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Wheat Letter - August 2, 2012


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. Click here to subscribe or unsubscribe to Wheat Letter.

In This Issue:
1. Watch Out for U.S. Drought Impact on Wheat Feeding
2. The World’s Millers Will Like the 2012 U.S. SRW Crop
3. Market Freedom…at Last
4. Canadian and U.S. Grain Sectors Prepare for New Marketing Environment
5. U.S. Wheat Associates Announces Staff Promotions
6. Wheat Industry News


Online Edition: Wheat Letter – August 2, 2012 (http://bit.ly/OtXMEa)

PDF Edition: see attached Wheat Letter - August 2, 2012.pdfWheat Letter - August 2, 2012.pdf

Crop Quality Information: USW Harvest Report (http://bit.ly/nf7FpE)


1. Watch Out for U.S. Drought Impact on Wheat Feeding
By Casey Chumrau, USW Market Analyst

U.S. Wheat Associates (USW) President Alan Tracy is cautioning U.S. wheat farmers and the world's wheat buyers to keep a close watch on how the deteriorating world corn supply situation changes feed wheat demand as 2012/13 progresses. Speaking at the USW Summer Board Meeting on July 6, Tracy said U.S. corn production is likely to be much lower than what the U.S. Department of Agriculture (USDA) predicted at that time and that feed demand around the world will continue to siphon more wheat from milling supplies throughout the year.

Since his remarks, the relentless drought in the United States prompted the International Grains Council to lower its world corn production estimate from 917 million metric tons (MMT) to 864 MMT and USDA to reduce its world estimate from 950 MMT to 905 MMT, with expectations USDA will further trim its estimate on August 10.

Corn supplies were already tight entering the 2012/13 marketing year because world consumption has increased 12 percent in the last five years while world production increased just 10 percent. Nearly 60 percent of total world corn consumption is dedicated to feed use each year, but tighter supplies mean less corn is available to meet growing feed demand, forcing feeders to look for alternatives. As was the case in 2011/12, feeders will likely rely more heavily on wheat this year than in prior years.

As of its July 11 World Supply and Demand Estimates (WASDE) report, USDA predicted wheat used for feed in 2012/13 will decline 16.8 MMT from last year’s record 147 MMT. However, due to the tight corn situation and the availability of wheat stocks, USW expects eventual world wheat feed use this year to meet or even exceed last year’s record level. Therefore, world wheat stocks will need to absorb the extra 16.8 MMT in consumption unaccounted for in the last USDA estimate. USDA will release its next WASDE report on Aug. 10, and USW expects it will increase global feed use for wheat.

In terms of export competition, feeding an extra 16.8 MMT is roughly equal to removing a major exporter from the market. In 2010/11, the Russian export ban withdrew a comparable wheat supply from the market and sent prices sharply higher, leaving the other major exporters to fulfill the world’s wheat needs. USW does not expect a similar “surprise” reaction this year to an increase in wheat feeding because prices are already high historically. However, USW does expect prices will continue to be high and volatile because there will be intense competition between the major crops for planted acres this fall and next spring. Buyers need to stay vigilant in order to take advantage of price dips as the volatility in the market allows.

Fortunately, the drought did not severely cut the U.S. wheat supply and, once again, millers and feeders around the world will be able to rely on both the quality and availability of U.S. wheat. Although U.S. commercial wheat sales have lagged some in the first two months of marketing year 2012/13, in part, we believe, because of uncertainty over price movements, USW expects U.S. exports could reach 35.0 MMT, a recent high set in 2010/11.


2. The World’s Millers Will Like the 2012 U.S. SRW Crop

Crop quality data surveying the 2012/13 U.S. soft red winter (SRW) wheat crop is now available. Harvest for SRW growers started early and ended in early July – about two weeks ahead of normal. For 2012, Great Plains Analytical Laboratory (formerly CII Laboratory Services) in Kansas City, MO, collected and analyzed 492 samples from 18 reporting areas in nine states that typically account for 60 to 70 percent of total SRW production.

Here is a summary of the results from the survey, funded by USW and USDA’s Foreign Agricultural Service. Complete data is available on the USW website and will be shared with hundreds of overseas customers at our annual USW Crop Quality Seminars. Buyers are encouraged to carefully construct specifications to be sure that they receive qualities that meet their needs either for traditional soft wheat products or for blending with stronger wheat.

