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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.” USW activities are funded by producer checkoff dollars managed by 19 state wheat commissions and USDA Foreign Agricultural Service cost-share programs. For more information, visit www.uswheat.org or contact your state wheat commission. Stakeholders may reprint original articles from Wheat Letter with source attribution. Click here to subscribe or unsubscribe to Wheat Letter.

In This Issue:
1. Global Wheat Trade Expected to Set New Record
2. U.S. Industry Stays Engaged in Food Aid, Development Conversation
3. Wheat Buyers Conference Reflects Loyalty and Customer Preference
4. Overseas Buyers Have a Voice in the U.S. Wheat Supply Chain
5. U.S. Farmers Produce Another Excellent, Sound HRS Crop
6. Wheat Industry News

PDF Edition: (See attached file: Wheat Letter - October 20, 2016.pdf) Wheat Letter – October 20, 2016

USW Crop Quality Reports: http://www.uswheat.org/cropQuality


1. Global Wheat Trade Expected to Set New Record
By Stephanie Bryant-Erdmann, USW Market Analyst

A fact that may be undervalued in a market fixed on supply news is that trade volume in wheat, the world’s most traded grain, is on a steady increase. In its latest round of estimates, USDA now expects 2016/17 world wheat trade will reach a record large 175 million metric tons (MMT) (6.42 billion bushels). Along with rising global demand and a potential shortfall of milling quality supplies, wheat buyers would do well to watch for any price effects and act quickly to cover their needs at the best value.

In its October World Agricultural Supply and Demand Estimates (WASDE) report, USDA noted that, if realized, world wheat trade would be 9 percent greater than the 5-year average of 160 MMT (5.86 billion bushels). The trade volume increase represents availability of large supplies and the continued growth of global wheat consumption. USDA expects total consumption will increase for the fourth consecutive year and reach a record 731 MMT (26.8 billion bushels), compared to the 5-year average of 694 MMT (25.5 billion bushels). That includes estimated feed wheat demand growing 6 percent to a record high 145 MMT (5.32 billion bushels). Rain increased winter wheat yields but also hurt milling quality in many production areas. In turn, lower prices are making feed wheat more competitive with corn.

USDA expects 2016/17 world wheat production to reach 744 MMT (27.3 billion bushels), up 1 percent from 735 MMT (27.0 billion bushels) in 2015/16 and 5 percent above the 5-year average. If realized, it would be the fourth consecutive year of record world production. USDA projects production will increase in six of the eight major exporting countries. Record-large world carry-in stocks add to the global surplus, resulting in the largest estimated world wheat supply on record, of which China is now expected to hold 46 percent by the end of the marketing year. USDA estimates 2016/17 world carry-in stocks at 240 MMT (8.80 billion bushels), up 11 percent from last year and greater than the 5-year average of 196 MMT (7.22 billion bushels). Total world supply will reach a projected 984 MMT (36.1 billion bushels), up 24.1 MMT from the record set in 2015/16 and 9 percent above the 5-year average of 903 MMT (33.2 billion bushels).

The ample world supply will help meet strong global wheat demand. According to USDA’s trade forecast, the U.S. will end 2016/17 with a 15 percent market share in the world wheat trade. This is up from the 2015/16 figure of 12 percent, the lowest on record, but still below the 5-year average of 17 percent. USDA now expects U.S. wheat exports to reach 26.5 MMT, up 26 percent year over year.

USDA predicts the majority of top U.S. wheat customers will import about the same amount or slightly more wheat in 2016/17 than in the prior year. Japan, the top U.S. customer over a 5-year period, will import an estimated 5.80 MMT (213 million bushels), up 1 percent from 2015/16 but 5 percent less than the 5-year average. USDA expects imports by Mexico will decline 4 percent year over year to 4.60 MMT (169 million bushels), but imports to the Philippines will increase by 3 percent to 5.00 MMT (184 million bushels). Imports by Nigeria are expected to remain unchanged year over year, but are up 3 percent from the 5-year average. Korean imports will increase 13 percent to 5.00 MMT (184 million bushels).

USDA expects Brazil to import 11 percent less wheat in 2016/17, but the origin of the Brazilian imports will also change. Argentina, Brazil’s top supplier will export 12 percent less wheat in 2016/17, so Brazil will need to shift to other origins. Year to date U.S. wheat exports to Brazil total 995,000 metric tons (MT), nearly double total U.S. sales to Brazil in 2015/16.

