Wheat Letter - February 21, 2013
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 and their customers.” 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. Many Complicated Factors Holding Down Wheat Prices
2. Science-Based Research, Regulation Make Sense for Genetically Modified Crops
3. U.S. Wheat Producers Welcome U.S.-EU Trade Agreement Talks
4. Wheat Leaders Meet at Kansas Wheat Innovation Center
5. U.S. Short Courses and Workshops for Wheat Buyers, Millers, Processors
6. The Passing of Tom Hammond
7. Wheat Industry News
Online Edition: Wheat Letter – February 21, 2013 (http://bit.ly/Xsm7eI)
PDF Edition: (Attached)  Wheat Letter - February 21, 2013.pdf
Crop Quality Information: USW Crop Quality Report (http://bit.ly/ACVDIp)
1. Many Complicated Factors Holding Down Wheat Prices
by Casey Chumrau, USW Market Analyst
The downward trend in wheat futures the last three months has been a bit of a puzzle to a lot of buyers and sellers. While the wheat market fundamentals appear mostly bullish, wheat futures have fallen 20 percent on average since Nov. 8, 2012. Declining world production estimates and crop damaging weather have not supported the markets and the slide stands as a reminder that complicated dynamics are driving today’s wheat market.
“The biggest reason for the drop in wheat futures,” said Mike Krueger of The Money Farm, “has been an exodus of speculative money from the markets in late November and early December due to concerns about the approaching fiscal cliff in the United States.”
Krueger said uncertainty created by the U.S. government’s budget battles overwhelmed any bullish wheat news at the time. Investors and investment funds looking for new opportunities pulled money out of commodities into the stock market, for example, which has performed extremely well the last few months. That erased the incentive to stay in or return to declining commodity markets.
In addition, “no commodity is an island,” said as Jay O’Neil, senior agricultural economist at the International Grains Program. He noted that the corn market is also weighing heavily on wheat. An estimated 42 percent year-over-year drop in export demand for U.S. corn has pressured corn prices and, in turn, the wheat markets. Many times in the last three months, the grain traders I talk to have blamed a daily loss in wheat on weakness in corn futures.
These factors eclipsed apparently bullish wheat fundamentals. For the better part of a year, the story dominating U.S. agricultural news has been the ongoing drought that slashed corn production in 2012 and threatens the 2012/13 wheat crop. However, until last week, that narrative had not changed for many months. O’Neil says a bull market needs new information every day and wheat simply ran out of momentum months ago. The bearish news of the first major winter storms finally provided new information last week.
Many people anticipate that lower U.S. wheat prices will increase demand for U.S. exports. In addition, reports have circulated on and off for months that several major wheat producers are short on exportable supplies. Both factors should support U.S. prices but, again, this a static narrative that no longer influences the market.
The presence of Ukraine, India, Canada and Australia in tender offers suggests they still have wheat to sell. The European Union is expected to draw down stocks to its lowest level on record. In addition, Russia has imported an estimated 1 million metric tons of wheat from Kazakhstan this year.
“Even when we think some suppliers might be sold out, they sell more” Krueger said. Until something new happens to change the scenario, these theoretic factors will not greatly impact wheat futures.
Both Krueger and O’Neil say weather and its impact on winter wheat potential and spring wheat planting decisions will probably drive wheat prices in the next few months. In fact, prices the past two days have dipped even more as a large winter storm brought rain, freezing rain or snow to the central and southern plains where most of the U.S. hard red winter wheat is grown. But analysts caution that general economic uncertainty, especially in the United States and Europe, will continue to influence the commodities markets.
In trying to understand the movements of wheat markets, it is ineffective to simply add up all the factors and determine if they are more bullish or more bearish. Instead, the volatility continues and it may be even more important to ask: What has changed since yesterday?
