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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. Few Surprises in First WASDE Projections for 2014/15
2. HRW for Every Need In Spite of Exceptional Drought
3. Another Slow Start for Some U.S. Spring Wheat
4. New Report Shows GM Crop Use Continues to Benefit Environment
5. Ensure Trade Works Best For All of Us
6. Wheat Industry News


Online Edition: Wheat Letter – May 15, 2014 (http://bit.ly/1nTukrv)

PDF Edition: (See attached file: Wheat Letter - May 15, 2014.pdf)

USW Price Report: www.uswheat.org/prices




1. Few Surprises in First WASDE Projections for 2014/15
By Casey Chumrau, USW Market Analyst

There were few surprises in USDA’s May 9 World Agricultural Supply and Demand Estimates (WASDE) report. The first official projections for marketing year 2014/15 in this report were in line with what most analysts expected. Although USDA expected both U.S. and global wheat production to decline from last year, the agency kept world supply estimates at near record levels that should remain sufficient to meet world demand.

USDA predicted 2014/15 world wheat production would reach 697 million metric tons (MMT), down 2 percent from 2013/14 but still the second largest on record. Production decreases for Canada, the United States and Ukraine should be offset by increases in other regions, primarily Argentina, the agency noted.

According to Statistics Canada, Canadian farmers plan to plant significantly less wheat than last year after the bin-busting 2013/14 crop of 37.5 MMT. Canada will end the marketing year with unusually high stocks on hand. As a result, USDA expects the 2014/15 Canadian crop will fall to 28.5 MMT, much closer to the five-year average of 28.0 MMT. For the United States, USDA estimated U.S. production at 53.4 MMT, down 8 percent from last year and the smallest since 2006/07, if realized. USDA also predicted Ukrainian wheat production would fall 2.23 MMT to 20.0 MMT in 2014/15.

In contrast, USDA estimated Argentina’s crop will rebound 19 percent to 12.5 MMT, still 3 percent below the five-year average. Government policies that limit export licenses and therefore increase risk for wheat farmers have resulted in much smaller crops the past two years.

Lower global production combined with an estimated 187 MMT carryover from 2013/14 put USDA’s predicted total 2014/15 world wheat supply at 884 MMT. If realized, it would be less than 1 percent lower than last year and third highest behind the record 894 MMT crop grown in 2011/12.

USDA expects the world’s consumers to use 696 MMT of those supplies in the new marketing year, down only slightly from a record 703 MMT in 2013/14. USDA estimated 128 MMT of wheat will be used as feed, down from 133 MMT last year and accounting for most of the total demand decline. Corn prices have not risen at the same pace as wheat the last few months, which has pushed feed demand back to corn.

Lower import demand in several key countries could cause total world trade to fall an estimated 6 percent from last year’s record of 162 MMT to 152 MMT, according to USDA. For example, China imported an estimated 7.0 MMT in 2013/14, significantly higher than average, in order to bolster its domestic supplies. USDA expects Chinese wheat imports in 2014/15 will decrease to around the five-year average of 3.0 MMT. Larger domestic production year-over-year expected in Brazil and Mexico would also reduce import demand in 2014/15.

USDA expects this reduced world trade to reduce export demand from six of the eight major wheat exporters, with only Argentina and Russia expected to increase sales. USDA expects a significant rebound in Argentinian exports after a smaller harvest led the government to limit export licenses in 2013/14. USDA estimated exports at 6.5 MMT in 2014/15, compared to 2.0 MMT last year and just below the five-year average of 6.6 MMT. Projected Russian exports increased from 18.2 MMT to 19.0 MMT in 2014/15, 29 percent greater than the five-year average.

USDA expected that the rest of the major exporters would see a decline in exports compared to last year, including large decreases for the United States and European Union. USDA pegged total U.S. 2014/15 exports at 25.9 MMT, 12 percent below the five-year average.

