Wheat Letter - June 7, 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. Customers Saving Boatloads on U.S. Wheat Compared to Last Year
2. Follow Harvest and Crop Conditions…With Some Perspective
3. Trade Teams Visit Wheat Farmers across United States
4. An Afternoon of Wheat for Embassy Officials
5. USW Employees Demonstrate Long-Term Commitment to Customers
6. Wheat Industry News
Online Edition: Wheat Letter – June 7, 2012 (http://bit.ly/L6BzbY)
PDF Edition:  Wheat Letter – June 7, 2012.pdf
1. Customers Saving Boatloads on U.S. Wheat Compared to Last Year
By Casey Chumrau, USW Market Analyst
Retail outlets routinely institute sales at the end of the year to make way for the new year’s items. In the U.S. wheat industry, June 1 marked the start of the new marketing year, reflecting the time when the new crop harvest is normally just getting started. While there cannot be a new year’s sale on wheat, our overseas customers are now seeing excellent opportunities to purchase high-quality U.S. wheat at relatively bargain prices particularly when compared to prices at this stage last year.
That difference is largest with hard red spring (HRS) wheat. The price of 13.5 percent protein (12% moisture) HRS for August delivery, sold from both the Gulf of Mexico and the Pacific Northwest (PNW), is down about $85 per metric ton (MT), or more than 20 percent lower than last year.* As of June 1, August delivery HRS in the PNW was $320/MT and in the Gulf was $338/MT.
Hard red winter (HRW) wheat is also showing price savings for customers. At about this point in last year’s harvest, the price for 11.5 percent protein HRW from the Gulf for August delivery was $275/MT. That was $38/MT or 12 percent more than current prices. Customers buying HRW from the PNW are currently paying $266/MT, or $47/MT less than last year.
The relative value for soft wheat is also higher than last year at this time. The current soft white (SW) price at $257 is $22/MT or 8 percent lower than last year’s price. Soft red winter (SRW) is down $15/MT to $250/MT.
Other than a temporary price spike during the week of May 18, SRW has been less expensive than Russian wheat since January. That price relationship may have been hard to imagine at the beginning of marketing year 2011/12 when Russian wheat was more than $40/MT cheaper than U.S. SRW. On July 15, 2011, Russian wheat was selling for an average of $240/MT while U.S. SRW, the next competitor up in price, was selling at $281/MT.
Russian traders used price aggressively to regain the market share lost after the country banned wheat exports in August 2010. As a result, traders sold all the wheat stored or produced close to ports and the added cost of transporting inland wheat quickly increased the export price. At the same time, wheat prices from other major producers started to fall. Bearish market factors such as high world wheat stocks and global economic stress helped push U.S. wheat prices lower and increased competitiveness. On June 6, the Chicago Board of Trade (CBOT) started a Black Sea wheat futures contract. It closed the first day at $255/MT, $26/MT higher than the CBOT SRW futures contract.
With adequate carryover stocks and the new crop generally pushing prices lower, market conditions seem right to continue this opportunity for several weeks, making this an excellent time to lock in supplies of high-quality U.S. wheat.
*Free on Board (FOB), August delivery
2. Follow Harvest and Crop Conditions…With Some Perspective
Rapidly changing conditions certainly dominated U.S. wheat crop news in April and May. U.S. HRW and SRW wheat prices were already headed down in mid-April when a very bullish potential yield report from the Wheat Quality Council’s annual Hard Winter Wheat Tour pushed prices to a two-year low. However, a lack of moisture during the critical grain fill period meant some areas are not meeting the tour’s expected yields. Overall, the crop is still much improved over last year’s drought-stricken crop. As a result of mixed yields and weather-related news throughout the world, prices are quickly bouncing up and down as the harvest progresses.
According to the U.S. Department of Agriculture (USDA) National Agricultural Statistics Service, winter wheat harvest stood at 20 percent complete as of June 3, 13 percentage points ahead of last year and 17 points ahead of the five-year average. Overall, 62 percent of the winter wheat crop was in good to excellent condition, down two percentage points from last week but 28 points better than the same time last year. Unusually dry conditions and hot weather depleted soil moisture and negatively affected SRW conditions in parts of Illinois and Indiana.