USDA also expects India and Morocco to import more wheat after drought hurt their domestic production. India is expected to import the largest wheat volume in a decade this year after back to back years of drought. USDA estimates Indian wheat imports will grow to 3 MMT in 2016/17, compared to the 5-year average of 116,000 MT. India is the second largest producer and consumer of wheat in the world behind China, producing an average 91.5 MMT of wheat each year. India’s beginning stocks of 14.5 MMT are 23 percent below the 5-year average of 18.9 MMT. However, Indian wheat production rebounded 4 percent year over year to 90.0 MMT, which is still 1.5 MMT below the 5-year average.

According to USDA, Moroccan wheat production will fall 66 percent year over year to 2.73 MMT, compared to the 5-year average of 6 MMT. Consequently, Moroccan’s imports are expected to reach 5.00 MMT in 2016/17, an increase of 13 percent year over year and 25 percent greater than the 5-year average.

While global wheat supplies are large, the quantity of milling quality wheat is tightening as discussed in the Aug. 25 Wheat Letter. Continued growth in wheat trade means increased competition for that smaller, high-quality wheat supply, a market dynamic that could push prices higher. Your local USW representative is ready to help ensure you are getting the wheat you need at the greatest possible value.


2. U.S. Industry Stays Engaged in Food Aid, Development Conversation
By Elizabeth Westendorf, USW Policy Specialist

This year, for the first time, USDA and USAID held their International Food Assistance and Food Security Conference in conjunction with the 2016 World Food Prize event in Des Moines, IA, the week of Oct. 10. The two-day event brought together people from commodity organizations, NGOs, government and academic institutions to discuss future food aid and development programming and opportunities for improvement. Representatives from USW, the National Association of Wheat Growers (NAWG) and from wheat commissions in Oklahoma, Nebraska and South Dakota attended the conference and hosted an exhibit detailing the importance of wheat to food aid and food security.

As part of the conference program, two representatives from the Jordanian government talked about their important work with wheat monetization through USDA’s Food for Progress program. Monetization is a process that funds development projects with the sale of donated U.S. commodities. The proceeds from a 2012 wheat monetization program went to Jordan’s Al-Karak Dam project, which is nearing completion. The proceeds from a second wheat monetization in 2015 were split between 10 different projects that focus on water conservation amid the country’s rising refugee populations.

Conferences like this one allow USW to connect with implementers of food aid programs and discuss how best to improve communication and commodity use efficiency. Wheat makes up, on average, 40 percent of all in-kind U.S. food aid. In marketing year 2015/16, 710,100 MT of wheat were exported for donation in food aid programs, including 410,000 MT to Ethiopia alone to help prevent famine during a historic drought. That is why U.S. wheat farmers and the organizations that represent them remain dedicated to ensuring that these programs work well and continue to be a focus for the U.S. government.

The USDA-USAID conference preceded the annual World Food Prize event that honors individuals improving the quality, quantity or availability of food in the world. This year’s prize went to four scientists for their work in biofortification — Dr. Maria Andrade, Dr. Robert Mwanga, Dr. Jan Low, and Dr. Howarth Bouis. Biofortification is the use of breeding to increase the critical vitamin and micronutrient content in staple crops. The busy week included the annual Borlaug Dialogue International Symposium in which 1,200 leaders in global food security discussed biofortification, the role of women in economic development, and the importance of food security to national security, among other topics.

Both the USDA-USAID conference and the Borlaug Dialogue featured trade prominently. USDA Foreign Agricultural Service Administrator Phil Karsting spoke at the USDA-USAID conference, where he argued that stakeholders who care about human rights and development should also care about Trans-Pacific Partnership (TPP) and enhancing free trade. U.S. Secretary of Agriculture Tom Vilsack spoke at the Borlaug Dialogue and focused on the importance of trade, and TPP specifically, to food security.

USW extends its sincerest congratulations to this year’s World Food Prize Laureates and its thanks to USDA and USAID for holding the Food Assistance and Food Security Conference. We appreciate the opportunity to participate in both of these important events because wheat is so vital to food security around the world. As Dr. Norman Borlaug, wheat scientist, Nobel Peace Prize Laureate, and World Food Prize founder, said, “If you desire peace, cultivate justice, but at the same time cultivate the fields to produce more bread; otherwise there will be no peace.”


