (HAD) due to lower test weight values, but vitreous kernel counts and falling number values are notably higher than 2010. There are areas of higher damage and DON due to elevated disease pressures.
"The better kernel color and soundness in the 2011 crop is leading to semolina with lower speck counts, and higher pasta color scores and improved cooked firmness in the finished product,” said North Dakota Wheat Commission Marketing Specialist Erica Olson. “Buyers should also find higher quality value in the 2011 crop."
Desert Durum®, grown in Arizona and California, exhibited consistently large kernel size and low moisture in the 2011 crop, traits that contribute to achieving high extraction rates. Buyers can expect excellent performance from this identity-preserved durum crop.
Soft White (SW) and White Club (WC)
Near perfect growing conditions from seeding to harvest yielded near record PNW soft white and white club crops with protein content below 2010. Both crops are sound, with somewhat lower falling numbers. Overall, nearly every factor in this year’s crops is close to or exceeds the five-year average.
Composite SW grade is #1 with a test weight of 80.1 kg/hl, above the 78.5 kg/hl average in 2010. WC also graded #1 with test weight similar to 2010 at 78.8 kg/hl. SW moisture is slightly greater and WC moisture slightly less than 2010. Significantly reduced protein levels are good news for many overseas customers. At 9.2 percent (12% mb), SW protein is less than 2010 and the five-year average. Protein in WC of 8.7 percent (12% mb) is much lower than the five-year average of 10.5 percent. A separate survey by the Washington Grain Commission of WC samples in Washington, where 85 percent of WC is grown, revealed a protein level of 9.5 percent (12% mb). The falling number values are 306 for SW and 284 for WC, both lower than last year and the five-year averages, even though there was no rain during harvest and no sprout damage is reported in the crop.
Not surprisingly given the lower protein content, farinograph and extensograph values indicate weaker gluten properties in both SW and WC crops. Sponge cake volume for SW flour of 1,226 cc and 1,247 cc for WC are above 2010 and five-year averages. Cookie diameters and cookie spread factors for both SW and WC were greater than their five-year averages.
Hard White (HW)
U.S. wheat farmers produced somewhat less HW in 2011 (nearly 702,000 MT) compared to 2010, with the majority moving to domestic markets. The samples received for testing have characteristics that vary by production region (PNW, California, Southern Plains). When composited by region and protein, the samples all grade #1 with test weights ranging from 60.5 to 64.8 kg/hl. Dough strength is typically medium to strong, with PNW HW samples having notably longer stability times compared to HRW at comparable protein. Baking performance is very good for all samples relative to their protein content. Bake absorption ranges from 60.5 to 68.7 percent, loaf volume from 873 to 1104 cc and crumb grain and texture scores of 6.5 to 8.0 points. Steamed bread performance is also very good. Noodle characteristics including color, bite and texture vary with production region supplies.
4. Nigerian Pasta Manufacturers Learn Instant Noodle Technology in United States
By Julia Debes, USW Communications Specialist
Instant noodles may not be traditional Nigerian cuisine, but Nigerians are eating more noodles every year. According to the World Instant Noodles Association (WINA), instant noodle production in Nigeria increased to 1.67 billion packets in 2010, a 54.6 percent increase over just four years ago.
More noodle consumption means more demand for instant noodles. In fact, noodle production in Nigeria has increased every year since 2007. Instant noodle production now consumes 500,000 MT of wheat, about 14 percent of Nigeria’s total wheat consumption.
With this substantial increase in demand and production, Nigerian pasta manufacturers are continually looking for ways to improve their products. This is where USW and the Wheat Marketing Center (WMC) are perfectly poised to help. For the last three years, the organizations have collaborated to bring Nigerian pasta manufacturers to the WMC in Portland, OR, to attend short courses specializing in Asian noodle production. In 2011, 15 Nigerian participants attended either the basic course in August or the Advanced Asian Noodle Technology Short Course for Nigeria in October, offering these professionals new skills and experience using high-quality U.S. wheat.
Dr. Gary Hou, technical director and Asian foods specialist with the Wheat Marketing Center, helped start the courses in collaboration with USW representatives based in the Cape Town regional office and in Lagos, Nigeria.
