Wheat Letter - May 24, 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. Final USDA Predictions Show 2011/12 to Be a Record Year
2. Winter Wheat Harvest Underway, Spring Wheat Emerging Ahead of Schedule
3. NCI Course Teaches Customers Risk Management
4. USW Fosters Continued Expansion of Simply Good Instant Noodles
5. USW Recognizes Dick Prior's Dedicated Service to U.S. Wheat Producers
6. Importance of Wheat in Food Aid Programs Highlighted at Annual Conference
7. Wheat Industry News
Online Edition: Wheat Letter – May 24, 2012 (http://bit.ly/JumDTG)
PDF Edition:  Wheat Letter – May 24, 2012.pdf
1. Final USDA Predictions Show 2011/12 to Be a Record Year
By Casey Chumrau, USW Market Analyst
Early indications in marketing year 2011/12 did not foresee breaking many records, but the marketing year will end May 31 setting new highs in world wheat production, total supplies and global demand. The U.S. Department of Agriculture (USDA) released its first projections for 2011/12 in May 2011 and adjusted projections each month in its World Agricultural Supply and Demand Estimates (WASDE). USDA released the most recent WASDE report on May 10, providing a good snapshot of how final numbers will look at the end of the marketing year.
USDA initially projected a 3 percent increase in world wheat production, compared to 2010/11, to 670 million metric tons (MMT). However, production in the Black Sea region and Australia greatly exceeded expectations and world production soared to a record 695 MMT, 7 percent greater than the previous year. USDA projected a rebound in Black Sea production following severe drought in 2010/11, but upped its estimates from an initial 87.0 MMT to a final 101 MMT. Additionally, Australian production of 29.5 MMT surprised many by setting a record for the second straight year.
The increased production significantly added to world supplies. As a result, USDA upped its world supply projections by 39.6 MMT from its initial estimates to a record 891 MMT by the end of 2011/12. USDA predicted a decrease in world beginning stocks, but the final reduction of 3.32 MMT from 2010/11 was far less than the 17.9 MMT decrease USDA originally expected.
World wheat demand set a record in 2011/12 for the fourth consecutive year, reaching 695 MMT of total consumption. USDA projected consumption would set another record, but the initial estimate was conservative. Tight world corn supplies and an increasingly narrow price spread between corn and wheat resulted in record wheat feed use, driving demand higher throughout the year. Last May, USDA estimated 2011/12 food use to increase 8.19 MMT from the previous year to 546 MMT. That estimate remained virtually unchanged throughout the year, but estimated feed demand increased from 124 MMT to 148 MMT, a 27 percent increase from 2010/11 and a new record. Therefore, total world consumption increased 6 percent from the previous record.
World trade also increased in 2011/12 as suppliers tried to meet the higher demand. In 2010/11, Black Sea wheat re-emerged on the world market. Russian exports increased from 3.98 MMT in 2010/11 to 21.0 MMT, 63 percent above the five-year average. Additionally, Kazakhstan more than doubled its exports from 2010/11 to 10.5 MMT, 49 percent above the five-year average.
In the United States, expected exports fell from 35.1 MMT in 2010/11, supported by the withdrawal of Black Sea wheat, to 27.9 MMT. Last May, USDA predicted 2011/12 sales would drop to 28.6 MMT. Strong price competition from other exporters slowed export demand in mid-year. In fact, USDA dropped its 2011/12 export estimates to as low as 25.2 MMT in December. But the pace increased significantly thanks to more competitive prices and USDA last estimated total 2011/12 U.S. exports will reach 27.9 MMT. As of May 10, with three weeks left in the marketing year, total known U.S. export sales were 27.8 MMT.
As the focus now shifts to predictions for the 2012/13 marketing year, one fact remains clear. The United States will continue to have a reliable supply of high quality wheat for our customers around the world.
2. Winter Wheat Harvest Underway, Spring Wheat Emerging Ahead of Schedule
On Monday, May 21, USDA’s National Agricultural Statistics Service (NASS) issued a summary of wheat harvest, crop conditions and planting progress for May 14 to 20. Following are highlights for the 2012/13 U.S. wheat crop.
Winter Wheat Harvest:
This past week saw the first NASS report on winter wheat harvest progress, which is now 3 percent complete. Harvest is underway in five states and is 7 to 14 percentage points ahead of the five-year average at this time in these states.
