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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.” 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. Reconnecting with Customers Past, Present and Future
2. A Tale of Two Continents: USW Board Team Travels to Africa, Europe
3. U.S. and Canadian Wheat Farmers Find Common Ground
4. New Farm Bill a Win for the World’s Wheat Buyers
5. Wheat Farmer Leaders Adopt 2014 Trade Policy Priorities
6. Wheat Industry News

Online Edition: Wheat Letter – February 6, 2014 (http://bit.ly/1evjvtR)

PDF Edition: (See attached file: Wheat Letter - February 6, 2014.pdf)

USW Price Report: www.uswheat.org/prices


1. Reconnecting with Customers Past, Present and Future
By Casey Chumrau, USW Market Analyst

Last week, I had the opportunity to participate in the U.S., Middle East and Africa Grain Forum, Partnership for Trade, in Doha, Qatar. It was a unique and important chance for the U.S. grain industry to connect with our past, present and future customers in the region. I joined 123 participants from 15 countries at the two-day conference that covered diverse topics and provided ample time for discussion and networking.

The event was a jointly sponsored by U.S. Wheat Associates (USW), U.S. Grains Council, U.S. Soybean Export Council, North American Export Grain Association and was funded by a USDA. Importers, traders, millers and government officials often work with more than one commodity and face similar logistical issues when importing U.S. grains and oilseeds. The conference provided a place for a broader discussion of those issues and opportunities.

Experts presented risk management tools for importers and tips for avoiding problems and disputes when entering into contracts. They discussed new technology in grain handling, storage and milling and addressed U.S. and world freight issues, international trade policy and the future of biotech crops.

Each of the commodities had a time to shine. As one of several USW representatives, I presented a world supply and demand update for wheat and provided an early outlook for the 2014 winter wheat crop. I discussed current factors that are driving prices and affecting the world market. Each commodity-specific delegation presented similar information.

I was honored to help inform such a distinguished group. The buyers at the event were part of the USW Middle Eastern, East and North African Region that imported 4.91 million metric tons (MMT) of U.S. wheat on average the past five years, accounting for 17 percent of total U.S. exports. This forum was a direct result of the value U.S. wheat farmers place on the regional relationships and served as an investment in their future maintenance. Armed with the tools and information we shared, importers and government officials will have greater confidence in the reliability of the U.S. grain industry and the consistent quality of the products.

Each of the U.S. participants walked away with a better understanding of this important regional market and better prepared to serve our customers in the future. Though much of today’s international business is done over the phone or internet, shaking your customer’s hand remains so supremely important. I was fortunate to have the chance to continue USW’s long tradition of meeting with our valued customers in person.


2. A Tale of Two Continents: USW Board Team Travels to Africa, Europe
By Julia Debes, USW Assistant Director of Communications

Three farmers and I tackled four countries on two continents in 14 days of intense visits to some of the best customers of U.S. wheat. From Jan. 10 to 24, this USW Board Team met with flour millers, grain traders and pasta producers in Nigeria, Ghana, Spain and Italy to learn about these important markets and provide a personal perspective on the U.S. wheat crop.

Team members included Jason Scott, soft red winter (SRW) wheat farmer from Maryland and a USW board member recently elected to serve as USW Secretary-Treasurer for 2014/15 (see story below), Lawrence Hunn, hard red winter (HRW) wheat farmer from northern California; and Brent Robertson, HRW wheat farmer from southwest Nebraska.

Our first stop was Washington, DC, for briefings from USW and USDA’s Foreign Agricultural Service.

Following a long flight to Lagos, Nigeria, USW Marketing Consultant Muyiwa Talabi and USW Assistant Regional Director Gerald Theus provided a welcome as warm as the weather. Our meetings started right away with FAS Regional Agricultural Counselor Russ Nicely, who explained to the group that the Nigerian market is based on relationships between U.S. wheat farmers and Nigerian customers who are consistently among the top U.S. wheat buyers.

“Wheat has found a home,” Nicely said, “and it is going to stay here.”

