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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. Weathering the Market: World Wheat Production Predicted at Second Highest on Record
2. Annual Tour Predicts Big Boost in HRS Crop in Northern Plains
3. Exception to the Rule: Trade Policies Contribute to U.S. Wheat Market Success
4. Draft Blueprint of Bread Wheat Genome Unveiled
5. New Hire, Promotion at USW
6. Wheat Industry News


Online Edition: Wheat Letter – July 24, 2014 (http://bit.ly/WL072414)

PDF Edition: (See attached file: Wheat Letter - July 24, 2014.pdf)

USW Harvest Report: http://www.uswheat.org/harvest


1. Weathering the Market: World Wheat Production Predicted at Second Highest on Record

Geopolitical issues and weather may push the market up and down short-term, but in the July 11 World Agricultural Supply and Demand Estimates (WASDE) report, USDA still predicted the world’s suppliers will have a substantial wheat crop to sell this marketing year.

According to the July 18 USW Price Report, renewed fears of geopolitical tension in the Black Sea region following the crash of Malaysia Airlines Flight 17 in eastern Ukraine pushed futures higher the day of the crash, but markets posted sharp losses the next day as concerns subsided. To date, Ukrainian ports are reported as operating normally.

Extreme weather issues also continue to hinder Northern Hemisphere wheat crops. For the U.S. hard red winter (HRW) crop, severe drought conditions reduced harvested acres and yields. In contrast, analysts expect excessive rain to reduce crop quality in both the European Union and Canada.


Despite crop condition challenges in these areas, USDA estimated 2014/15 global wheat production will reach 705 million metric tons (MMT), the second highest on record, and down just 1 percent (9.0 MMT) from 2013/14. Combined with slightly lower expected world beginning stocks of 184 MMT, USDA predicted global wheat supplies of 888 MMT, 2.19 MMT lower than 2013/14.

According to USDA, world wheat trade will fall 8 percent from the prior marketing year to 152 MMT in 2014/15, still 4 percent greater than the five-year average. As a result, supplies will slightly exceed use, according to USDA, who projected global ending stocks 1 percent higher than the prior year at 189 MMT. Of note, 33 percent of global ending stocks are attributed to China.

For the United States, USDA reported a decline in beginning stocks at 16.1 MMT, 25 percent below the five-year average and the lowest since 2008/09. For this year’s crop, USDA projected U.S. wheat production to fall 7 percent to 54.2 MMT, with an increase in hard red spring (HRS) wheat more than offsetting declines for the other classes. The HRS crop in the northern plains has benefitted from abundant soil moisture and yields are forecast as above average (see story below).

USDA also predicted U.S. wheat exports will decline 24 percent to 24.5 MMT, below the five-year average of 29.5 MMT. As a result, U.S. ending stocks are expected to increase 12 percent to 18.0 MMT, still below the five-year average of 21.2 MMT.

Canadian wheat production and trade numbers will also be down, according to USDA. USDA estimated Canadian wheat production to fall 25 percent from the record 37.5 MMT in 2013/14 and to equal the five-year average at 28.0 MMT. Additionally, due to a smaller crop and sustained logistical issues, USDA predicted Canadian exports will fall 7 percent to 21.0 MMT.

The WASDE report listed other major wheat exporters with small production and trade decreases for this marketing year. Black Sea wheat production could reach 87.5 MMT, down slightly from 88.3 MMT in 2013/14, according to USDA. USDA also reported Ukrainian exports down 500,000 MT to 9.0 MMT but still 26 percent greater than the five-year average.

Conversely, USDA estimated a 19 percent increase in Argentinean production in 2014/15 to 12.5 MMT, still 3 percent below the five-year average. As a result, USDA projected Argentina’s exports to rebound to 6.5 MMT, up from 2.0 MMT the prior marketing year. Despite an increase in crop production, however, political policies continue to cause uncertainty for Argentina’s wheat farmers and export licenses are not guaranteed. Brazil, one of Argentina’s largest customers, continues to purchase wheat from outside the Mercosur trading block.

Finally, USDA raised EU wheat production 1.6 MMT, but also increased EU wheat feeding 1.0 MMT as wheat quality is expected to suffer in the lower Danube region due to excessive rainfall in recent weeks.

Overall, advancing Northern Hemisphere harvests and expectations for plentiful global supplies could continue to weigh on the world markets, even with short-term fluctuations. As always, the United States will continue to have a reliable supply of high quality wheat for the world’s buyers to purchase.