Significant and somewhat unusual demand from China and Brazil in 2013/14 helped U.S. exports surge well past initial expectations to 32.3 MMT. According to USDA’s initial report this year, the import demand in both of these countries will diminish in 2014/15. EU's forecasted exports fall from 30.0 MMT last year to 27.5 MMT, but remain 20 percent greater than the five-year average of 22.9 MMT. Despite ongoing political tensions that could potentially disrupt future port operations, USDA expects Ukrainian exports to fall just 1.0 MMT to 8.5 MMT. If realized, it would be above the five-year average of 7.15 MMT and the third highest on record.

If all these estimates hold, USDA expects 187 MMT of wheat will be in the bins to carry into 2015/16. The ending stocks projection would be up slightly from 2013/14 and 2 percent greater than the five-year average of 192 MMT. USDA estimates China will control about 33 percent of all stocks at the end of the year, continuing a recent trend.

You can find more information in the monthly USW Supply & Demand presentation.


2. HRW for Every Need In Spite of Exceptional Drought

Record high temperatures and high winds followed by near record cold temperatures this week added to worries about the drought and freeze-stressed wheat crop in the south-central U.S. plains. This is, perhaps, the worst situation so far in parts of the region, but better conditions in other states will sustain U.S. hard red winter (HRW) wheat availability.

Kansas, Oklahoma and Texas lead the United States in HRW production. The current drought unfortunately affects a major part of the wheat production area in those states. According to the National Weather Service, in some production areas less than 5 inches of rain has fallen in the last 180 days. The U.S. government rates the drought there as “exceptional,” the worst rating possible — its impact is also exceptional.

Crop scouts on the recent Wheat Quality Council tour estimated the 2014/15 Kansas HRW crop at 7.095 MMT (260.7 million bushels), unusually close to USDA National Agricultural Statistics Service’s (NASS) estimate May 12 of 7.087 MMT (260.4 million bushels). That is more than 18 percent less than Kansas farmers produced last year and, if realized, would be the state’s lowest production since 1996. USDA pegged total Oklahoma production at 1.7 MMT (62.7 million bushels) or nearly 41 percent less than in 2013/14. Sadly, that would be Oklahoma’s lowest production since 1957. Texas Wheat Producers Board Executive Vice President Rodney Mosier said that if Texas farmers harvest USDA’s estimate of 1.5 MMT (55.1 million bushels) of HRW this year, it would be “about half a good potential crop.”

In its first estimate of 2014/15 production, USDA forecasted total U.S. HRW production at 20.3 MMT (746 million bushels), which would be 16.5 percent less than the five-year average but 54,400 MT (2 million bushels) more than the 2013/14 crop. It is up this year because HRW planted area is larger and because conditions are much better in northeastern Colorado, western Nebraska, Wyoming, the Dakotas, Montana and parts of the Pacific Northwest. For example, USDA currently forecasts HRW production in Colorado at 2.29 MMT (84.15 million bushels), or 90 percent above last year’s drought-reduced crop of almost 1.2 MMT (44.3 million bushels) and 14 percent more than the 2012/13 crop. With ending stocks expected to be 5.1 MMT (187.37 million bushels), total available HRW stocks 25.5 MMT (936.87 million bushels) would be quite sufficient to meet average domestic and global demand.

USDA estimated total U.S. winter wheat production, including HRW, soft red winter (SRW) and winter white wheat, will fall by 9 percent for 2014/15 compared to 2013/14. USDA cited an expected reduction in SRW production as the primary basis for that forecast.

Depending on the weather conditions between now and the time the crop matures, wheat buyers should also find good quality in the new HRW crop from the south-central plains.

“Historically, Texas has produced wheat with high protein and good baking quality under these conditions,” Mosier said.

Mark Hodges, executive director of Plains Grains, Inc. (PGI), shares Mosier’s hope for higher protein, very good dough functionality and acceptable test weights in this year’s HRW crop, pending conditions through maturity. PGI supervises quality testing in the central and southern plains and supplies data each year to U.S. Wheat Associates (USW) — data that USW representatives share with the world’s wheat buyers.