Steelee Fischbacher, director of communications at Texas Wheat, reported that yields vary widely across the state, with above-average yields of 60 bushels per acre in the Northern Blacklands to highly variable yields averaging 30 bushels per acre in the Rolling Plains. Drought will challenge yields in the Panhandle and South Plains.
Harvest is expected to be in full swing in Kansas by May 27. Conditions remain windy and dry and topsoil moisture “drastically declined” in the last week. Bill Spiegel, director of communications with Kansas Wheat, said, “The wheat crop throughout Kansas runs the gamut from areas that will not be harvested due to drought to areas that should have well-above-average yields.”
Winter Wheat Percent Harvested (percentages indicated) |
| State | Previous Year | Previous Week | May 20, 2012 | Five-year avg. |
| AR | 1 | NA | 14 | 1 |
| CA | 0 | NA | 15 | 5 |
| MO | 0 | NA | 1 | 0 |
| OK | 2 | NA | 14 | 0 |
| TX | 11 | NA | 11 | 4 |
USW provides weekly Harvest Reports as wheat harvest progresses across the country. Reports are posted online every Friday through October at http://www.uswheat.org/reports/harvest.
Winter Wheat Progress:
NASS indicated that dry, warm weather conditions across most of the winter wheat growing region advanced crop development, but the crop will need precipitation in coming weeks. Overall, crop progress continues ahead of schedule with 79 percent of the winter wheat crop headed, 20 percentage points further along than the five-year average. Despite five straight weeks of declining crop conditions in Kansas, the national winter wheat condition remains relatively steady and still improved over last year’s drought-stricken crop.
Winter Wheat Percent Headed (percentages indicated) |
| State | Previous Year | Previous Week | May 20, 2012 | Five-year avg. |
| AR | 100 | 100 | 100 | 100 |
| CA | 99 | 99 | 99 | 99 |
| CO | 21 | 64 | 90 | 28 |
| ID | 0 | 0 | 1 | 2 |
| IL | 73 | 92 | 96 | 71 |
| IN | 40 | 81 | 93 | 53 |
| KS | 79 | 98 | 100 | 75 |
| MI | 0 | 18 | 43 | 1 |
| MO | 86 | 97 | 99 | 78 |
| MT | 0 | 0 | 0 | 0 |
| NE | 6 | 52 | 81 | 11 |
| NC | 100 | 100 | 100 | 99 |
| OH | 8 | 53 | 94 | 24 |
| OK | 99 | 100 | 100 | 98 |
| OR | 4 | 8 | 16 | 10 |
| SD | 0 | 14 | 39 | 1 |
| TX | 96 | 98 | 98 | 92 |
| WA | 4 | 0 | 15 | 12 |
| 18 states | 59 | 72 | 79 | 59 |
| These 18 states planted 88% of the 2011 winter wheat acreage |
Winter Wheat Condition by Percent (percentages indicated) |
| State | Very Poor | Poor | Fair | Good | Excellent |
| AR | 3 | 6 | 42 | 39 | 10 |
| CA | 0 | 0 | 15 | 45 | 40 |
| CO | 3 | 10 | 40 | 42 | 5 |
| ID | 0 | 1 | 8 | 71 | 20 |
| IL | 1 | 3 | 16 | 58 | 22 |
| IN | 1 | 5 | 24 | 55 | 15 |
| KS | 6 | 16 | 35 | 36 | 7 |
| MI | 2 | 7 | 24 | 53 | 14 |
| MO | 3 | 9 | 25 | 47 | 16 |
| MT | 1 | 9 | 31 | 36 | 23 |
| NE | 2 | 6 | 32 | 52 | 8 |
| NC | 0 | 1 | 18 | 63 | 18 |
| OH | 2 | 10 | 34 | 41 | 13 |
| OK | 1 | 5 | 19 | 54 | 21 |
| OR | 0 | 7 | 22 | 48 | 23 |
| SD | 0 | 4 | 27 | 54 | 15 |
| TX | 11 | 21 | 34 | 26 | 8 |
| WA | 0 | 0 | 11 | 84 | 5 |
| 18 States | 4 | 10 | 28 | 45 | 13 |
| Prev Wk | 5 | 9 | 26 | 46 | 14 |
| Prev Yr | 24 | 21 | 23 | 26 | 6 |
| National crop conditions for selected states are weighted based on 2011 planted acreage |
Spring Wheat:
Spring wheat planting is all but complete and emergence continues ahead of normal. Spring wheat is completely emerged in Minnesota and South Dakota, well ahead of the five-year averages of 55 and 74 percent, respectively, at this time. Overall, 86 percent of the spring wheat crop has emerged, 36 percent ahead of the five-year average.