Nigerian wheat consumption continues to rise rapidly. More and more Nigerians are looking for a nutritious, convenient food and they are finding it in the fastest growing product segment — instant noodles made primarily from HRW.

To learn more, we went to the experts. Dufil Flour Mills has a 70 percent market share of the Nigerian instant noodle market. Today, Nigeria is behind only countries in Southeast Asia in per capita consumption and nearly every milling company is manufacturing instant noodles, even though they first appeared on the market less than a decade ago.

Pasta is also a popular product in northern Nigeria. The team visited BUA Flour Mills, who produces both long and short cut pasta exclusively for this market. Yet, BUA told the group they cannot keep up with demand, even while operating at more than full capacity.

Both Dufil and BUA stressed the importance of self-sufficiency or milling the wheat they need for their own products. Flour Mills of Nigeria takes that concept another step forward.

As the world’s second largest miller, Flour Mills of Nigeria operates five regional mills and two pasta production plants. It also owns a sugarcane plantation, a cassava mill, an export elevator in Corpus Christi, TX, and even 22 bulk commodity vessels. Peter Kradolfer, flour operations director, explained that the company is accelerating in-house miller and baker training while continuing to expand its operations.

Dangote Flour Mills, which recently turned over operations to South Africa-based Tiger Flour Mills, also understands the importance of training. Dangote had tough questions for our team on freight rates and price premiums but said they had implemented 90 percent of what its own personnel had learned during USW-sponsored trade teams, short courses and seminars.

Hopping west to Ghana, the theme of rapid expansion and need for training continued. Regional Agricultural Counselor Kurt Seifarth explained that flour milling is not new to Ghana, but the market is fiercely competitive.

Our hosts at Olam Flour Mills explained that small bakers who may use between half a 50-kilogram bag up to 100 bags of flour per day consume most of the flour in the country. These bakers may take their dough to a communal mixing facility or simply let it ferment anywhere between three to 12 hours. As a result, mills must sell flour that can stand up to variable conditions to produce the high-volume loaf preferred by customers. Bakers blend multiple flours to spread their risk, but if they feel one is underperforming, they will quickly switch.

Sharad Gupta, business head for wheat at Olam, said, “We cannot trade off on quality. We err on the side of higher quality, even if it comes at a higher price.”

Flour Mills of Ghana, owned by Seaboard, echoed how difficult success can be in this competitive market. General Manager Trevor Augustine said, “We are improving month by month, but every extra bag we sell here is a heck of a lot of work.”

TEMA Flour Mills is taking a different approach to the competitive nature of this market. As the smallest mill in Ghana, TEMA cannot compete on volume, so the mill uses HRS and HRW to produce high quality flour for their customers, including a baby food product produced for Nestle Ghana.

As the team moved from Africa to Europe, there was a big difference in temperature and in the nature of the wheat markets. While Africa is just learning the great taste of pasta, USW Marketing Specialist Rutger Koekoek explained that Europeans have been enjoying their bread products for centuries. Koekoek, based in the USW Rotterdam Office, joined the team in Madrid, Spain.

Steady consumption, however, is actually leading to profit challenges for Spain’s 120 flour milling companies, according to Ramón Sánchez Expósito, head of AFHSE, the national flour millers association. He explained that while the average mill size has increased 300 percent in the past 20 years, consumption has remained relatively flat, leading to 40 to 50 percent over-capacity.

Despite challenges, success is still occurring in these markets. Emilio Esteban, a family owned mill now operated by a pair of cousins, has made the mix of tradition and innovation its motto. Rather than focus on expansion, the mill works on evolving their flour offerings by working with the local university on sustainability initiatives and experimenting with adding new specialty ingredients. For their premium flour products, the mill is a high user of U.S. HRS wheat.

Emilio Esteban, the grandson of the mill’s founder and current owner, said, “We cannot mill without HRS.”