3. Wheat Buyers Conference Reflects Loyalty and Customer Preference

Many of the buyers in East and North Asia had the opportunity to get an in-depth review of the new wheat crop at USW’s North Asia Marketing Conference, Oct. 9 to 11, 2016, in Guam. USW and five state wheat commissions hosted approximately 87 flour millers and other buyers from Japan, Korea and Taiwan to promote the reliability of the U.S. wheat marketing system and share a range of emerging market factors.

“Relationships are particularly important in these three markets. This conference is an avenue to broaden our contact with East and North Asian millers and demonstrate our commitment to work on their behalf,” said USW President Alan Tracy, who spoke at the conference about shifts in world wheat trade. “When our customers see and understand that supporting their interests is a key part of our mission, it generates trust, which in turn facilitates all of our work with them.”

From wheat class and quality updates to a global financial outlook, retail trends and transportation challenges, the conference allowed USW to address topics that are top of mind for customers and U.S. wheat farmers. One topic that stood out to many customers, led by USW Vice President of Policy Dalton Henry, focused on innovations in plant breeding.

“Being able to learn about customer concerns and explain benefits from new technologies being used in plant breeding is a key part of the role USW plays,” said Henry.

An important aspect of the conference, said USW Regional Vice President Matt Weimar, is the opportunity for participants to address concerns they have in their own markets and discuss how the U.S. wheat industry can be a partner in finding solutions. While these three markets are historically consistent buyers, USW recognizes that all customers care about where the U.S. wheat market is headed and that the wheat is consistently dependable.

“Taiwan’s millers are quality buyers, who always purchase grade No. 1 U.S. wheat,” said USW Country Director Ron Lu from the USW Taipei Office. “When millers start discussing whether they should purchase lower quality, cheaper wheat to save on cost, the information shared at events like NAMC encourages them to continue purchasing high quality wheat from the United States.”

The conference also allowed USW to provide updates on future market impacts such as the upcoming closure on the Columbia and Snake River System.

“I highlighted that rail loading capacity has increased with the construction of two new shuttle-train loading facilities in eastern Washington — increasing the amount of wheat that can be moved to export elevators when the systems locks and dams are closed,” said USW Vice President and West Coast Office Director Steve Wirsching. “USW is recommending that overseas buyers increase soft white (SW) purchases before the closure, and buy more spring and hard red winter wheat when the river is closed because wheat in those classes moves to export elevators mainly by train.”

A vital part of USW’s marketing efforts, the in depth engagement at conferences such as NAMC, ultimately reflects on the loyalty and preference customers have for U.S. wheat.

“I relish the opportunity to meet with the end users who continue to be loyal customers of U.S. wheat,” said USW Chairman Jason Scott who farms on Maryland’s Eastern Shore. “It is great for the importers to be able to meet with the farmers that are growing their wheat and, as one of those farmers, it is also important for me to meet the people using my products and address any concerns they may have about our wheat.”

USW wants to thank these conference sponsors: Washington Grain Commission, Oregon Wheat Commission, Idaho Wheat Commission, Montana Wheat and Barley Committee, North Dakota Wheat Commission and USDA’s Foreign Agricultural Service.


4. Overseas Buyers Have a Voice in the U.S. Wheat Supply Chain

The U.S. wheat industry takes pride in its products and position as the world’s most reliable choice. It is very important that both our domestic and export customers can depend on the integrity of our supply chain, the quality of U.S. wheat and our unmatched reliability as a supplier. One of the critical foundations is the unique inspection and certification available to importers from the Federal Grain Inspection Service (FGIS), an agency that is part of the USDA Grain Inspection, Stockyards and Packers Administration (GIPSA). Forty years ago this year, an act of Congress established FGIS and required either federal or state agency grain inspections for export. Read more here: “U.S. Wheat Industry Helps Celebrate 100 Years of Grain Standards.”

“No other wheat exporter comes close in terms of the neutral, detailed, federally supervised quality assurance of the U.S. commercial transaction itself,” USW Regional Technical Director Peter Lloyd has often told customers. “As far as commercially possible, FGIS inspection and certification ensures that what the buyer specifies, the buyer gets.”

Even more reassuring is the fact that organizations focused on helping overseas wheat buyers get the most value from U.S. wheat are actively involved in advising the federal agencies responsible for grain inspection. To help GIPSA and FGIS better meet the needs of “customers who operate in a dynamic and changing marketplace,” representatives from all segments of the U.S. grain industry are appointed by the Secretary of Agriculture to serve on a Grain Inspection Advisory Committee.