Spring Wheat Percent Planted (percentages indicated) |
| State | Previous Year | Previous Week | May 20, 2012 | Five-year avg. |
| ID | 85 | 95 | 100 | 93 |
| MN | 68 | 100 | 100 | 82 |
| MT | 46 | 86 | 96 | 79 |
| ND | 29 | 94 | 99 | 69 |
| SD | 88 | 100 | 100 | 95 |
| WA | 91 | 91 | 99 | 97 |
| 6 States | 50 | 94 | 99 | 78 |
| These six states planted 98% of the 2011 spring wheat acreage |
Spring Wheat Percentage Emerged (percentages indicated) |
| State | Previous Year | Previous Week | May 20, 2012 | Five-year avg. |
| ID | 56 | 60 | 77 | 68 |
| MN | 29 | 95 | 100 | 55 |
| MT | 13 | 34 | 63 | 44 |
| ND | 7 | 69 | 90 | 41 |
| SD | 47 | 96 | 100 | 74 |
| WA | 74 | 69 | 83 | 86 |
| 6 States | 21 | 68 | 86 | 50 |
| These six states planted 98% of the 2011 spring wheat acreage |
For more information, visit http://bit.ly/n45mCU.
3. NCI Course Teaches Customers Risk Management
By Casey Chumrau, USW Market Analyst, and Rutger Koekoek, USW Marketing Specialist, Rotterdam
Grain merchandising has changed a lot in the last 10 years, thanks in large part to a significant increase in market volatility. Companies around the world must arm themselves with the tools to manage and mitigate the higher risk that follows higher volatility. In an effort to help international buyers meet this challenge, U.S. Wheat Associates (USW) partnered with the Northern Crops Institute (NCI) to bring eight international buyers to Fargo, ND, last week.
The Advanced Grain Procurement Strategies Short Course addressed risk management tools and marketing strategies that help buyers compete in the international grain business. Led by Dr. William Wilson, professor of agribusiness and applied economics at North Dakota State University, the course covered topics such as hedging and options contracts, basis analysis, U.S. grain logistics, inventory management strategies and discussed the importance of having a risk management policy. An options trading game allowed participants to apply the new hedging strategies, while a tendering game challenged them to think strategically about making tender offers.
The course is important for international customers because it provides thorough insight into the different elements of risk involved in commodity trading and, more importantly, provides some practical tools to reduce that risk.
“Through this course, buyers learned how to use hedging strategies such as options and managing inventory to limit such risk,” according to Chad Weigand, USW assistant regional director, based in Mexico City. “International wheat buyers also became much more familiar with how the U.S. grain marketing system functions. That will help buyers understand the factors contributing to this volatility and help them become much more comfortable purchasing U.S. wheat."
The course, which is the second of two procurement courses offered at NCI, also included a visit to a grain terminal where the international buyers were introduced to the sophisticated grain inspection process and saw firsthand the efficiency and scale of U.S. grain logistics.
“I’m convinced that it is an interesting supplement to the other procurement course that we took before and, therefore, is a good way to consolidate knowledge about the various tools to manage price risk on grain commodities,” said Luis Matos Ramos, administrator at Germen Moagem de Cereais in Portugal. “It is also an opportunity to meet people from different geographies that share the same problems.”
Course participants routinely cite the interaction with grain buyers from many different countries as a major benefit of the short course. The 17 participants last week represented eight countries, including Mexico, Honduras, Trinidad, Poland, Portugal, Japan and the United States. This interaction allows participants to discuss the differences in grain merchandising in their respective countries and how they deal with the associated price risks.
The United States is the world leader in terms of risk management policy and hedging tools. The NCI course makes international wheat customers aware of these tools, enabling them to be more competitive in today’s market and better prepared for further changes in the world grain marketing industry.
4. USW Fosters Continued Expansion of Simply Good Instant Noodles
By Shawn Campbell, USW Assistant Director, West Coast Office
When the late Momofuku Ando invented instant noodles for the Japanese market in 1958, it was probably impossible for him to foresee that his new product would become so popular around the world. Ando was simply trying to create a product that was cheap, nutritious, easy to prepare and had a long shelf life. These attributes turned out to be ideal for many markets, spreading even to the West African nation of Nigeria.