“HRW wheat is grown in several different regions of the country, and USW reports on milling and functional quality from each of those regions and individual grain sheds,” said Kansas Wheat Chief Executive Officer Justin Gilpin. “Conditions, yields and quality vary from year to year. But, even with a short crop, there will be HRW wheat available this year for every need. And USW representatives will have the crop quality information buyers need to find that wheat.”





Exceptional Drought. Plains Grains Executive Director Mark Hodges showed Wheat Letter that 90 percent of the HRW production region outlined above is under “exceptional drought.” Overall, USDA expects total U.S. winter wheat production (including HRW, SRW and soft white (SW) winter) for 2014/15 will be down 9 percent compared to last year.


3. Another Slow Start for Some U.S. Spring Wheat

USDA and the North Dakota Wheat Commission (NDWC) this week reported that adverse weather continues to delay 2014/15 U.S. hard red spring (HRS) wheat planting, especially in the northern plains. Unlike the south-central plains, the problem here is wet, cold weather. Nationally, HRS planting is one-third complete, up only 8 percentage points from last week. That is behind even last year's slow pace of 40 percent and the five-year average of 53 percent.

“Right now, growers should be planting corn, soybeans, sugarbeets and wheat,” said Minnesota Wheat Research & Promotion Council Executive Director Dave Torgerson. “They can get a lot done in a short period of time if they have to, but they are making alternative plans in case this delay continues.”

“Wheat remains a priority crop and producers in North Dakota are still hopeful to get a good run at planting in the next week or two,” said NDWC Marketing Director Jim Peterson. “The window will get smaller to meet current planting intentions if they cannot make significant progress. This delay no doubt risks some loss in HRS planted area, especially relative to earlier reported intentions.”

In other states, HRS and spring SW planting is much more advanced. Planting is 97 percent complete in Idaho and Washington, 74 percent complete in South Dakota and 51 percent in Montana.

USDA also reported that durum planting progress was at a standstill in North Dakota last week with a total of only 1 percent planted as of May 11. That is 10 percent behind progress last year and well behind the five-year average of 23 percent for this time. In Montana, progress is better with 23 percent planted, up from 9 percent the previous week and on pace with 2013, although behind the five-year average for this time of 36 percent.


4. New Report Shows GM Crop Use Continues to Benefit Environment

On May 6, PG Economics Ltd in Dorchester, United Kingdom, released its ninth annual installment on the global economic and environmental impacts of crops derived from biotechnology. According to the report from the firm that provides advice and consultancy services to agriculture and other natural resource-based industries, biotech crops allowed farmers, in both developed and developing countries, to grow more and better crops with less impact on the environment.

In the report, PG Economics stated, “During the last 17 years, this technology has made important positive socio-economic and environmental contributions. These have arisen even though only a limited range of GM [genetically modified] agronomic traits have so far been commercialized, in a small range of crops.”

To prepare its analysis, PG Economics tracked data on input applications for both conventional and biotech crops from 1996 to 2012 using an environmental impact quotient to determine the broader impact on the environment. They found that direct benefits from biotechnology include yield improvements, reduced production risk and decreased use of insecticides. As a result, farmers improved productivity while practicing improved farming methods, including conservation, minimum and no-tillage systems.

Highlights from the report include:
  • In 2012, 17.3 million farmers worldwide planted biotech crops on 160 million hectares, equal to 45 percent of global plantings for soybeans, corn, cotton and canola.
  • Due to less fuel use and reduced tillage, biotechnology reduced greenhouse gas emissions from agricultural practices. In 2012, this was equivalent to removing 27 billion kg of carbon dioxide from the atmosphere, comparable to removing 11.9 million cars from the road for one year.
  • Biotech crops reduced pesticide spraying by 8.8 percent (503 million kg) from 1996 to 2012, equal to the total amount of pesticides applied to arable crops in the European Union for nearly two crop years.
  • To maintain global production levels without biotech crops, farmers in 2012 would have needed additional acreage equivalent to 9 percent of the arable land in the United States or 24 percent of the arable land in Brazil.

