Wheat Letter - September 13, 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. USDA Makes Few Changes to World Wheat Supply and Demand Outlook
2. Russian Wheat Prices Have to Move Higher
3. Trade Policy Discussions Cover the Globe
4. Treat Your Wheat…With the Respect It Deserves in Your Diet
5. USW Thanks Pansy Lam for 31 Years of Service
6. Neal Fisher Wins NDSU Alumni Award
7. Wheat Industry News
Online Edition: Wheat Letter – September 13, 2012 (http://bit.ly/RN0zuO)
PDF Edition: see attached  Wheat Letter - September 13, 2012.pdf
Crop Quality Information: USW Harvest Report (http://bit.ly/nf7FpE)
1. USDA Makes Few Changes to World Wheat Supply and Demand Outlook
By Casey Chumrau, USW Market Analyst
Four months into the marketing year and with U.S. spring crop harvest entering its final stages, the U.S. Department of Agriculture (USDA) made minimal changes to the World Agricultural Supply and Demand Estimates (WASDE) report in its monthly release Sept. 12. With very few changes elsewhere, eyes remain on Russia as industry players try to determine what falling production estimates will mean for the rest of the world market. (See story below.)
The largest change was a 4.10 million metric tons (MMT) decrease in estimated 2012/13 global wheat production. The new estimate of 659 MMT would be 5 percent below last year’s record 695 MMT but just 1 percent below the five-year average. A 1.0 MMT increase to 199 MMT in carry in stocks slightly offset the production decline and put total world supply at 857 MMT, compared to 893 MMT in 2011/12. Estimated global demand declined 2.59 MMT to 681 MMT, including a 2.0 MMT reduction in wheat used for feed. Estimated feed use of 132 MMT is significantly lower than the record 144 MMT fed in 2011/12 when corn and wheat prices were near parity.
The only significant country-specific changes in WASDE for wheat this month were for Russia, which accounted for most of the global production decrease. USDA lowered estimated Russian wheat production by 4.0 MMT to 39.0 MMT. The revised estimate matched indications by Russian officials and private analysts last week that Russian production will likely fall short of the 41.5 MMT produced in 2010/11, which led Russia to impose a yearlong export ban. USDA left Russian exports unchanged at 8.0 MMT, but lowered estimated consumption by 1.70 MMT to 35.5 MMT. Russian officials said higher wheat prices have depressed domestic demand. Officials also indicated the Russian government would import wheat, if needed, to protect domestic supply. USDA increased estimated Russian imports from 200,000 MT to 500,000 MT, which would be the most since 2006/07 when imports reached 928,000 MT. USDA puts Russian carry out stocks at 6.44 MMT, down from 8.47 MMT last month and 40 percent lower than the five-year average.
The balance sheet for the rest of the major wheat exporters remained mostly unchanged. The only exception is estimated wheat exports from Ukraine decreased 2.0 MMT to 4.0 MMT. USDA did increase its estimate for Ukraine production by 500,000 MT, but that pushed the total production estimate up to 15.5 MMT, a level that is 30 percent less than last year and 22 percent below the five-year average. According to reports out of Ukraine, the government has reached an agreement to cut off exports at 4.0 MMT.
U.S. wheat export estimates did not change but the by-class export estimates shifted some. Estimated hard red winter (HRW) exports decreased 650,000 MT to 15.7 MMT, while expected hard red spring (HRS) exports jumped 410,000 MT to 6.53 MMT and estimated white wheat exports increased 270,000 MT to 4.62 MMT. Total expected U.S. exports remained at 32.7 MMT.
