Wheat Letter - April 12, 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. Tight Corn Stocks, Not Quality Concerns, Pushing Wheat as Feed
2. U.S. Wheat Classes Present Good Buying Opportunities Approaching End of Marketing Year
3. U.S. Wheat Crop Mostly Ahead of Schedule
4. Improving on Staff of Life
5. Wheat Industry News
Online Edition: Wheat Letter – April 12, 2012 (http://bit.ly/Hyd9Va)
PDF Edition:  Wheat Letter - April 12, 2012.pdf
1. Tight Corn Stocks, Not Quality Concerns, Pushing Wheat as Feed
By Casey Chumrau, USW Market Analyst
The 2011/12 marketing year will end May 31, a point at which most analysts expect the U.S. Department of Agriculture (USDA) to make only minor changes to its year-end supply and demand estimates. USDA did make mostly small changes to wheat production, world trade and beginning stocks estimates in its monthly World Agricultural Supply and Demand Estimates (WASDE) report released April 10. However, USDA sharply increased projections of wheat used for feed. Generally, a spike in feed use would indicate quality issues, but other market factors are driving the feed wheat use higher than ever this year.
Driving feed wheat demand is the very tight supply of corn. Despite five consecutive years of record corn production, projected 2011/12 world ending stocks are 2 percent lower than last year and 7 percent lower than the five-year average. USDA currently projects U.S. ending corn stocks down 29 percent in 2011/12 to 20.3 million metric tons (MMT), 46 percent below the five-year average of 37.8 MMT.
Historically, about 70 percent of total world corn consumption is utilized as feed. However, the increase in total demand for corn, including biofuels, limits the amount available this year for feed. The lower supply of corn for feed and relatively high corn prices has driven livestock owners to look to alternative feed grains.
The April WASDE indicated that USDA expects wheat will meet a large portion of the unmet feed demand. USDA increased projected world feed wheat use by 7.0 MMT in April to a record 138 MMT, 5 percent greater than the previous record set in 1990/91 and 22 percent greater than the five-year average. Tight corn supplies in China, the world’s largest feed grains consumer, have led to the current estimate of 19.5 MMT in feed wheat use this year, nearly doubling the previous record.
USDA also increased projected U.S. feed wheat use by 950,000 MT to 4.90 MMT, 37 percent above the five-year average. Kim Anderson, agricultural economist at Oklahoma State University, attributed the increase to the tight U.S. corn stocks. Anderson noted that the United States has plenty of wheat available for all uses, but demand dynamics may pull more of this high quality wheat into the feed market.
Looking at the futures market, the spread between wheat and corn has tightened significantly the last few years. Historically, the three major wheat futures markets have held a premium to the Chicago Board of Trade (CBOT) corn price. However, on multiple days in the last year the CBOT soft red winter (SRW) futures contract closed at a discount to CBOT corn. For example, the CBOT corn contract closed 8 cents higher than the CBOT May SRW contract on Wed. April 11. Analysts also are watching the spread between CBOT corn and Kansas City Board of Trade’s (KCBT) hard red winter (HRW) contract. To date, KCBT has never closed lower than CBOT corn, but KCBT closed Wednesday with an 8 cent premium to CBOT corn and the spread April has been as low in as 4 cents. The tightening of the price spreads makes wheat a more viable option for feed use.
Even though USDA lowered projected world wheat ending stocks in April by 3.3 MMT to 206 MMT, it will be the fourth largest carryover supply on record and 25 percent greater than the five-year average, if realized. In the United States, estimated ending stocks would decrease 870,000 MT, an 8 percent decline from last year, but still 22 percent above the five-year average. The United States continues to have an abundant supply of wheat available at competitive prices to meet the world’s demands.
2. U.S. Wheat Classes Present Good Buying Opportunities Approaching End of Marketing Year
In 2010/11, weather problems for our major wheat export competitors combined with competitor export restrictions resulted in the highest U.S. wheat exports since 1992/93. Returning to U.S. wheat sales closer to normal in 2011/12, the United States is on track to meeting USDA’s 27.2 MMT export projections, but with distinctly different situations for each of the six classes of U.S. wheat.