By June 3, virtually all of the U.S. spring wheat crop was up and growing, which is well ahead of last year and the five-year average. Growing conditions have been good and 78 percent of the spring wheat crop was rated in good to excellent condition, down just slightly from last week.
Some important perspective for buyers is that U.S. wheat stocks are plentiful, yield potential is generally at or above average and U.S. wheat value remains very good compared to prices last year.
Crop quality is the next bit of critical information for overseas customers. Stay informed as U.S. Wheat Associates (USW) posts its Harvest Report every Friday afternoon on our website (http://bit.ly/M7NKqm).
3. Trade Teams Visit Wheat Farmers across United States
USW brings trade teams from around the world to the United States each summer, hoping to catch our farmers in action harvesting the new wheat crops and to get a look at initial crop quality. This June, teams from Nigeria, South Korea and the European Union will visit farms and other locations from Texas to Ohio to Oregon and many states in between.
Trade team visits allow international millers, bakers and grain purchasers to visit with farmers, discuss supply and quality with industry representatives and visit elevators and port facilities. The connections forged on visits like these are the very foundation of past, present and future successes for U.S. wheat farmers, industry stakeholders and overseas customers.
“Our visitors always say that building relationships with farmers and the people in the U.S. wheat export supply chain makes a difference in their jobs,” said USW Vice President of Marketing Programs Rick Callies. “They get firsthand knowledge of the new crop and proof that the United States is the world’s most reliable supplier of high quality wheat.”
Teams in the United States this month include:
- Nigerian HRW Team: Nigeria buys up to 90 percent or more of its wheat from the United States. Representatives from Nigerian flour milling companies will visit Nebraska, Kansas and Texas June 16 to 26 to survey the current HRW and hard white (HW) crops.
- Korean Crop Survey Team: A team from South Korea will visit Oregon, Montana and California June 17 to 27 to learn more about the HRW, HW, SW and HRS crops. The four companies represented on this team mill 85 percent of flour in South Korea.
- European HRS/SRW Team: A group of executives and owners from leading milling companies in Spain and Italy will examine the HRS, durum and SRW crops June 17 to 23 in North Dakota, Minnesota and Ohio.
USW could not organize these trade team visits without help from the people who work for our state wheat commission member organizations and the wheat farmers we represent. We appreciate the time they take to show the best the U.S. wheat industry has to offer.
4. An Afternoon of Wheat for Embassy Officials
USW recently hosted an event in Washington, DC, for embassy officials from top wheat importing countries to discuss the U.S. and world wheat market. Officials from the 16 countries who registered for the event represented more than 50 percent of total U.S. wheat exports by volume in marketing year 2010/11 (June to May).
For that marketing year, roughly 20 percent of world wheat production crossed an international border, including more than 50 percent of the U.S. wheat crop. The United States continues to be the most reliable wheat supplier and the leading wheat exporter in the world.
Trade in U.S. wheat plays a critical role in the economy of each country by providing a reliable source of raw material for their flour milling and baking industries, which in turn helps build their economic capacity and provides their consumers with nutritious, affordable wheat food products.
“We wanted to reach out to these officials who also participate in global agriculture and agricultural trade,” said USW Director of Policy Shannon Schlecht. “In the past, government wheat buyers were our primary customers, but wheat trade has privatized and our promotional activities are now more focused on private buyers. However, government policy on such issues as import duties and non-tariff barriers can still greatly affect trade flows.”
The event provided an opportunity to update officials on the U.S. farm bill, the global supply and demand outlook for 2012/13, the status of new wheat research, including potential future traits using biotechnology, and to reinforce the quality, value and reliability of U.S. wheat production.
“Wheat is not just wheat because it is used in a variety of products that requires different qualities,” Schlecht said. “We wanted to demonstrate that U.S. producers reliably produce six distinctly different wheat classes to meet end user needs around the world.”