2. Russian Wheat Prices Have to Move Higher
By Shawn Campbell, USW-West Coast Assistant Director
On Tuesday, Sept. 11, Russian Deputy Prime Minister Arkady Dvorkovich reiterated earlier statements that, “Russia will not limit grain exports, even if its exportable surplus is exhausted.” The announcement, while commendable in light of Russia’s recent accession to the World Trade Organization, may not be practical. The very next day, USDA lowered its expectations for Russian wheat production in 2012/13 to 39.0 MMT; 30.6 percent lower than 2011/12, the lowest production level in nine years, and 2.5 MMT lower than the drought ravaged crop in 2010/11. The cut to the USDA’s estimate for Russian wheat production brought it more in line with an earlier prediction of 38.0 MMT made by the analyst group SovEcon.
Russia’s wheat exports are primarily sourced from its Southern district, while its own domestic consumption is mainly sourced from the country’s interior (Central, Volga, Urals and Siberia districts). When supplies in the interior are unable to meet domestic demand, wheat can be moved north from the Southern district. This year, SovEcon is estimating that the Russian interior will produce 22.8 MMT of wheat, well short of the 35.5 MMT of domestic consumption estimated by USDA.
Some of this 12.7 MMT shortfall will be covered by stocks on hand. At the beginning of 2012/13, Russia had 10.4 MMT of wheat in stocks, 5.0 MMT of which were held in government-controlled intervention stocks. The USDA is currently predicting that 4.0 MMT of these stocks will be used to make up for the shortfall in production. It is possible that this number could go higher, but there are sure to be consequences, such as higher prices, for drawing down ending stocks too low.
Imports are another option to make up for part of the shortfall. USDA currently estimates Russia will import 0.5 MMT of wheat this marketing year, while the Institute for Agricultural Market Studies (IKAR) estimates that imports could reach as high as 2.5 MMT. However, production in Ukraine and Kazakhstan, the two closest sources of imported wheat for Russia, has been hit by the same drought that damaged Russia’s own crop. Wheat production in Ukraine is expected to fall 29.9 percent lower than last year. Production in Kazakhstan is expected to fall 53.8 percent, but Kazakhstan will export some wheat this year.
Whatever portion of the expected shortfall that cannot be met by stocks and imports will have to be brought north from the export-oriented Southern district. SovEcon currently estimates that the Southern district will produce 15.2 MMT of wheat. If USDA estimates for stocks usage and imports turn out to be correct, then 8.2 MMT of this production will have to be moved north to avoid a shortage in the domestic market. SovEcon is estimating that Russian grain traders have already exported 4.6 MMT of wheat in the first three months of the 2012/13, 60.0 percent of the USDA estimate of 8.0 MMT for the entire marketing year. If the domestic market wants to avoid shortages, and the Russian government holds to its promise of not implementing grain export restrictions, then is for Russian wheat prices to rise until they discourage exports. If that does not happen soon there will be growing pressure for the government to protect domestic users.
3. Trade Policy Discussions Cover the Globe
By Tyler Jameson, USW Assistant Director of Policy
Here in the United States, work continues to promote trade and food security, even though Washington has been relatively quiet with Congress out of town for the past month and with much attention paid to the U.S. presidential campaigns.
Last week, leaders gathered in Vladivostok, Russia, for the Asia Pacific Economic Cooperation (APEC) summit. One major focus was free trade and food security. The leaders reiterated that free trade is vital to food security and continued their commitment to sustainable development. Members also agreed to lower tariffs on “green” goods such as wind turbines. APEC’s members represent more than 50 percent of world gross domestic product and 40 percent of world trade as well as a growing regional market for wheat.
USW agrees with APEC that trade restrictions work against countries trying to achieve food security and was pleased to hear that the Russian government plans to keep the door to its wheat open for exports, at least at this time. Unfortunately, French President François Hollande has launched a global campaign to win support for creating strategic stockpiles of agricultural commodities as “protection against [market] volatility.”
“A government-owned stockpile would increase market instability – just what a food insecure country doesn’t need – by adding yet another exogenous variable to grain prices,” said USW President Alan Tracy. “It makes far more sense to let the market send the right signals to all players than to have the price moving over speculation about what stockpile management decisions governments may or may not take.”