Instant noodles were introduced in Nigeria in 1996 and are now one of its fastest growing food products. That is because Nigeria’s population is in a state of flux. Rapid economic expansion is keeping people on the move with limited time to prepare meals. At the same time, incomes remain quite low, refrigeration is a luxury and food still makes up a large portion of consumer spending. Today, 13 percent of all the wheat consumed in Nigeria is in the form of instant noodles and every year new food companies enter the market.
USW is fostering the growth of the instant noodle market in Nigeria and many other countries. Since 2010, USW has sponsored seven teams of Nigerians to travel to the Wheat Marketing Center (WMC) in Portland, OR, to learn about the technology and techniques needed to make high quality instant noodles. Dr. Gary Hou, WMC technical director and Asian foods specialist, helped start the courses in collaboration with USW representatives based in Cape Town, South Africa, and Lagos, Nigeria.
Just this month another group visited the WMC to learn exactly what it takes to make the high quality instant noodles that the Nigerian market demands. However, this team was a little different from previous groups. Among its six members was a representative from a company in Cameroon, a neighboring country where most of its people have never eaten instant noodles. Like the Nigerian manufacturers, this representative sees an opportunity to expand the popularity of instant noodles, with help from USW, WMC and the U.S. wheat farmers who support those organizations.
To learn more about instant noodle courses, visit http://bit.ly/KByhdt.
5. USW Recognizes Dick Prior's Dedicated Service to U.S. Wheat Producers
By Vince Peterson, USW Vice President of Overseas Operations
While change is just a part of life's natural cadence, it still is not easy to accept that a senior USW colleague has elected to retire and begin the next stage of their life. Dick Prior has served with USW for 24 years, all of them based from Cairo, Egypt, tasked as USW regional vice president for the Middle East, East and North Africa.
Dick's career in international agribusiness projects and wheat market development included stints in Nigeria, Saudi Arabia, as well as nearly 37 consecutive years living and working in Egypt.
On May 14, USW honored Dick and his years of service by hosting a reception and dinner at the home and garden of U.S. Agricultural Minister-Counselor Jonathan Gressel in Maadi, Egypt. Friends, current and former co-workers, business colleagues and the highest level representatives of USW's primary Egyptian government and industry counterparts gathered together to reminisce, laugh and stifle some feigned agony with Dick over stories of his past years of work for USW and his life in Egypt.
USW was also able to use the event as an opportunity for me to introduce Mark Samson, who has relocated from Idaho to take Dick’s position as USW regional vice president. Mark previously served as USW's regional vice president for South Asia. This public “changing of the guards” allowed USW to reinforce our long-term commitment to both the regional marketplace and Egypt.
Everyone at the event had the opportunity to join USW in wishing Dick a prosperous and enjoyable retirement. Dick plans to relocate to his home state of Washington later in June where he has family, but intends to maintain a residence in Egypt and visit frequently. Thank you and best wishes, Dick!
Nomani Nomani, vice chairman of the General Authority for Supply Commodities (GASC), shakes hands with Dick Prior.
6. Importance of Wheat in Food Aid Programs Highlighted at Annual Conference
By Tyler Jameson, USW Assistant Director of Policy
Each year, members of the USW Food Aid Working Group (FAWG) attend the International Food Aid and Development Conference in Kansas City, MO, to demonstrate the U.S. wheat industry’s commitment to global food security. This year, more than 500 government officials and representatives from private voluntary organizations (PVOs) and private sector organizations participated in the conference May 7 to 9. Eight U.S. wheat industry representatives from Idaho, California, Montana, South Dakota, Washington and Kansas were on hand to highlight our crop’s important role in worldwide food aid programs.
A FAWG trade show exhibit at the conference featured the six U.S. wheat classes and helped educate participants on the foods derived from each class. The exhibit also provided information about USW resources available to assist PVOs and governments when implementing their food aid or development projects. Face-to-face dialogue between wheat representatives and the people on the ground working toward alleviating hunger in Africa, Southeast Asia and Latin America produce relationships that will continue beyond the conference.
Wheat is a global crop that provides 20 percent of the world’s calories and is a key part of U.S. food aid programs. Every year, the United States donates nearly one million metric tons of wheat for international development and food aid use in more than a dozen countries. U.S. wheat from a variety of classes are used in emergency feeding situations — like one in the Horn of Africa in the past year — or sold in a food deficit recipient country to provide funds used to conduct a range of important in-country agricultural development programs.
The U.S. wheat industry is committed to the goal of global food security and supports using a wide range of food security programs. This includes President Obama’s Feed the Future initiative as well as traditional, proven food aid and development programs.