2. Science-Based Research, Regulation Make Sense for Genetically Modified Crops
by Steve Mercer, USW Vice President of Communications
Food with ingredients that have biotechnology-derived traits have been available for almost 20 years and consumed in literally trillions of meals around the world with no evidence of added harm or illness. Just this week, the International Service for the Acquisition of Agri-Biotech Applications reported that developing countries for the first time have grown more hectares of biotech crops than industrialized countries, “contributing to food security and further alleviating poverty in some of the world’s most vulnerable regions.”
Yet skeptics still question the safety of these food products and the validity of their regulation.
The fact is numerous studies undertaken by government agencies charged with monitoring food safety and conclusions by leading global health and medical organizations agree that biotech crops are equally as safe to eat as conventional crops. In the United States, for example, companies put newly developed biotechnology traits to the test with rigorous safety evaluations that include molecular characterization, toxicological evaluation, allergenicity assessments, compositional analysis and feeding studies. This extensive testing takes five to 10 years and costs tens of millions of dollars.
One scientist just argued that this process "wastes resources and diverts attention from real food safety issues."
Bruce Chassy, a professor emeritus of food science and human nutrition at the University of Illinois at Urbana-Champaign, presented this position at a meeting of the American Association for the Advancement of Science in Boston, MA, Feb. 17. During his talk, Chassy said biotech crops are overregulated in a process that actually hurts the environment, reduces global health and burdens the consumer. Chassy said he believes this is a response not to scientific evidence but instead to a global campaign that disseminates misinformation and fear about these food sources.
Noted British environmentalist Mark Lynas recently made a similar point in a remarkable lecture to the Oxford Farming Conference. In it, he renounced his prior opposition to genetically modified crops based on the potential of this technology to help feed the world and give poor farmers in developing countries a competitive leg up. Lynas ended the lecture with a challenge:
“So my message to the anti-GM lobby … is this. You are entitled to your views. But you must know by now that they are not supported by science. We are coming to a crunch point, and for the sake of both people and the planet, now is the time for you to … let the rest of us get on with feeding the world sustainably.”
Today, no wheat is commercially available in the world that has been modified by single gene transfer, but dedicated, upright public and private scientists around the world are conducting biotech research on wheat. Their goal is to help farmers produce more and better wheat with less impact on our environment. The U.S. wheat industry believes that biotechnology will help the world address nutritional deficiencies and health problems while increasing crop yields to make food more accessible, affordable and better for people everywhere. That is why the industry supports rigorous, but not onerous, scientific study, testing and regulation of biotech crops, including wheat.
“Safety is our top priority and twenty years of experience has proven that the products of modern biotechnology are as safe and healthful as their traditionally developed counterparts,” said USW President Alan Tracy. “We urge the U.S. government and governments everywhere to find ways, within a scientifically sound approval process, to significantly reduce the time and cost of regulatory approval to speed innovation and allow smaller enterprises and university breeding programs to participate in that innovation.”
3. U.S. Wheat Producers Welcome U.S.-EU Trade Agreement Talks
by Tyler Jameson, USW Assistant Director of Policy
U.S. wheat producers welcome President Obama’s announcement last week that the United States will enter into negotiations with the European Union (EU) toward a comprehensive trade and investment agreement, officially called the Transatlantic Trade and Investment Partnership (TTIP). While the name is different, this agreement will be a free trade agreement (FTA) with an ambitious goal to liberalize trade between two economic systems that represent nearly 50 percent of the global economy.
A truly comprehensive FTA between the United States and the EU would increase market access for U.S. wheat producers and lower costs for European importers. Removing some existing non-tariff trade barriers would also provide more stable access to the European market.
EU imports of U.S. wheat on a five-year average are more than 1 million metric tons (MMT), valued at $330 million. For marketing year 2011/12, imports reached just under 1.2 MMT worth $362 million. The largest EU importer is Italy with an average of 438,000 MT over the last five years, followed by Spain at an average of 368,000 MT.
While European imports of U.S. wheat have been relatively consistent, there is room for growth and stability. As part of U.S.-EU negotiations, wheat growers and importers would benefit from the full elimination of tariffs on all U.S. wheat. Full duty elimination would include the margin of preference program on high protein wheat as well as the tariffs on low- and medium-protein wheat.