While gathered in Vladivostok for the APEC meeting, Trans-Pacific Partnership (TPP) trade ministers released a statement hailing progress on the agreement and called for negotiators to finish their work as quickly as possible. To that end, TPP negotiators are currently meeting in Leesburg, VA, for the 14th round of negotiations. Negotiations were originally expected to be completed before 2013 but they will continue on numerous outstanding issues and the pending addition of Canada and Mexico to the talks. U.S. wheat producers strongly support this regional agreement as a catalyst for lowering barriers to trade for U.S. wheat and boosting economic growth in the region.
4. Treat Your Wheat…With the Respect It Deserves in Your Diet
No matter where you live, no matter your income, no matter your culture – we all share the biological need to provide our bodies with healthy, nutritious food. And, according to the United Nations, 20 percent of our world’s calories come from wheat products and 20 percent of the protein consumed by people in developing countries also comes from wheat foods. That’s why wheat researchers across the globe are working on developing wheat varieties that stand up to tough environmental challenges like drought and frost, utilize less natural resources like water and provide even more nutritional value.
Yet, in the United States, a growing number of Americans have been duped – including celebrities like singer Lady Gaga and Fox News host Bill O’Reilly – into believing recent claims that wheat not only is no longer necessary for strong, healthy bodies, but also that it has nefariously been turned into a “chronic poison” that causes addictive eating habits and obesity.
Touting his book, “Wheat Belly: Lose the Wheat Lose the Weight,” on CBS, cardiologist Dr. William Davis claimed that the semi-dwarf varieties of wheat developed by Dr. Norman Borlaug during the Green Revolution have increased levels of a protein called gliadin that cause Americans today to eat an extra 440 calories a day because the peptides that form as gliadin breaks down stimulate hunger. Some nutritionists appearing on programs like “The View” are supporting this claim that wheat is extremely detrimental to human health.
Dr. Glenn Gaesser, Arizona State University professor and director of the Healthy Lifestyles Research Center, rebuked gluten-free proponents in the Capital Press, saying, “There's the lingering perception there that carbs are somehow bad, grains in particular. Much of that is based on conjecture; it's nonsense. It claims that wheat is the cause of all our problems, that it stimulates appetite, but that's just not true.”
Dr. Brett Carver, wheat breeder at Oklahoma State University and chair of the National Wheat Improvement Committee, also rebuked these claims in an interview with the Oklahoma Farm Report. He reported that modern wheat breeding has not changed protein composition or protein amounts of the wheat, further stating that there is not sufficient evidence to claim the protein itself has changed. Additionally, a study published in the July 1, 2012, edition of the Journal of Nutrition examined 45 other studies and 21 randomized-controlled trials and reported that individuals who regularly consumed whole grains, versus those who never or rarely consumed whole grains, had a 26 percent lower risk of Type II diabetes, a 21 percent lower risk of cardiovascular disease and consistently had less weight gain during an eight to 13 year period.
According to the Wheat Foods Council’s September issue of Kernels, about 1 percent of the population has celiac disease, and another estimated 6 percent suffer from gluten sensitivity. For these people, gluten-free products are medically necessary. But this relatively small population alone does not account for the fact that in the United States, the gluten-free market grew 30 percent each year between 2006 and 2010, according to a 2011 report by Packaged Facts. In fact, according to a July study from the American Journal of Gastroenterology, 1.6 million people in the United States are on a gluten-free diet, even though they have not been diagnosed with celiac disease.
So, what are these fad diet followers missing out on? Nothing but extra calories, according to Dr. Davis. However, a recent article in the Journal of the Academy of Nutrition and Dietetics reported that average, healthy adults receive no health benefits at all from following a gluten-free diet. Gaesser’s paper “Gluten-Free Diet: Imprudent Dietary Advice for the General Population,” that reviewed all the published scientific studies concluded that gluten-free diets are not an effective weight-loss method and he even found the converse to be true – gluten-free products often contain more added fats and sugars than gluten-containing versions.