In Italy, our last stop, consumption of common wheat (all classes except durum) is also steady at 5.1 MMT per year. In addition, Italian millers use 5.2 MMT of durum wheat each year, mainly for pasta. Andrea Cagnolati of Grain Services, the largest HRS broker in Italy, explained that high protein wheat is needed for pandoro and panettone, two types of bread made and consumed around Christmas, in addition to pizza and high loaf volume bread.

Some Italian mills find the performance of HRS more valuable than the proximity of other European supplies. Aguigaro & Figna purchases HRS each month for their top products. Manager Gabriele Ferrari told the team that consistent quality is a top priority and they have 15 quality control officers in three labs.

Quality is also important for the world’s largest pasta producer by volume — Parma-based Barilla. Filippo Bertuzzi, Barilla’s senior purchasing manager, said that a blue box of Barilla pasta is the same product in all markets, no matter where it is produced. That constitutes 1.7 MMT of products in more than 100 countries.

Barilla is constantly working to improve both product quality and sustainability. Since 2008, Bertuzzi explained that Barilla has decreased its water consumption by 23 percent, CO2 emissions by 25 percent and overall energy use by 4 percent.

From the largest Italian pasta producer to a specialized Ghanaian mill one hundredth the size, our team answered tough questions on freight rates and provided personal perspectives on the winter wheat crop currently in dormancy. No matter the weather, the mill or the language, one message was clear — there is no comparison to the consistent, high quality of U.S. wheat and, more importantly, the respect for the U.S. wheat farmers who produce it year after year.

Read more about the trip on the USW Facebook page at www.facebook.com/uswheat.


3. U.S. and Canadian Wheat Farmers Find Common Ground

Representatives of several Canadian farm groups attended the U.S. Wheat Associates (USW) board of directors meeting recently in Washington, DC, and said they look forward to building a collaborative relationship with U.S. farmers.

“At this meeting, if I closed my eyes and listened, I would think I was at a meeting with Canadian farmers,” said Richard Phillips, president of Canada Grains Council. “We will remain competitors, but clearly we face many of the same issues. It makes sense to work together on the challenges shared by farmers on both sides of the border.”

Alberta farmers Greg Porozni, chairman of Cereals Canada, and Gary Stanford, president of Grain Growers of Canada, joined Phillips at the USW Winter Board Meeting. Porozni and Stanford are both members of the Alberta Wheat Commission.

USW Vice President of Policy Shannon Schlecht said he was not surprised when the Canadian leaders contacted him about the meeting because USW representatives have also participated in several Canadian grain industry meetings the past few years.

“We welcomed the opportunity to have them attend and share perspectives in part because the opening of the western Canadian wheat and barley market created new ways to work together,” Schlecht said, referring to the end of the Canadian Wheat Board’s monopoly in 2012.

For example, Canadian and U.S. organizations formed the Canada-U.S. Task Group in April 2012 to review and communicate cross-border trade information. As part of this effort, the task group launched http://canada-usgrainandseedtrade.info, a website that provides answers to questions about cross-border trade for wheat, durum and barley farmers in Canada and the United States.

Schlecht added that he appreciated comments the producers made about fair border policies and added that USW looks forward to working together to resolve a couple of remaining trade issues that will result in free and fair cross-border trade.

Porozni told the U.S. farmers that industry-wide cooperation creates a win-win situation for everyone.

“My organization is focused on building partnerships,” Porozni said. “We look forward to collaborating with U.S. wheat farmers on issues like harmonizing the world’s low-level presence policies for biotech crops, fighting trade policies that disrupt the markets for our farmers and promoting healthy wheat foods.”

Stanford said Grain Growers of Canada is committed to promoting the commodities it represents, including wheat and durum, on the basis of sound science and sustainability for farmers. It is an approach he believes U.S. farm organizations share.

“The more often we meet, the more we can build trust,” Stanford said. “Then, together, we can be more effective in addressing the issues that matter to all farmers.”