USW would like to thank the officials who attended this event and the individuals who also participated from USW, USDA and the National Association of Wheat Growers.
5. USW Employees Demonstrate Long-Term Commitment to Customers
For most of the world’s wheat buyers, bakers and wheat food processors, the people who promote U.S. wheat have very familiar faces. In our 17 offices worldwide (two in the United States, 15 overseas), about 80 colleagues are working hard every day to show how the six classes of high quality wheat produced by U.S wheat farmers can help our customers improve and expand their businesses. Many of those colleagues have been at this work for a very long time indeed, applying a wide breadth of experience and expertise.
“We are blessed with a number of employees who have dedicated most of their careers to serving U.S. wheat farmers and their customers overseas,” USW President Alan Tracy said. “In the wheat business, relationships matter, and these people have helped us build long-term, successful relationships with our customers. We thank them for their commitment to this industry and for their years of dedicated service.”
As an organization, USW employees work hard to provide customers with technical and trade assistance, crop quality information, product development and promotion, just to name a few of their activities. Our overseas customers can trust that their USW contacts are well equipped to provide all the information and assistance they need.
Thank you to these USW employees who celebrated a milestone anniversary working for USW in the first half of 2012:
- Fleur Noeth: 45 years as of January 10. Fleur is the assistant to the vice president of marketing programs in the USW Headquarters Office.
- Alvaro de la Fuente: 35 years as of March 19. Alvaro is the regional vice president of the South American Region, based in Santiago, Chile.
- Pansy Shepherdson: 30 years as of April 5. Pansy is the accounting technician in the USW Singapore Office.
- Aska Tam: 25 years as of April 1. Aska is the bilingual secretary in the USW Hong Kong Office.
- Gerald Theus: 20 years as of January 1. Gerald is the assistant regional director of the USW Sub-Sahara African Region, based in Cape Town, South Africa.
- Patricia Tong: 20 years as of April 14. Patricia is the executive administrator in the USW Singapore Office.
- Dr. Won Bang Koh: 20 years as of May 3. Koh is the country director for the USW Seoul Office.
- Dr. Woojon Park: 15 years as of April 1. Woojoon is the senior technical marketing specialist in the USW Seoul Office.
6. Wheat Industry News
- Marubeni to Buy Gavilon. Tokyo-based Marubeni Corp. will buy Gavilon Group LLC, the third largest grain handler in the United States, for $3.6 billion. Marubeni will aim to trade 25 MMT of grain by the end of their fiscal year (March 2013). For more information, visit http://s.nikkei.com/L76KEs.
- WMC Advanced Asian Noodle Short Course. The Wheat Marketing Center (WMC) in Portland, OR, will hold its Advanced Asian Noodle Short Course June 11 to 15. For more information or to register, visit http://www.wmcinc.org.
- NCI Rheology of Wheat and Flour Quality Short Course. The Northern Crops Institute (NCI) in Fargo, ND, will hold its Rheology of Wheat and Flour Quality Short Course from June 12 to 14. For more information or to register, visit http://www.northern-crops.com.
- IGP Online Flour Milling Course. The International Grains Program (IGP) in Manhattan, KS, will hold its Introduction to Flour Milling Course June 18 to July 27. The course will be based entirely online. For more information or to register, visit http://www.grains.ksu.edu/igp/.
- Bread Bakers Guild Plans Conference for June. The Bread Bakers Guild of America has organized a national bread conference, WheatStalk 2012, for June 28 to 30 at Kendall College in Chicago, IL. The event will feature three educational days with hands-on classes, demos, lectures and oven building. For more information, please visit http://bit.ly/KpYgZu.
- Vilsack Appoints New GIPSA Administrator. U.S. Agriculture Secretary Tom Vilsack named Larry Mitchell as administrator of USDA’s Grain Inspection, Packers and Stockyards Administration. Mitchell is a former CEO of the American Corn Growers Association and Farm Service Agency deputy administrator for farm programs for President Bill Clinton.
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. |