In reality, gluten-free dieters often don’t receive enough of some vital nutrients that are essential to proper body function, including fiber, iron, B vitamins, antioxidants and folic acid.
According to the Wheat Foods Council, women of child-bearing age, in particular, need the folic acid provided in enriched grains because they have played a vital role in preventing neural tube defects. The Flour Fortification Initiative works worldwide to encourage countries to fortify their wheat with important vitamins or minerals. As of August 2012, 74 countries have either voluntary or mandatory fortification requirements. Fortifying flour with folic acid protects 60 babies a day across the globe from neural tube defects. According to Kernels, since folic acid fortification was required in enriched grain in 1968, these types of defects, like spina bifida, have decreased by 36 percent in the United States alone. The Centers for Disease Control and Prevention acknowledged that enriched grains, not vitamin supplements, are the number one source of folic acid for women of child bearing age and named this achievement in May 2011 as one of the top 10 public health achievements of the last decade.
Even more impressive is the impact of the development of the same semi-dwarf wheat that Dr. Davis calls poison. Semi-dwarf wheat was developed by Dr. Borlaug, known as the father of the Green Revolution and the scientist who saved millions of people from starvation.
When Dr. Borlaug started his revolutionary work in the 1940s in Mexico, crops were plagued by disease and often could not yield even enough to help farmers feed themselves. Through conventional crossbreeding, he and his team developed new varieties of wheat that could resist disease like rust and had shorter, stiffer stems that could support a larger head of wheat – allowing more wheat to be grown per acre of land. The wheat he developed provided food for millions around the world. At the time of his death in 2009, the New York Times reported that half of the world’s population went to bed at night having consumed grain descended from Borlaug’s high-yielding varieties. That same article named Dr. Borlaug “the plant scientist who did more than anyone else in the 20th century to teach the world to feed itself.”
Today, wheat consumption around the world continues to increase because people recognize its nutritional value. At USW, we work in more than 100 countries demonstrating how wheat grown in the United States provides better quality flour for the world’s needs. In the Philippines, we work with flour millers to promote bread consumption in a campaign called “Mabuhay Tinapay” or “Live Better with Bread!” In South Korea, Taiwan and China, we are working with government officials, millers and bakers to define and promote consumption of nutritious whole wheat products. In Mexico, our staff even goes to local schools to help elementary school children understand where their bread comes from and why it is good for them.
We believe in the wheat grown by American farmers every year. And, we believe that through modern technology wheat will be even better in the future – for the farmer and for the consumer. So no matter whether you eat flat bread, steamed buns, noodles or bagels, know that the U.S. wheat used in these products will provide your body with the healthy nutrients it needs and the great quality you deserve.
5. USW Thanks Pansy Lam for 31 Years of Service
One remarkable fact about USW is that so many of our colleagues have worked for the organization for more than 25 years. Sadly, USW will lose one of those veterans on Sept. 30 when Pansy Lam, associate regional director for the People’s Republic of China/Hong Kong, retires after 31 years of service to USW and U.S. wheat farmers.
Pansy Lam was born and raised in Hong Kong, but she was already working with Americans at the U.S. Consulate in Hong Kong when former USW Regional Vice President Fred Schneiter hired her in 1981 as a part-time assistant.
“Since then, Pansy has been integral to almost all of our accomplishments in this region,” said USW Regional Vice President Matt Weimar.
For example, Pansy helped coordinate the purchase and installation of the first instant noodle line in China that demonstrated the potential of instant noodles and prompted construction of hundreds of new lines throughout China. She also managed many tasks in the development of a model flour mill that U.S. wheat producers donated to China in 1983. In 1984, Pansy’s work as a bridge between U.S. wheat producers, USW and the Guangdong Grain Bureau played a key role in the development of the Sino America Baking School in Guangzhou that now graduates 500 bakers each course year. Over the past three decades, she has assisted with dozens of Crop Quality Seminars and board team delegations and helped an almost countless number of industry officials prepare for visits to the United States to learn firsthand about the value of purchasing premium-quality U.S. wheat.