U.S. food aid programs are re-authorized roughly every five years as part of the Farm Bill. With a new Farm Bill under development, USW and our partners at the National Association of Wheat Growers are following these important issues closely. We continue working to ensure that a strong network of programs is in place to fight hunger effectively wherever it exists.
7. Wheat Industry News
- Wheat Growers Celebrate USDA’s 150th Anniversary. The U.S. wheat industry congratulated USDA as it celebrated its 150th anniversary on May 15. “From its support for research and export market development to inspecting our food and helping maintain a safety net for farmers, USDA has had a positive and lasting impact on the wheat industry, American agriculture and the lives of every American,” said Randy Suess, a wheat farmer from Colfax, WA, and USW chairman. To read more, visit http://bit.ly/JH50Ru.
- Kansas Wheat and CoBank Invest in K-State Wheat Research. The Kansas Wheat Commission Research Foundation announced that the Farm Credit Associations of Kansas and CoBank have pledged $300,000 in matching funds to support wheat research at Kansas State University. The donated funds will be used to match contributions from Kansas wheat farmers and farmer cooperatives. Proceeds will fund the public wheat breeding program at Kansas State University. For more information, please visit http://bit.ly/LELWHT.
- TransPacific Partnership (TPP) Talks Advance. The Office of the U.S. Trade Representative announced that TPP talks with eight other Asia Pacific countries advanced during the recent negotiation round in Dallas, TX. The next scheduled round of negotiations is July 2 to 10, 2012.
- WMC Advanced Asian Noodle Short Course. The 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. NCI in Fargo, ND, will hold its Rheology of Wheat and Flour Quality Short Course 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 is conducted entirely online. For more information or to register, visit http://www.grains.ksu.edu/igp/.
- Colombia Embassy Launches Updated Website. On May 15, the same day the U.S.-Colombia Free Trade Agreement entered into force, the Embassy of Colombia launched an updated version of its official website aimed at highlighting key information about Colombia, its history and culture, and the longstanding bilateral alliance between Colombia and the United States. For more information, visit www.colombiaemb.org.
- Syngenta and Buck Semillas Enter Wheat Research Agreement. Syngenta will exchange its global germplasm pool with Buck Semilla’s locally adapted genetics to deliver new varieties to Argentinean wheat farmers under a new research agreement. For more information, please visit http://bit.ly/KM4bK2.
- MGEX Announces Revised Expanded Trading Hours. MGEX announced it has received CFTC approval to expand its trading hours. Effective May 20, the trading hours are now 5:00 p.m. to 2:00 p.m. Central Time (CT), Sunday to Friday. For more information, visit http://bit.ly/KPCRq9.
- Ball Named Milling Operative of the Year. Ken Ball, a plant superintendent at Star of the West Milling Co., was recently named Milling Operative of the Year during the 116th annual conference and expo of the International Association of Operative Millers held in Spokane, WA. For more information, please visit http://bit.ly/KM7ZLg.
- Winter Wins Borlaug Award. The Council for Agricultural Science and Technology (CAST) named Dr. Carl Winter, director of the FoodSafe Program and extension food toxicologist in the Department of Food Science and Technology at the University of California–Davis, as the 2012 Borlaug CAST Communication Award recipient. The annual award goes to a specialist who communicates the importance of food and agricultural science to the public, policymakers and the news media. For more information, please visit http://bit.ly/KbfZo2.
- Syngenta Announces New Wheat Grower Programs. Syngenta announced it is supporting the All Aboard Wheat Harvest tour with High Plains Journal and continuing its Voices Across the Plains program. Voices Across the Plains participants share snapshots of their farming operations and management practices via photo, video and blog submissions, as well as in monthly printed feature articles and during bi-weekly radio interviews. For more information, visit http://bit.ly/KbiXsA.
- Condolences to the family of John Howard, IGP senior program manager and former director, who passed away on May 19. John was a long-time USW employee, serving as assistant regional director then regional director in the USW Casablanca Office, assistant regional director in the USW Rotterdam Office, director of programs in the USW Headquarters Office then finally as the USW South Asian regional vice president in Singapore from 1984 to 1996. “John will be missed by his many friends in the wheat industry,” USW President Alan Tracy said. “His expertise and experience helped shape USW’s successful efforts around the world.” For more information, please visit http://bit.ly/KzbeA4.
- Condolences to the family of Stewart Doan, who passed away on May 10. Stewart was an accomplished agricultural journalist and was working as the senior editor at Agri-Pulse. For more information, please visit http://bit.ly/LqZ9Oe.
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