2. Annual Tour Predicts Big Boost in HRS Crop in Northern Plains
By Steve Mercer, USW Vice President of Communications

Fifty-three representatives of the entire U.S. wheat value chain, from farmers to domestic and overseas customers, gathered in Fargo, ND, on June 21 to visit more than 400 wheat fields in North Dakota and South Dakota over three days. The goal: estimate the yield potential of the 2014/15 hard red spring (HRS) and hard amber durum crops, the same as others have done on the Wheat Quality Council (WQC Hard Spring and Durum Tour for more than 25 years. U.S. Wheat Associates (USW) Vice President of Communications Steve Mercer and Assistant Director of the USW West Coast Office Shawn Campbell participated in this year’s tour.

“While it is helpful to get a snapshot of the crop potential before harvest, we generate a historical record of the crop over many years for comparison,” said Ben Handcock, WQC executive director. “Another great thing about these tours is the chance for people who are responsible for buying wheat to get their first experience in the field, walking and touching the crop.”

Dave Katzke is a quality control executive with General Mills who has participated in the spring wheat quality tour for more than 20 years. As a member of the WQC, he serves as the tour's record-keeper.

“The tour gives me an early look at the issues and opportunities with the next crop," Katzke said. "For example, in our review session, we heard there is a pretty big gap in planting dates because of the wet, cold spring that could affect yield and quality between the early and late crops, depending on conditions through harvest.”

Before heading out to scout wheat fields, North Dakota State University (NDSU) entomologists and plant pathologists provided additional background on this year’s crop conditions. Dr. Janet Knodel, entomologist, told the group that while insect pressure this year has been relatively light, there are pockets of concern about wheat midge larvae and stem maggot feeding on developing grain. Dr. Andrew Friskop, plant pathologist, showed the participants how to look for signs of fusarium head scab and leaf diseases. In addition, NDSU's spring wheat breeder Dr. Mohamed Mergoum and durum breeder Dr. Elias Elias described the challenge of balancing the farmer's need for higher yields with the downstream customer's need for quality, a shared goal that USW works towards with overseas customers and breeders through the Overseas Varietal Analysis program.

At NDSU's seed development facility, participants learned how to apply the following formula across all their field stops to determine an estimated average yield in bushels per acre.

Each day in the field the tour participants follow the same routes as previous tour participants so comparisons are consistent. The first day on the road, June 22, was long. Traveling west from Fargo through southern North Dakota and northern South Dakota in 14 vehicles, tour participants stopped at 156 spring wheat fields. Yields in South Dakota were excellent and scouts reported good stands in south-central North Dakota. Conditions in parts of southwestern North Dakota were mixed and the gap in planting dates was very evident with some wheat in the flag leaf stage and some only 3 or 4 weeks from maturity. No serious disease or insect pressure was seen.

At the end of the day, the tour reported an estimated weighted average yield of 48.3 bushels per acre (bu/a) or 3.25 metric tons per hectare (MT/h). Even if the average yield declines from this point, the tour result still represents the highest expected yield for the first day of the tour in five years. That compares with day one average estimates of 43.5 bu/a (2.93 MT/h) in 2013 and 42.6 bu/a (2.87 MT/h) in 2012.

Tour participant Alyssa Hicks with the USDA Spring Wheat Quality Laboratory in Fargo, ND, checked 11 spring wheat fields in central North Dakota between Bismarck and Devils Lake on the second day of her sixth spring wheat quality tour. She believes this tour gives her an edge as she analyzes dozens of wheat samples from the new crop.

"Now, when I see samples coming into the lab from various regions at a very busy time later this year, I will know about any environmental and management issues from those regions and I can determine how to manage those samples more effectively and efficiently," Hicks said. "I also like the chance to talk about the crop with the other people on the tour in a more relaxed situation. We spend a lot of time in our vehicles."

Hicks and other participants reported results that were fairly consistent across the north-central and northwestern regions of North Dakota. The gap in planting dates was less evident on the second day in the central region, but there were many fallow and late-planted HRS fields farther north and west. The final estimated average yield potential for HRS under current conditions was 48.4 bu/a (3.26 MT/h), consistent with the previous day’s estimate, compared to the 2013 Day Two estimate of 45.0 bu/a (3.03 MT/h) and the 2012 estimate of 45.5 bu/a (3.06 MT/h). The tour also checked 14 durum fields and estimated current yield potential at 36.6 bu/a (2.46 MT/h), compared to 41.6 bu/a (2.80 MT/h) on 2013 Day Two.