"The first time I visited a wheat farm in North Dakota with representatives from the Guangdong Grain Bureau, I saw the huge wheat farming areas and large harvester equipment, all managed by only a few operators,” Pansy said. “That was so impressive and made me feel good about working for such a productive group of people.”
Perhaps above all, Pansy’s colleagues and customers will miss her reassuring presence in our work.
“I had the good fortune to meet and travel with Pansy on a board team visit to Hong Kong and Guangdong Province,” said USW Vice President of Communications Steve Mercer. “She could not have been more warm and gracious to us or more dignified and efficient with our customers.”
“We will all miss Pansy,” Weimar said, “but we all wish her much happiness in the future.”
6. Neal Fisher Wins NDSU Alumni Award
Many wheat buyers, flour millers and bakers from around the world have had the chance to meet Neal Fisher, administrator of the North Dakota Wheat Commission, over the years. USW appreciates Fisher’s hard work providing the proof that the United States has the most reliably supply of high quality wheat in the world, and his efforts are also being recognized in his home state.
North Dakota State University has awarded Fisher the 2012 Harvest Bowl Agribusiness Award. The Harvest Bowl Agribusiness Award recognizes one individual each year who is distinguished in the field of agriculture and business in North Dakota and beyond.
Fisher has worked for the North Dakota Wheat Commission for 33 years, starting in 1978 as a marketing specialist. He then became the deputy administrator in 1982 and was named administrator in 1998.
In his position as administrator, Fisher implements producer-funded programs aimed at increasing the worldwide use of the state’s HRS, durum and other wheat classes. The North Dakota Wheat Commission has been an active member of USW for more than 50 years and Fisher has traveled globally presenting information on supply and demand, wheat quality and other topics.
Fisher earned both his bachelor’s and master’s degrees in agricultural economics from North Dakota State University. He maintains his interest in the family farming and ranching operation near Tappen, ND, where his son, Josh, is the principal owner and operator.
Fisher will be recognized during the 39th annual Harvest Bowl program at North Dakota State University in Fargo, ND, on Oct. 26 and 27. For more information on Fisher and the Harvest Bowl Agribusiness Award, please visit http://bit.ly/QjuMxt.
7. Wheat Industry News
- Kansas Wheat Launches New Site for Home Bakers. A new website called "America's Breadbasket" creates an online community where home bakers can share recipes, baking tips and more, plus gain access to the nutrition information and educational resources of the Kansas Wheat Commission (KWC). In the website's blog, "Daily Bread," industry experts address topics ranging from nutrition trends and fads, new recipes, kitchen tips and more. Also, users can ask questions about all things related to wheat food and wheat flour of the KWC's nutrition educators. For more information, visit http://bit.ly/PbW2P7.
- Bayer Acquires French Wheat Breeding Station. Bayer CropScience has acquired a wheat breeding station in France from the privately-owned company RAGT Semences S.A.S. Breeders are developing new varieties with improved tolerance to abiotic stresses like drought and heat as well as with an improved resistance to fungal diseases. For more information, visit http://bit.ly/RI8dGX.
- NCI Grain Procurement Short Course. The Northern Crops Institute (NCI) in Fargo, ND, will hold its Grain Procurement Management for Importers Course Sept. 17 to 26. For more information or to register, visit http://www.northern-crops.com.
- WMC Whole Grain Products Short Course. The Wheat Marketing Center (WMC) in Portland, OR, will hold its Whole Grain Products Short Course Dec. 10 to 14. For more information or to register, visit http://www.wmcinc.org.
- IGP Buhler Milling Courses. The International Grains Program (IGP) in Manhattan, KS, will hold its Buhler-KSU Executive Milling Course in English Nov. 5 to 9. For more information or to register, visit http://www.grains.ksu.edu/igp/.
- Condolences to the family of Michael Bouris. Michael was a former USW board director and an active member of the California Wheat Commission. For more information, visit http://bit.ly/SbKPMW.
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