USW Vice President and West Coast Office Director Steve Wirsching has served on the Advisory Committee for several years and for the past year has served as its chairperson. Another friend of world wheat buyers, Janice Cooper, managing director of the Wheat Marketing Center in Portland OR, also serves on the Advisory Committee and, like Wirsching, was elected by committee members to serve as its chairperson. Cooper first joined the committee while she served as executive director of the California Wheat Commission.

“With a focus on providing the highest level of service in the most cost effective way, each committee member can bring issues or opportunities to the table,” Wirsching said. “If the committee agrees that action is needed, they pass resolutions that FGIS acts on and then shares progress with the committee. So we really do have the chance to represent the interests of our customers as members of the Advisory Committee.”

For example, Wirsching said FGIS now uses more precise, quantitative detection tests to measure mycotoxin levels because USW brought evidence to the committee that some overseas wheat buyers needed more accurate data. Based on another idea USW shared in the Advisory Committee, FGIS now places FGIS personnel on regular overseas assignments to help USDA’s Foreign Agricultural Service and organizations like USW provide technical training for grain buyers.

“This is my last meeting and before Janice Cooper takes over as chairperson in May 2017,” Wirsching said. “Janice is well respected and her judgement is trusted to help guide the committee on its mission to help ensure the quality and integrity of the grain marketing system.”

“This committee helps the grain export industry fully engage in the inspection and certification process that is so important to buyers,” Cooper said. “We have planned the Advisory Committee’s fall meeting here in Portland specifically to do that. The committee members will tour an export elevator and watch how wheat is inspected first hand, and they will have a chance to meet with the Wheat Marketing Center board of directors. This will also provide a better understanding of the depth of FGIS’s work, including how much effort is made to maintain integrity in its operations.”

USW believes that it is important to stay actively involved in all phases of the U.S. wheat supply chain to provide a voice representing the interests of the world’s wheat buyers. This helps increase the buyers’ confidence in the export system and adds value to the high quality wheat our farmers produce.


5. U.S. Farmers Produce Another Excellent, Sound HRS Crop

The 2016/17 U.S. hard red spring (HRS) wheat crop offers buyers many positive attributes. You will find high grades and protein levels, little to no DON in most of the crop and good functional performance, especially for dough strength, absorption and bake quality. Differences in growing season environments created some variance in protein levels and functional performance among cropping regions, but key parameters such as dough stability, absorption and loaf volume all tended to improve with protein content in 2016. The entire HRS crop quality report, including regional data, is posted at www.uswheat.org/cropQuality.

An early planting season and excellent growing season pushed the national average yield to a record, but with less planted area, production slipped 13 percent from last year. The crop averages a No. 1 Dark Northern Spring (DNS) and is very similar to the 2015/16 crop for many grade parameters. Specifically, the crop averages a 61.6 lb/bu (81 kg/hl) test weight, near zero damage and 77 percent vitreous kernels. Ninety-two percent of the samples grade No. 1, and 81 percent are above 60 lb/bu (78.9 kg/hl) test weight. The crop average vitreous kernel level is slightly lower than last year, but higher than the 5-year average and more than two thirds of the crop meets the standards for the DNS subclass.

Protein levels are high, averaging 14.2 percent (12% moisture basis), up slightly from 14.1 percent in 2015 and the 5-year average. Kernel moisture is low, averaging 12.1 percent, as most areas had dry harvest conditions. These conditions also produced a sound crop, with an average falling number of 406 seconds, although some northern areas of the region had isolated impacts from rain during harvest. Disease pressures were nonexistent across most of the region with only northern areas facing pressure from Fusarium Head Blight. The crop as a whole is less than 0.05 ppm for DON, down from 0.1 ppm in 2015 and 0.4 ppm for a 5-year average. In areas where disease pressure was highest, DON levels may be closer to the 5-year average, but only one of the eighteen cropping region composites showed detectable DON, averaging 0.3 ppm.

Milling yields, based on a Buhler Lab Mill, are at 66.9 percent, similar to a year ago, and slightly below the 5-year average. Likewise, flour ash and wet gluten values are similar to 2015 and the 5-year, at 0.53 percent and 34.7 percent, respectively. Amylograph values are slightly lower than a year ago, but higher than the 5-year average. The average is 659 B.U., based on the 65-gram test.