In discussion about the day's results, the group agreed that they had expected to see more HRW fields. Farmers and state wheat commission leaders joined the tour participants at dinner in Devils Lake, ND, and explained that significantly more HRW had been planted last fall but winterkill and other factors forced farmers to abandon all but about 200,000 acres (80,937 hectares) of HRW. Farmers chose either to replant those fields to HRS or abandon the fields completely for this season. In addition to the cold, late spring, challenges with HRW this year had a significant impact on cropping decisions.

The third and final day of the tour covered northeast North Dakota. Detailed description of the day’s scouting were not available at release time, but the final weighted average estimate of the HRS crop yield potential in North Dakota under current conditions is 48.6 bu/a (3.27 MT/h), an all-time record high if realized. For durum in North Dakota, current yield potential is 36.6 bu/a ( 2.46 MT/h), down from last year’s prediction of 41.7 bu/a (2.81 MT/h) Current yield potential for HRW in North Dakota is 44.0 bu/a (2.96 MT/h), down from 53.5 bu/a (3.60 MT/h) projected during last year’s tour.


3. Exception to the Rule: Trade Policies Contribute to U.S. Wheat Market Success

The 2013/14 marketing year had two big surprises — Brazil and China topped the charts as the top two U.S. wheat customers. These markets typically do not import large amounts of U.S. wheat, but their purchasing spree demonstrated there is always great potential for increased U.S. wheat exports, especially if trade policy challenges can be resolved.

What was different this year? Both of these countries had a need for high quality wheat — and they knew where they could find it.

USW actively works to showcase the quality, reliability and value of the six U.S. wheat classes to each of these markets — even in years when they do not source such large quantities of their wheat needs from the United States. Our staff regularly meets with buyers to explain the current year’s crop quality and routinely provide information on the U.S. wheat marketing system. This long-term focus allows buyers to quickly turn to the U.S. wheat farmer, versus our competitors, when market situations arise.

For example, USW has been working in China for more than 25 years, despite China’s status as the largest wheat producer in the world. When poor crop conditions and declining strategic reserves occurred, Sinograin, a Chinese government wheat buyer, took advantage of a price advantage for a large U.S. SRW crop and acted quickly to purchase 2.8 MMT of U.S. wheat to refill grain reserves. Additionally, the private sector imported 1.21 MMT, including four of the six wheat classes. In all, China purchased 4.21 MMT of U.S. wheat.

During the past two years, Brazilian millers could not source enough wheat from Mercosur countries. Fortunately, the government implemented a temporary zero duty tariff rate quota for non-Mercosur wheat and Brazilian millers purchased 4.21 MMT of U.S. wheat, primarily HRW, according to USDA Foreign Agricultural Service.

Both of these countries, however, have policies in place that limit U.S. competitiveness as a consistent supplier.

For example, potential sales of U.S. wheat are severely limited in the Brazilian wheat market due to a 10 percent tariff differential between the United States and Mercosur member countries — despite the fact that Brazil is among the top three importers of wheat in the world. Additionally, Brazil has failed to implement a 750,000 MT duty free tariff rate quota for non-Mercosur wheat, agreed upon in the WTO Uruguay round, that further contributes to a lack of regular imports of U.S. wheat.

China has several policies in place to encourage wheat production, including minimum support prices and input subsidies. The government also administers a tariff rate quota system that allocates low import tariffs mainly to government entities and only a limited quantity is allocated to the private sector at these same low tariff rates.

Policy restrictions have routinely limited exporters’ ability to sell large, consistent amounts of U.S. wheat to these two large and important wheat markets. However, we hope that last year’s positive reactions from end users to receiving high quality U.S. wheat will lead to more open trade policies in the future to create more trade between our countries — not just in a year of need, but in every marketing year.


4. Draft Blueprint of Bread Wheat Genome Unveiled

Five times more complex than the human genome, the DNA sequence of wheat has been a tricky one for scientists to decipher — at least until now. On July 18, the International Wheat Genome Sequencing Consortium (IWGSC), including almost 100 authors representing 23 laboratories in 15 countries, published a draft sequence of the wheat genome in the international journal Science.

The chromosome-based draft sequence gives new insight into the structure, organization and evolution of the world’s most widely grown cereal crop. Additionally, wheat breeders and researchers now have, for the first time, a genetic blueprint that will enable them to rapidly locate specific genes on individual wheat chromosomes.