4. New Farm Bill a Win for the World’s Wheat Buyers

The U.S. Congress this week passed the Agriculture Act of 2014, better known as the farm bill, with strong bipartisan support. President Barack Obama plans to sign the bill into law Feb. 7. The legislation will remain in effect for five years and, in addition to making numerous reforms and helping reduce the U.S. budget, provides a number of benefits to U.S. wheat buyers around the world.

There is, perhaps, no section of the farm bill more important to international customers than the continuation of the Market Access Program (MAP), the Foreign Market Development Program (FMD) and other export market development programs including the Emerging Markets Program and Quality Samples Program. These programs provide cost-share funding to USW to maintain overseas offices and conduct market development activities like trade servicing, trainings and seminars that U.S. wheat customers have come to rely on to help improve their processes and bottom lines. They will continue under this farm bill at the same funding levels as prior years.

The farm bill continues the GSM-102 export credit guarantee program, but makes a number of changes to help comply with the WTO Brazil Cotton Case ruling. Customers may continue to see tenor length and fees change, but the program will remain in place to provide credit for importing U.S. agricultural products.

All U.S. wheat customers want to know that farmers are doing all they can to produce high-quality wheat in ways that reduce the impact on the environment. The sustainability of U.S. wheat production is improving every year, yet this new farm bill also includes a number of important conservation programs to ensure that farms are productive for future years and generations. There are incentives in the legislation for farmers to preserve valuable resources, while other programs require conservation practices in order to participate.

Though it took Congress three years to overcome many roadblocks, the farm bill provides much more certainty for U.S. wheat farmers, for the U.S. wheat supply chain and for their domestic and overseas customers. The U.S. wheat industry is pleased to see its passage.


5. Wheat Farmer Leaders Adopt 2014 Trade Policy Priorities

At their winter meetings last week in Washington, DC, USW and National Association of Wheat Growers directors voted unanimously to adopt the U.S. wheat industry’s 2014 trade policy priorities.

These priorities highlight U.S. wheat producer support for, full funding of MAP, the FMD cooperator program and for the critical role of USDA’s Foreign Agricultural Service and the Office of the U.S. Trade Representative. The organization also supports completing ongoing free trade agreement negotiations, the monitoring and enforcement of existing trade agreements and passage of Trade Promotion Authority.

To read the full policy priority document, please visit the USW website at http://bit.ly/1gNbbXT.


6. Wheat Industry News
  • Book on Borlaug. A special memorial edition of Our Daily Bread; the Essential Norman Borlaug is now available for purchase. The author, Noel Vietmeyer, worked with Dr. Borlaug and recorded his recollections of his life as a “wheat whisperer.” For more information, contact noelvi@cox.net or visit http://amzn.to/MXf0wK.
  • A Dialogue on GMO Food. Monsanto Chief Technology Officer Robb Fraley has responded to an article by the CEO of Chipotle, a U.S. restaurant chain, describing that company’s views on foods produced from genetically modified crops. USW believes Fraley’s thoughtful comments set the record straight on a number of misperceptions about GMOs, especially the spotless record of safety. To read more, please visit http://huff.to/1cVLKzS.
  • WMC Asian Noodle Technology and Ingredient Application Short Course. The Wheat Marketing Center (WMC) in Portland, OR, will hold its Asian Noodle Technology and Ingredient Application Short Course March 10 to 14, 2014. For more information or to register, visit http://www.wmcinc.org.
  • IGP Flour Milling Short Courses. The International Grains Program (IGP) in Manhattan, KS, Buhler-KSU Expert Milling Course in English March 17 to 21, 2014. The Spanish version of the course will be March 24 to 28, 2014. For more information or to register, visit http://www.grains.ksu.edu/igp/.
  • IGP/NCI Durum Wheat Milling, Pasta Production Courses. IGP and The Northern Crops Institute (NCI) in Fargo, ND will hold a Durum Wheat Milling short course at NCI April 7 to 9, 2014. An NCI Pasta Production and Technology Short Course will follow from April 9 to 11. For more information or to register, visit http://www.northern-crops.com/.

Nondiscrimination and Alternate Means of Communications
USW prohibits discrimination in all its programs and activities on the basis of 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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