The TTIP must be a comprehensive and high standard agreement similar to the ongoing Trans-Pacific Partnership negotiations, with plans to address non-tariff trade impediments including sanitary-phytosanitary (SPS) measures that go beyond existing World Trade Organization (WTO) rules. These WTO-plus SPS measures will create increased cooperation and transparency on science-based SPS risk assessments, standards, processes and regulations to further minimize trade disruptions.
U.S. wheat producers look forward to the opportunities free trade between the United States and the EU would bring to producers and customers. We encourage negotiators here and across the Atlantic to reach a truly comprehensive and forward-looking agreement that ensures the greatest possible benefits for their producers and customers.
4. Wheat Leaders Meet at Kansas Wheat Innovation Center
by Bill Spiegel, Kansas Wheat Director of Communication, excerpts from Kansas Wheat Scoop
As Del Wiedemann toured the Kansas Wheat Innovation Center (KWIC) in Manhattan, KS, with his wife, Pat, his enthusiasm could scarcely be contained. From the Center's molecular breeding laboratories, to row-after-row of environmental growth chambers, to the custom-built greenhouse complex, the Innovation Center symbolizes a new future for the nation's wheat industry.
"The word that comes to mind is what teenagers say, and that is 'awesome'," said Wiedeman, a Wakeeney farmer who served on the Kansas Association of Wheat Growers (KAWG) board of directors in the 1980s and was president of the National Association of Wheat Growers in 1990.
Wiedeman was one of nearly 30 past KAWG directors and Kansas Wheat Commissioners (KWC) who visited the KWIC on Feb. 9
"This has been an emotional experience," said Wiedeman of his first look at the KWIC, and the chance to reconnect with many farmers he hadn't seen for years. "With this facility, built by farmers for wheat farmers, it's kind of like coming home again."
Aaron Harries, director of marketing for Kansas Wheat, said the gathering was a unique opportunity for leaders from the two organizations to be reacquainted.
"These are the folks who laid the groundwork for this Innovation Center. While the two organizations have evolved over the years, strong leadership has been a constant. A vision of a home for the Kansas wheat farmer is something that these leaders have shared and it is nice to see their dreams realized," Harries said.
Cooperation between KAWG and the KWC has been vital to the strength of the Kansas wheat industry in the past. That the two groups led the building of the Kansas Wheat Innovation Center is impressive, said Ernie Schlatter, a Lebanon farmer who served on the Kansas Wheat Commission in the 2000s.
"I was amazed to think about what's going to take place here," he said. "To lead wheat research, what could be a better place than right here in Manhattan?"
The tour participants learned how doubled haploid wheat research being conducted at the KWIC will lead to quicker development of wheat varieties suited for Kansas farmers. This research, and future research projects in the Center's 25,000 square feet of laboratory and greenhouse space, has the potential to boost wheat yields and improve efficiency of wheat farmers.
"I would like to see wheat yields increase about 10 bushels per acre; I think that's the goal of all wheat farmers," Schlatter said.
"The wheat industry will play an extremely important role in the future, as it has in the past. We need to do things in a modern way, and be able to position, adjust and innovate what is coming down the road," Wiedeman said. "This facility will help keep the U.S. wheat industry competitive for a long time."
5. U.S. Short Courses and Workshops for Wheat Buyers, Millers, Processors
by Brittney Fund, USW Communications Intern
The U.S. wheat industry is blessed to have respected organizations like the Wheat Marketing Center (WMC) in Portland, OR, Kansas State University’s International Grains Program (IGP) in Manhattan, KS, and the Northern Crops Institute (NCI) in Fargo, ND, that enrich the working experience that buyers, millers and wheat food processors have with the U.S. wheat industry. In addition to customized workshops sponsored by USW, these organizations offer many open short courses and workshops opportunities in 2013 that can help our domestic and overseas customers grow their enterprises.
Following are open courses coming up in the next few months.