To read the full report, visit http://bit.ly/QFbXKz.


5. Ensure Trade Works Best For All of Us
By Tyler Jameson, USW Assistant Director of Policy

May is World Trade Month. With trade negotiations and issues abounding in world headlines, what better time to consider the role of international trade in the world wheat market as well as in our own lives and businesses.

As the most planted and traded agricultural commodity in the world, wheat is an integral part of the world market. In fact, according to USDA, 162 MMT will be exported in marketing year 2013/14 and 151.8 MMT in 2014/15. The free flow of wheat between countries contributes to jobs and food security and unnecessary policies should not increase costs or hinder the competitive positions of producers, sellers and buyers.

Wheat is a significant part of the critical role agricultural trade plays in the global economy. According to the World Trade Organization (WTO), world agricultural exports totaled $1.657 trillion in 2012. Of that, U.S. agricultural exports accounted for what was, at the time, a record $139.5 billion according to USDA. In fiscal year 2013 (October-September) the United States set a new record for agricultural exports with $140.9 billion in sales — $10.09 billion (7.16 percent) of which were from wheat exports.

Of course, agricultural trade is only part of the global trade picture. Trade in other goods and services play a major role in the global economy, reducing costs to consumers and increasing income. According to the WTO, the 1994 Uruguay Round agreement alone increased world income by $109 to $510 billion.

USW supports efforts to increase trade and reduce costs through removing tariff and non-tariff barriers. This week, chief negotiators from the 12 Trans-Pacific Partnership (TPP) nations are meeting in Vietnam in an effort to advance this proposed high-standard 21st century agreement and expand trade opportunities in the Asia-Pacific region. Soon, negotiators from the United States and European Union will gather to advance transatlantic trade liberalization through the Transatlantic Trade and Investment Partnership (TTIP).

We hope to see progress at both negotiations in the spirit of world trade month and for the common good of people everywhere.


6. Wheat Industry News
  • FAO Releases Food Outlook Report. The Food and Agriculture Organization of the United Nations (FAO) released its biannual report on global food markets. The report noted that early prospects for 2014 cereal crop production will decline from last year’s records, but should still be the second largest ever at 2,468 MMT. The wheat production forecast would be the second largest ever at 702 MMT in 2014. Read more at http://bit.ly/RCIAtg.
  • Alltech Honors Borlaug. Alltech has posthumously awarded Dr. Norman Borlaug, father of the Green Revolution and Nobel Peace Prize winner, its 2014 Medal of Excellence. Julie Borlaug will receive the award on behalf of her grandfather at the 30th Annual Alltech International Symposium May 18 to 21. For more information, visit http://bit.ly/1qA2DIE.
  • WMC Artisan Bread Baking Short Course. The Wheat Marketing Center in Portland, OR, will hold its Artisan Bread Baking Short Course June 16 to 20, 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 Basic Milling Principles Short Course June 3 to 6, 2014 and its Advance Milling Principles Short Course June 10 to 13, 2014. For more information or to register, visit http://www.grains.ksu.edu/igp/.
  • NCI Rheology of Wheat and Flour Quality Course. The Northern Crops Institute in Fargo, ND will hold its Rheology of Wheat and Flour Quality short course July 15 to 17, 2014. For more information or to register, visit http://www.northern-crops.com/.
  • Welcome to Chris Kirby, new director of marketing and communications at the Oklahoma Wheat Commission.
  • Thank you to Randy Englund, who retired on May 1 from the South Dakota Wheat Commission, for his service to the wheat industry and welcome to Reid Christopherson, who is the organization’s new executive director.

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