A Very Sound Crop

U.S. SRW farmers produced an excellent crop for 2012/13 that averages U.S. Grade No. 1. The crop is very sound with generally high test weight values, large kernel size, good milling characteristics and relatively low DON values. However, the crop has somewhat lower than average protein, dough processing and end product values.

The overall average test weight of 60.2 lb/bu (79.2 kg/hl) is about 1.4 lb/bu (1.8 kg/hl) above 2011 and the five-year average and reflects the sound milling quality of the crop. The Gulf tributary average test weight of 60.5 lb/bu (79.5 kg/hl) is 2.2 lb/bu (2.7 kg/hl) above the five-year average. The below-average East Coast test weight of 59.2 lb/bu (77.9 lb/bu) results from lower values in North Carolina where rain delayed harvest. The average of total defects is better than normal for the Gulf area and about average for the East Coast, and dockage is slightly lower than average for both areas. Protein content of 9.9 percent (12% moisture basis) is lower than last year and the five-year average, mainly because of lower average values in the Gulf area. Averages of DON values in all states are less than 1.0 parts per million (ppm) and most are below 0.5 ppm, well below historical average values. The composite average falling number of 329 is similar to the five-year average.

Flour and Baking Data

Buhler laboratory mill flour extraction is well above the already high 2011 value and 3.8 percentage points higher than the five-year average, consistent with the higher test weight values and large kernel size — suggesting that the crop has very good milling characteristics. While farinograph absorption is above the five-year averages, average farinograph peak and stability times and alveograph W values are all slightly below last year and the five-year averages. Composite average loaf volume and cookie spread ratio values are also somewhat below last year and the five-year averages.

Funding for the SRW crop quality survey comes from USW and USDA’s Foreign Agricultural Service.


3. Market Freedom…at Last
By Alan Tracy, USW President

State wheat producer organizations in the United States formed Western Wheat Associates and Great Plains Wheat in the 1950s and merged these organizations in 1980 as U.S. Wheat Associates. During all those years and decades, USW has worked to promote U.S. wheat to our customers in the face of several competing organizations that had monopoly control over their countries' wheat supplies and prices. It has been frustrating to watch markets we built with our customers over many years be taken away just because a monopoly exploited its ability to price wheat at whatever it took to buy market share, bury the discounts in its price pools and tell its farmers what a great job it was doing on their behalf.

Yet, we watched Argentina dismantle its wheat board and South African end all its commodity control boards, including for wheat, in the 1990s. The Australian Wheat Board finally lost its monopoly over export sales in 2008 after former AWB executives were caught paying hundreds of millions of dollars in kickbacks to Saddam Hussein's regime to control the Iraq wheat market — a sordid affair in which USW was the first to publicly call for an inquiry.

Then, this Wednesday, Aug. 1, 2012, the last of the old monopolies died when the “Marketing Freedom for Grain Farmers Act” took effect in Canada. The Canadian Wheat Board, though renamed and recast as a private grain merchandising company, still gets government loans and support, but that, too, is scheduled to end in no more than five years.

There are still some commodity boards with pricing or volume control in smaller crops such as cacao, and Russia and Kazakhstan sometimes seem to be heading fitfully in the direction of re-establishing government-controlled wheat marketing. For the moment, however, the monopoly dinosaurs have died out for the major commodities. That is even more important for wheat, which represents the largest volume, fully one third, of the world’s annual grain trade. So Aug. 1, 2012, marked marketing freedom day not just for Canadians, but also for an entire global industry.

U.S. wheat producers are still a little uncertain about how this new marketplace will work. For example, there are lots of details to be resolved related to U.S.-Canadian cross-border trade (see below). But, we welcome the opportunity to compete openly and fairly based on the value of wheat to our customers, especially overseas where markets are growing. We have a lot to offer in terms of value and reliability of supply, and we are confident that the new, fairer marketplace will work both to our favor and to the benefit of buyers. Pricing shenanigans will no longer distort markets, disrupting logical supply lines and skewing trade. It is past time.