Jorge Dubcovsky, professor at the University of California Davis, said that these results “have been a fantastic resource for our laboratory. The development of genome specific primers, which used to take several weeks of work, can now be done in hours. … In addition to the acceleration of day-to-day work in wheat genetics, this resource has made possible analyses and discoveries at the genome level that were not possible before.”

While this is a draft sequence, the announcement marks a major landmark towards a complete sequence of the wheat genome. In fact, scientists released a first reference sequence for the largest chromosome, 3B, in the same issue of Science. The sequence establishes a template for sequencing the rest of the genome.

“We have reached a great milestone in our roadmap,” said Catherine Feuillet, IWGSC co-chair. “We know now the way forward to obtain a reference sequence for the 20 remaining chromosomes and we hopefully will be able to find the resources to achieve this in the next three years.”

With a chromosome-based full sequence in hand, plant breeders will have a high quality tool at their disposal to assist their breeding programs. This work will eventually help breeders produce a new generation of wheat varieties with higher yields, better disease resistance and other important attributes for farmers to grow more and better wheat with less impact on the environment.

For more information and a list of author affiliations, visit http://www.wheatgenome.org/.


5. New Hire, Promotion at USW

USW announced that Nada I. Obaid joined the organization July 14, as administrative assistant, and that Stacy Taylor has been promoted to executive assistant to the president and meeting planner.

Obaid recently arrived in the United States from Iraq after working as an Arabic-English translator and in procurement in the public and private sectors. Most recently, she was office manager at Qatarrat Al-Shahad for Economic Consultations and Commercial Agencies in Baghdad. She also served as marketing specialist with the USDA Foreign Agricultural Service at the U.S. Embassy in Baghdad. In that position, she translated documents and assisted U.S. suppliers having business with the Iraqi government. Obaid’s prior positions included work at the Iraqi Ministry of Trade and the Grain Board of Iraq related to government-managed food procurement and supply management. Obaid has a bachelor’s degree in translation from the University of Mustansiriyah in Baghdad.

In her new position, Obaid provides general office administrative duties as well as assist with meetings and other USW activities.

Taylor recently marked her 25th year working with USW in administrative positions, joining the organization in July 1989. She was named executive assistant to the president in 2008 and added assistant meeting planner to her responsibilities in 2012. In her new position, Taylor will coordinate all USW board of directors meetings and world staff conferences.


6. Wheat Industry News
  • NASS to Report on U.S. Flour Production. USDA National Agricultural Statistics Service (NASS) will launch a Current Agricultural Industry Report (CAIR) focused on flour milling, starting in 2015, that will replace data collected previously by the North American Millers’ Association (NAMA) through Veris Consulting, Inc. NAMA gathered and released the data after a report with similar information was terminated by the U.S. Department of Commerce in 2011 due to funding shortfalls. For more information, visit http://bit.ly/NASSfloursurvey.
  • USDA Creates Foundation for Food and Agricultural Research. U.S. Agriculture Secretary Tom Vilsack today announced the creation of the Foundation for Food and Agricultural Research (FFAR), which will leverage public and private resources to increase scientific and technological research, innovation and partnerships. For more information, please visit http://bit.ly/1rurxHR.
  • WMC Whole Grain Products Short Course. The Wheat Marketing Center in Portland, OR, will hold its Whole Grain Products Short Course July 28 to Aug. 1, 2014. For more information or to register, visit http://www.wmcinc.org.
  • IGP Milling Courses. The International Grains Program in Manhattan, KS, will have its Buhler-KSU Executive Milling Course in Spanish Aug. 11 to 15, 2014. For more information or to register, visit http://www.grains.ksu.edu/igp/.
  • NCI Grain Procurement Management for Importers Course. The Northern Crops Institute in Fargo, ND will hold its Grain Procurement Management for Importers short course Sept. 15 to 24, 2014. For more information or to register, visit http://www.northern-crops.com/.
  • Congratulations to Brandi Miller, on her promotion to associate director at IGP. In her new position, Miller will maintain her role as coordinator of on-line education and professional development as well as take on additional leadership responsibilities. For more information, visit http://www.grains.ksu.edu/igp/.
  • Condolences to Judi Adams, president of the Wheat Foods Council, on the death of her mother.
  • Welcome to Shane Dagoberg, recently hired as new communication and program associate at the Minnesota Wheat Research and Promotion Council. For more information, visit http://bit.ly/dagoberghire.
  • Congratulations to Erica Olson, marketing specialist with the North Dakota Wheat Commission, and her husband Craig on the birth of their daughter Brynne Laura on July 16. Brynne weighed 8 lbs, 13 ounces and measured 21.5 inches long.


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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