The 2016 crop exhibits stronger dough properties and greater water absorption on the overall crop compared to 2015. Farinograph tests show a three-minute increase in stability, averaging 13.2 minutes, compared to 10.3 in 2015, and 10.6 for a 5-year average. Stabilities across western portions of the region are slightly weaker than a year ago, whereas some eastern areas are appreciably stronger. Environment and variety shifts are both contributing factors. Stabilities range from eight to 21 minutes across the region. Absorption values are higher than 2015 in all cropping regions, averaging 62.7 percent, but still slightly lower than the 5-year average. Dough strength as measured on the Extensograph and Alveograph indicates stronger properties overall, with slightly less extensibility.

Baking evaluations show slightly higher loaf volumes compared to 2015, averaging 976 cubic centimeters, with similar absorption, averaging 67.6 percent. Loaf volumes range from 897 to 1008. Dough handling properties are similar to a year ago with overall bread scores showing improvements.

U.S. wheat farmers, through their state commission membership in USW, and USDA’s Foreign Agricultural Service fund the annual crop quality survey of all six U.S. wheat classes. USW’s 2016 Crop Quality Report, regional HRS reports, along with regional reports for all six U.S. wheat classes, are available at www.uswheat.org/cropQuality. USW will also be sharing the results of the survey with hundreds of overseas customers at several upcoming events, including USW's annual crop quality seminars. Buyers are encouraged to construct specifications carefully to be sure they receive qualities that meet their needs.


6. Wheat Industry News
  • World Pasta Day is October 25. Media and other influencers are always interested in sharing information, tips and recipes for this popular food holiday. To help you communicate messages around this annual celebration, the International Pasta Organization has compiled several resources you can find at this Dropbox link: https://www.dropbox.com/sh/o16pqkegt1v6x77/AAChVKNHhrnVTwEbImOmK33La?dl=0.
  • Retired Washington Wheat Farmer Receives Top Alumni Award. Past USW Chairman Randy Suess was recently honored by the Washington State University (WSU) Alumni Association with its highest honor – the Alumni Achievement Award – for his contributions to the wheat industry and U.S. agriculture. “I was extremely honored to receive this,” Suess told the Capital Press. “It really seems kind of funny, receiving an honor for something I just really love doing. Read the full announcement here.
  • Dr. Kevin Folta Awarded the 2016 Borlaug CAST Communication Award. Each year the Council for Agricultural Science and Technology (CAST) recognizes an individual in science and agriculture who demonstrates an ability to communicate through written material, public presentations and various forms of media. This year’s recipient, Dr. Kevin Folta was honored during World Food Prize events in Des Moines, IA, earlier this month, where he gave a keynote address, “Unveiling Our Halo--Building Trust with a Concerned Consumer.” Read the full announcement here.
  • Thousands of Students attending the National FFA Convention are receiving a limited edition DVD of the “Great American Wheat Harvest” movie produced by Conjo Studios. USW is a supporter of the film and one of the sponsors of the limited edition DVD as a way to reach out to tomorrow's U.S. wheat producers and active members of the U.S. wheat supply chain.
  • Notable Quote: “When major emerging economies are providing trade-distortive agricultural subsidies at a greater volume than all of the developed countries put together, we can no longer turn a blind eye to their lack of transparency and their failure to live up to their agreed-upon limits. In our most recent WTO case, for example, we have found that China is providing nearly $100 billion per year in highly trade-distortive subsidies above and beyond its WTO limits. Think about that for a minute. $100 billion is more than the GDP of 130 countries. How can we have a serious conversation about distortions to global agricultural trade if we pretend that trade-distortive subsidies at this level don't exist?” – U.S. Trade Representative Amb. Michael Froman in remarks to the Graduate Institute, Geneva, Switzerland, based on USW-sponsored research.
  • IGP-KSU Grain Purchasing Training. Registration is now open for this course planned for April 2017 at the IGP Institute in Manhattan, KS. This course benefits individuals who are responsible for buying U.S. food and feed grains, and is divided into continuous back-to-back one-week sessions. The first week will investigate how grain is traded and transported, while the second week will focus on commodity price risk management. For more information and to register visit www.grains.k-state.edu/igp.

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USW prohibits discrimination in all its programs and activities based on 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.
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Wheat Letter - October 20, 2016.pdf
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