We must also tip our hats to our northern neighbor's wheat and barley producers, who will now be able to market their wheat to whomever they choose. On average, we expect the open market to improve their returns and that the end of monopoly pricing tactics will improve ours. Buyers, too, are better served by markets that send the right signals back to the sources of supply and forward to end users.

To our customers, the best guarantee of a steady supply of wheat is the U.S. wheat producer. We repeat our promise of reliability, quality and service, and we genuinely look forward — finally — to a global market that works as it should, without monopoly trade distortions.


4. Canadian and U.S. Grain Sectors Prepare for New Marketing Environment
Reprinted from Canada-U.S. Grain and Seed Trade

Wheat, durum, and barley producers in Canada and the United States are asking important questions about cross-border trade following the removal of the mandatory marketing requirement for western Canadian farmers on Aug. 1, 2012. A new website, launched today by a working group of Canadian and U.S. non-profit and trade organizations, hopes to provide some answers.

The website, http://canada-usgrainandseedtrade.info, provides a detailed frequently asked questions (FAQs) section and industry news. Visitors can also submit comments and additional questions through the website.

“The new grain marketing environment is good news for wheat, durum, and barley producers on both sides of the border,” said Richard Phillips, executive director of the Grain Growers of Canada. “The site will help producers better understand how to navigate through these changes and market their grain across the border.”

On Aug. 1, 2012, the Marketing Freedom for Grain Farmers Act took effect in Canada, and the cross-border system for wheat, durum, and barley will work the same as it already does for other commodities, such as canola and pulses. The changes to Canada’s marketing environment will provide new opportunities for U.S. and Canadian producers to move grain across the border, in both directions.

“The information on this site will help producers who might consider delivering their grain across the border understand market differences,” said Shannon Schlecht, USW director of policy. “Key questions are answered for U.S. and Canadian producers, including how to find a buyer, how wheat will be graded and requirements for crossing the border.”

Export licenses will not be needed to deliver or market wheat, durum, or barley from Canada, but U.S. and Canadian grain crossing the border will still be subject to the respective and applicable customs and import regulations, such as phytosanitary requirements.

“People on both sides of the border have many questions on the new marketing changes and their implications,” said Dennis Stephens, executive secretary of the Canada Grains Council. “We focused on starting to answer those questions on grading, contracts and pricing, among others, to provide transparency and facilitate cross-border trade.”

“It is great to see so many key grower and industry stakeholders come together for this effort,” said Gary C. Martin, president and chief executive officer of the North American Export Grain Association. “We plan to update the site frequently and we strongly encourage growers and industry to contact us through the website with their comments, questions and suggestions.”


5. U.S. Wheat Associates Announces Staff Promotions

USW is pleased to announce promotions for four of its domestic staff, effective Aug. 1, 2012.

Steve Wirsching is named Vice President, Director of West Coast Office in Portland, OR. In USW’s Arlington, VA, Headquarters Office, Shannon Schlecht is named Vice President of Policy, Steve Mercer is named Vice President of Communications and Julia Debes is named Assistant Director of Communications.

“At every meeting, I tell our directors how proud I am of our entire staff,” said USW President Alan Tracy. “The work of these four people has earned special attention from their colleagues and our partners outside the organization. I am pleased to recognize their work and expect them to contribute even more to the U.S. wheat industry in these strong leadership roles.”

Wirsching has been with USW since 1992, starting as Assistant Director in the West Coast Office. He then served as Assistant Regional Director in the South American Region Office in Santiago, Chile, and in the Mexican, Central American, Caribbean Office in Mexico City, Mexico, before returning to the West Coast Office as Assistant Director in 2008. He was named Director in 2010. Wirsching grew up on a family farm in Idaho and earned a bachelor’s degree in agribusiness/animal science and a master’s degree in agricultural economics from the University of Idaho.

Schlecht joined USW in 2001 as Assistant Director in the West Coast Office, then transferred to Cairo, Egypt, as Assistant Regional Director, Middle East, East and North Africa. He became Deputy Director of Policy in September 2009 and was named Director of Policy in 2010. Schlecht hails from a North Dakota farm family and earned bachelor’s and master’s degrees in agricultural economics from North Dakota State University.