Ample SW Production Keeps Prices Competitive
In contrast to farmers in many other growing areas, the Pacific Northwest saw nearly perfect growing conditions this year, leading to a 12 percent production increase from last year. With an influx of supply, white wheat prices have stayed competitive worldwide, leading to increased sales. According to USDA’s Export Sales report, white wheat commercial sales through April 5 are up 13 percent from 2010/11. As a result, USDA lowered projected ending stocks of white wheat in its WASDE report this month to 1.96 MT from 2.37 MMT in March.
HRW Ending Stocks Predicted Higher
Increased sales last marketing year benefited the HRW crop more than most of the other classes. In 2011, however, drought ravaged the Great Plains states. Combined with an increase in overall world wheat production, USDA decreased 2011/12 estimated production 23 percent from last year and reduced exports to the current projection of 10.3 MMT. Commercial sales data reflects this trend with HRW sales 41 percent lower than last year at this time, a drop of 6.73 MMT.
However, lower sales led to slightly raised ending stocks in the April WASDE from 9.14 MMT to 9.55 MMT. USDA’s projections are above last year’s ending stocks, meaning more HRW will carry over into the new marketing yea and will be available to meet world demand.
Durum Down Overall
In the Northern Plains durum growing area, too much moisture prevented farmers from planting and harvesting the crop. As a result of decreased planted and harvested acres, sales dropped. According to USDA, durum production last year decreased 53 percent to 1.36 MMT and current projected exports are down 42 percent to 680,000 MT. In line with this prediction, commercial sales are down 52 percent from last year.
HRS Producers Waiting for the Right Price
Hard red spring (HRS) farmers faced the same wet weather challenges as durum producers last year. USDA estimated 2011/12 production down 30 percent, projected exports down 29 percent and ending stocks 23 percent lower than last year. Current export commitments align with this trend, as USDA reported commercial sales are down 29 percent (2.60 MMT) from last year. With plenty of on-farm storage, however, many farmers in the HRS growing area are waiting for the right time to sell.
SRW Sees Highest Sales Increase
Production in the SRW growing region east of the Mississippi River rebounded in 2011, providing an ample supply. Reduced availability of Black Sea wheat later in the marketing year has led to increased SRW exports for milling use. Additionally, with tight corn stocks, SRW has become the alternative feed of choice, leading to increased sales (see story above). Overall, USDA projected SRW commercial sales up 41 percent (1.15 MMT) from last year.
Even with increased sales, USDA estimated large SRW carryover stocks compared to 2010/11. Even though the WASDE report lowered estimated SRW endings stocks to 5.74 MMT from 6.61 MMT last month, USDA predicted ending stocks 19 percent higher than last year.
Uptick in Sales Pace Indicates Continued Sales
Overall, customers realize there are still good opportunities to purchase high quality U.S. wheat before switching to new crop purchases, evidenced by a recent uptick in net sales due to more competitive prices.
According to the USDA’s weekly Export Sales Report, commercial sales of U.S. wheat through April 5 are at 26.3 MMT, 23 percent lower than last year’s year-to-date total. While export sales are lower than last year’s above average levels, the United States is still on pace to meet USDA’s estimated total exports of 27.2 MMT and are just 4 percent below the 10-year average. In fact, including commercial sales to unknown destinations would put the United States right at total projected exports if those sales are designated before the end of marketing year.
3. U.S. Wheat Crop Mostly Ahead of Schedule
By Julia Debes, USW Communications Specialist
An early planting and growing season typically improves a wheat crop’s potential. And by all accounts, the 2012 U.S. wheat crop across the country is progressing far ahead of schedule in most areas.
Overall, winter wheat is ahead of schedule and in better condition than last year. In USDA’s Crop Progress report for the week ending April 8, 61 percent of the winter wheat crop across the country is in good to excellent condition, compared to 36 percent at this time last year. Even better, only 10 percent of the winter wheat crop is rated poor to very poor, compared to 36 percent last year.
State by state, winter wheat is ahead of schedule by varying degrees. In areas of Texas, typically the first HRW growing area to harvest, inadequate soil moisture continues to stress the wheat crop. The crop is still progressing faster than normal, with 35 percent of the wheat headed out compared to the five-year average of 15 percent.