Wheat Marketing Center
Asian Noodle Technology and Ingredient Application Short Course – March 26 to 29
This course focuses on improving noodle quality by optimizing flour and functional ingredients.
Flat Bread and Flour Tortilla Technology Short Course – April 16 to 19
This hands-on course teaches processing technology and how to improve the quality of Middle Eastern flat breads and flour tortillas.
International Grain Program
Grain Purchasing Short Course – April 8 to 19
This two-part course focuses on the fundamentals of grain purchasing in part one and grain trading and hedging in part two. Attendees have the option to attend both sections or just one.
Northern Crops Institute
Pasta Production and Technology – April 16 to 18
This course provides fundamental and applied aspects of manufacturing extruded and sheeted pasta products in addition to presenting raw material quality criteria, specifications and processing variables and their impact on final pasta product quality in detail.
Advanced Grain Procurement Strategies – May 6 to 10
The purpose of this short course is to address risk management tools and marketing strategies that assist buyers competing in the international grain business.
Durum Wheat Milling – May 21 to 24
Participants will become more familiar with durum wheat and receive an overview of durum milling. This course effectively meets the needs of newcomers to the durum wheat class industry.
6. The Passing of Tom Hammond
USW was very sad to learn that Columbia Grain President & CEO Thomas J. Hammond passed away from a sudden illness Feb. 14, 2013. Tom is survived by his wife of 33 years, Cheryl Hammond, his son Robert Hammond and his daughter Katherine Hammond. He was 60 years old.
“Over the years, Tom has been a rock-solid partner for U.S. Wheat Associates devoting his personal time and encouraging the same from his staff and the resources of the company to work with USW on scores of market development activities,” said USW Vice President of Overseas Operations Vince Peterson. “Many of USW's overseas associates have fond memories of Tom traveling with our retired associate Paul Dickerson or me to places like Yemen, Egypt, Kenya, Uganda, Costa Rica or Guatemala to open one more door for U.S. wheat farmers. Tom’s partnership has also helped USW place better qualified and more competent associates in our local offices.”
Tom started working in the grain industry right out of Vanderbilt University, moving to Iowa to work for Cook Industries. He was soon transferred to Portland, OR. When Cook sold its grain division to Marubeni Corporation in 1978 and became Columbia Grain, Tom stayed on and was named President & CEO in 2000. Tom was serving as Chairman of the Board for the North American Export Grain Association at the time of his death.
Tom’s passing is a great loss to our industry and many of our customers. We know that you join us in mourning his loss and that your thoughts are with his family. A celebration of Tom’s life for his family, friends and business associates will be held March 9 in Portland. Read more in The Oregonian.
7. Wheat Industry News
· The World Food Program (WFP) is honoring the legacy of the late Mary Chambliss, who managed USDA international food assistance programs for many years, by establishing The Mary Chambliss Memorial Fund for WFP’s school meal programs in communities of greatest need. Click here for more information.
· IAOM announces open enrollment for two new Resident Milling Courses in March 2013 in Cremona, Italy. Together with Ocrim's International School of Milling Technology, IAOM is offering technical milling courses modeled after the courses IAOM offers at the International Grains Program. Click here for more information.
· Folic Acid May Reduce Autism Risk. Women who took folic acid supplements before and during early pregnancy were about 40 percent less likely to have a baby later diagnosed with autism according to a study published last week in the Journal of the American Medical Association. In many countries, wheat flour is enriched with folic acid, a B vitamin, and the Flour Fortification Initiative has shown significant reductions in neural tube birth defects from this practice. The latest study indicates additional supplements of folic acid may also help prevent autistic spectrum disorders. Click here to read more.
· International Baking Industry Exhibition. Registration is now open for this event in Las Vegas, NV, October 2013 where “more than 20,000 baking professionals from every segment of the grain-based market will converge for the world’s largest, most comprehensive trade event of the year. IBIE is jointly sponsored by the American Bakers Association, BEMA and the Retail Bakers of America. Click here for more information and to register.
· 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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