Mercer joined USW as Director of Communications in 2006. As a marketing communications writer and manager, Mercer worked primarily for public relations and advertising agencies serving clients in commercial agricultural supply industries including crop protection, animal health, seed, and livestock equipment. A graduate of the University of Illinois, Urbana-Champaign, in agricultural journalism, Mercer grew up in a small farming community in Illinois.

Before joining USW as Communications Specialist in 2010, Debes worked on a Florida state legislator's communications staff and as Deputy Press Secretary at the Ohio Auditor of State’s Office. Debes earned a bachelor’s degree in agricultural communications and journalism from Kansas State University and a master’s degree in media and communication studies from Florida State University. Her family operates a diversified crop and livestock farming operation in central Kansas.

6. Wheat Industry News
  • Staff Changes. The Ohio Corn and Wheat Growers Association promoted Jack Irvin to director of government and industry affairs and hired Brad Moffitt as its new director of market development and membership. Congratulations to our associates. For more information, visit http://bit.ly/OGO54X.
  • BBSRC (UK) Launches New Website to Support Wheat Research. The new website provides a central hub for the Wheat Initiative, which aims to coordinate wheat research programs and contribute to food security across the globe. Visit the new site at http://www.wheatinitiative.org/.
  • Bayer, CSIRO and GRDC Form Research Partnership. Bayer CropScience, the Commonwealth Scientific and Industrial Research Organisation (CSIRO) and the Australian Grains Research and Development Corporation (GRDC) have formed a partnership to increase yield in wheat, utilizing CSIRO’s work on biotechnology. For more information, visit http://bit.ly/Ni8fhp.
  • Dow Holds Grand Opening of Nairn Research Facility. Dow AgroSciences celebrated the grand opening of its Nairn Research Facility in eastern Canada. The new facility combines breeding techniques including di-haploids, disease nurseries and shuttle breeding. For more information, visit http://bit.ly/T1XnsX.
  • Sierra Leone Mandates Flour Fortification. Sierra Leone has moved from voluntary to mandatory wheat flour fortification. According to the Flour Fortification Initiative, this makes 76 countries which require at least iron or folic acid to be added to wheat flour. For more information, visit http://bit.ly/MZLFMS.
  • USDA Deregulates Roundup Ready Sugar Beets. USDA’s Animal and Plant Health Inspection Service (APHIS) announced its deregulation of a variety of sugar beet genetically engineered (GE) to be resistant to the herbicide glyphosate, commonly referred to as Roundup Ready sugar beets. For more information, visit http://1.usa.gov/MZAYvN.
  • WMC Whole Grain Products Short Course. The Wheat Marketing Center (WMC) in Portland, OR, will hold its Whole Grain Products Short Course December 10 to 14. For more information or to register, visit http://www.wmcinc.org.
  • NCI Grain Procurement Short Course. The Northern Crops Institute (NCI) in Fargo, ND, will hold its Grain Procurement Management for Importers Course September 17 to 26. For more information or to register, visit http://www.northern-crops.com.
  • IGP Buhler Milling Courses. The International Grains Program (IGP) in Manhattan, KS, will hold its Buhler-KSU Executive Milling Course in Spanish August 6 to 10. The English version of the course will be August 13 to 17. For more information or to register, visit http://www.grains.ksu.edu/igp/.
  • Soy & Grain Trade Summit. The Soy & Grain Trade Summit will be held September 17 to 19 in New Orleans, LA. The Summit brings together industry leaders from 38 states and more than 40 countries. For more information, please visit http://bit.ly/QteNBb.
  • Congratulations to Alan Tracy, USW President, on his 15th anniversary leading USW!
  • Congratulations to Vince Peterson, USW Vice President of Operations, and his wife Sandy on the birth of their granddaughter, Penelope Jean Lowenstein.
  • 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.


Nondiscrimination and Alternate Means of Communications
USW 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 USW at 202-463-0999 (TDD/TTY - 800-877-8339, or from outside the U.S., 605-331-4923). To file a complaint of discrimination, write to Vice President of Finance, USW, 3103 10th Street, North, Arlington, VA 22201, or call 202-463-0999. USW is an equal opportunity provider and employer.