In Oklahoma, USDA reported that 41 percent of the HRW wheat crop is already headed out, compared to just 6 percent last year at this time. Mike Schulte, executive director of the Oklahoma Wheat Commission, reported that wheat is two to three weeks ahead of normal, projecting harvest to be toward the second or third week of May in the southwest corner of the state, although some producers are predicting even sooner.
“In southwest Oklahoma, I had a producer tell me that he felt they would be cutting wheat in as early as mid-to-late May,” Schulte said. “Overall, crop conditions as of right now look favorable just as long as we can dodge future possible hail and tornado damage.”
In Kansas, 79 percent of the wheat is jointed, compared to the five-year average of 32 percent and 30 percent at this time last year. Additionally, 65 percent of the wheat is rated good to excellent. According to Nebraska Wheat, Nebraska’s winter wheat crop is also about two weeks ahead of schedule with 10 percent of the wheat jointed.
In the Pacific Northwest, mixed weather across Idaho has resulted in a good-looking crop overall. According to USDA, 86 percent of Idaho’s winter wheat is rated good to excellent with 11 percent rated fair. Despite good conditions, however, Tereasa Waterman, information and education manager with the Idaho Wheat Commission, reported that winter wheat acres may be plowed under to plant other crops like potatoes or sugar beets.
Further west in Wyoming, Keith Kennedy, executive director of the Wyoming Wheat Marketing Commission, said wheat farmers could easily start harvest as early as July 1, two to three weeks ahead of normal. He added that while there is sufficient moisture at the moment, the crop will need some significant moisture soon.
Colorado Wheat Administrative Committee President Tom Neira, who farms in central Colorado near Bennett, would also welcome additional moisture in coming weeks. He reported, “Wheat in our area still looks good, as it had a good start last fall, but it will need a drink soon.” Dan Anderson, who farms in far northeastern Colorado near Haxtun, reported his wheat is two weeks ahead of schedule and looking good, but agreed that it could use some moisture soon. That is on par with USDA’s report that 18 percent of the wheat in Colorado is jointed compared to 10 percent for the five-year average at this time.
The SRW crop is also progressing faster than normal. In Ohio, winter wheat was 13 percent jointed, ahead of both last year and the five-year average. In Maryland, Jason Scott, who farms in the Delmarva peninsula near Stevensville, said his wheat is about a week ahead of schedule, but cooler weather this week slowed crop progress a little.
Spring wheat planting is also ahead of schedule in most areas, with producers taking advantage of mild weather conditions to get their wheat in the ground. According to USDA’s April 8 Crop Progress report, 21 percent of the crop has been planted, compared to 3 percent last year and the five-year average of 5 percent.
In North Dakota, 8 percent of durum and 17 percent of spring wheat has been planted. Erica Olson, marketing specialist with the North Dakota Wheat Commission, said producers are planting spring wheat and durum at least a month earlier than last year, when wet conditions delayed and prevented planting.
Farmers are also ahead of the five-year averages in both South Dakota, where 52 percent of spring wheat is seeded, and Minnesota, where 25 percent is seeded. In a normal year, farmers in both states would just be starting planting.
In contrast to most areas, farmers in northern Idaho and eastern Washington have seen greater precipitation that has slowed spring wheat planting. Scott Yates, director of communications for the Washington Grain Commission, reported that farmers were initially worried about a drought this year, but now are so water logged they may be late getting into their fields. USDA reports that farmers have planted 15 percent of their spring wheat in Idaho and 26 percent in Washington, behind the five-year averages of 23 and 37 percent, respectively.
While the crop is mostly ahead of schedule, farmers across the country acknowledge that weather in coming weeks could have a large effect on the harvested crop. A late frost, too little moisture or damaging storms could still hurt the wheat crop. But, for now, they are relatively optimistic.
4. Improving on Staff of Life
Reprinted with permission by Dr. E. Kirsten Peters, Washington State University
About 10,000 years ago Earth’s climate lurched from bitter Ice Age conditions to the much balmier time in which we live today.
We don’t fully understand what caused that great climate shift, but we know it was near the time of that great temperature transition that people started to farm. And one of the crops people in some parts of the world learned to tend was wheat.
In the Western world, our love affair with wheat is as intense as it is old. Peasants have lived on bread and not much else, and even those of us with a grocery store full of options at our disposal are likely to have at least some wheat-products each day.