“As more manufacturers started producing instant noodles in Nigeria, many professionals in the industry did not have the required knowledge or skills,” Hou explained. “Some companies realized it was necessary to train their employees in this new product and requested assistance from USW. As a result, WMC designed specific courses for Nigerian industry professionals sponsored by USW.”
The first two participants attended a WMC Asian noodle course in July 2008. By December 2008, USW sponsored participants for the first Nigerian Asian Noodle Technology Short Course. In 2009, USW brought participants to the United States for two Nigerian Asian noodle short courses.
“These courses are designed to quickly improve knowledge and skills without going through years of trial and error,” Hou said. “Each course is different. We’re constantly modifying courses to make them more relevant to our Nigerian participants.”
By 2010, participants requested more in-depth knowledge and WMC created an advanced Asian noodle course, covering ingredient functionality, new product development, packaging materials, shelf life study, seasoning development, sensory evaluation techniques and Hazard Analysis & Critical Control Points (HACCP) programs.
Hou explained that the advanced course divides participants into three teams, that each develop a new noodle seasoning flavor. The teams then present their new noodle product and related marketing strategies to the full group. For the most recent Advanced Asian Noodle Short Course for Nigeria, organized in cooperation with the Oregon State University Food Innovation Center, the participants presented their results to the WMC Board of Directors.
“I was impressed by the interaction between teammates, who weren’t from the same companies,” said Keith Bailey, chair of the WMC Board of Directors and general manager of AgVentures, LLC. “This work is important because it helps educate customers on how best to use U.S. wheat for their specific product.”
Armed with technical education and experience using high quality U.S. wheat, Nigerian pasta manufacturers are primed to produce superior instant noodles for an increasing number of consumers. While Nigeria is now the largest instant noodle market in Africa, Hou explained that consumption is only 0.9 meals per person per month. In contrast, Indonesia consumes 7.0 instant noodle meals per person per month. How will pasta manufacturers in Nigeria meet even more demand for instant noodles? USW and WMC will help answer that question, backed by the most reliable source of high quality wheat in the world.
5. Wheat Industry News
· Monsanto's Beachell-Borlaug International Scholars Program (MBBISP) began accepting applications on Nov. 1 for its fourth round of funding. The program is a competitive grant for students pursuing their doctorate degree in rice or wheat plant breeding. The goal of the program is to develop highly educated breeders in these staple crops, while providing an international opportunity to experience the work and mission of the public sector. The program requires students enrolled in a developing country university to complete part of their research in a developed country - Australia, Canada, the United States or Western Europe. Students interested in applying to the program, open through Feb. 1, 2012, can find more details at www.monsanto.com/mbbischolars or contact Dr. Ed Runge at e-runge@tamu.edu.
· Ag Secretary Plans Travel to Asia. U.S. Agriculture Secretary Tom Vilsack announced plans to travel to Vietnam and China in mid-November to help strengthen bilateral trade relations and support the American brand throughout the Asia Pacific region. Vilsack is the first sitting American Secretary of Agriculture to visit Vietnam. For more information, visit http://1.usa.gov/shWWGU.
· USW/NAWG Hold Fall Board Meeting. National Association of Wheat Growers and USW leaders gathered for the 2011 Fall Wheat Conference this past week in Scottsdale, AZ. The conference included committee and Board meetings for both organizations, as well as meetings of the two organizations’ joint committees on trade and biotechnology policy. See pictures from the meeting at http://www.facebook.com/uswheat.
· World Grain Market Reports Released. In addition to the USDA WASDE report, two other world wheat trade reports were released recently. The International Grains Council released its monthly Grain Market Report on October 27. The United Nations Food and Agricultural Organization released its monthly Cereal Supply and Demand Brief on November 7.
· Wheat Letter Holiday Schedule. Wheat Letter will not be published the week of Nov. 24. The next issue will be published Dec. 1, and the last issue for 2011 will be published Dec. 15.
· Follow USW Online. Check out our page at www.facebook.com/uswheat for the latest updates, photos and discussions of what is going on in the world of wheat. Also, find breaking news on Twitter at www.twitter.com/uswheatassoc, additional photos at www.flickr.com/photos/uswheat, plus video stories at http://www.youtube.com/uswheatassociates.
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