Unfortunately, about 2 percent of Americans suffer from celiac disease, a malady triggered by gluten proteins such as those found in wheat. It’s a serious condition that erodes necessary structures in the intestines called microvilli. Symptoms of celiac disorder range from things such as diarrhea to long-term malnutrition because nutrients are not absorbed and transferred to the bloodstream as they should be.
The only treatment for celiac disease is to avoid eating gluten. That’s a tall order because wheat and wheat by-products are in a wide variety of foods. To avoid eating any wheat requires constant vigilance and a lot of home-cooking. That’s why it would be ideal if new wheat strains could be developed that didn’t contain the proteins that cause the malady in the first place.
Enter Professor Diter von Wettstein of Washington State University. Von Wettstein came to this country from Denmark in 1996 when regulations there forced him to retire owing to age. Here in the land of the free, von Wettstein can pursue research into wheat strains and celiac disease.
“Retirement should mean you get to do what you think is fun,” he said to me recently. “I think research is fun.”
At age 82, von Wettstein shows no sign of slowing down. In addition to running a research laboratory of seven, he returns to Europe from time to time to see his family -- and ski in Austria.
“I had to give up downhill skiing,” he said with regret. “Too many surgeries on my hip. But I still do cross-country.”
Like many serious research groups in this country, von Wettstein’s research lab is highly international. His team includes men and women from China, Chile and Ghana. The group is hard at work on changing wheat so that it won’t cause celiac disease.
Wheat is full of a mixture of proteins, a number of which can cause problems in people with celiac. Six proteins are needed for giving bread its baking properties, but about 150 proteins are not needed. Using advanced genetic techniques, von Wettstein and his team are shaping wheat strains to have fewer and fewer of the problematic proteins.
At the moment, there’s winter wheat growing on an experimental farm not far from where I work that has 60 to 70 percent of the proteins that attack the microvilli “silenced.” Von Wettstein is confident that in time that proportion will reach 100 percent.
“I wouldn’t work on this problem if I didn’t think we could solve it,” he said.
There are other potential avenues of research being explored that could help celiac sufferers. One is to find an enzyme that would break down the problematic proteins while food was still in the stomach. Von Wettstein’s group is looking for enzymes that could be added to bread before it’s baked. If the enzymes withstood the temperature of baking in an oven, then they could go to work in the stomach where celiac patients don’t have problems, sparing the crucial intestines.
We’ve had a long and wondrous love affair with wheat. For myself, it’s tough to imagine what celiac sufferers live with each day. Here’s hoping that with some further scientific research all of us will be able to enjoy a good slice of bread, some noodle soup or a piece of cake.
E. Kirsten Peters, a native of the rural Northwest, was trained as a geologist at Princeton and Harvard. Planet Rock Doc, a collection of Peters’ columns, is available at bookstores or from the publisher at wsupress.wsu.edu or 1-800-354-7360. This column is a service of the College of Agricultural, Human and Natural Resource Sciences at Washington State University.
5. Wheat Industry News
Food Aid Conference Approaching. The 2012 International Food Aid & Development Conference, sponsored by USDA and USAID, will be May 7 to 9 in Kansas City, MO. For more information or to register, visit http://1.usa.gov/HA5rPm.
NPA Reveals New Website. The National Pasta Association (NPA) recently revealed a new website that includes an enhanced resource center and a new section dedicated to health professionals. To view the website, visit http://www.ilovepasta.org/.
AACC International Online Bookstore Open. AACC International is celebrating the opening of its new online bookstore with a grand opening sale. More than 100 food and grain science titles are now available. To check out the bookstore and the sale, visit http://bit.ly/HBzYv0.
WFC Helps Sponsor Whole Grains Summit 2012. The Wheat Foods Council the Grains for Health Foundation are co-sponsors of a “Whole Grains Summit 2012” May 19 - 22 in Minneapolis, MN. The event will convene scientists, industry experts and health professionals from around the world to discuss research on whole grains, dietary fiber and functional grain components. For more information, visit http://bit.ly/yv1lOr.
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/.
Congratulations to Pansy Shepherdson, accounting technician in the USW Singapore Office, on her 30th anniversary working for USW. Thanks for your service!
Congratulations to Steve Mercer, USW director of communications, on the birth of his grandson, Theodore Glenn Wiemer on April 10.
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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