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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 18 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. Taking Stock of the 2015/16 Global Wheat Supply and an Early Look Ahead
2. Protein, DNS and Value All Up in the New HRS Crop
3. Transferring Knowledge Helps Millers Sustain Their Business
4. Annual NTE Report Supports Growers and Wheat Market
5. Food Aid Donors Defend Benefits of Monetization
6. Wheat Industry News

PDF Edition: (See Attached) (See attached file: Wheat Letter - November 5, 2015.pdf)

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


1. Taking Stock of the 2015/16 Global Wheat Supply and an Early Look Ahead
By Stephanie Bryant-Erdmann, USW Market Analyst

With the 2015/16 harvest wrapped up in the Northern hemisphere, it is a good time to take stock of the global situation and look ahead to 2016/17. In its October World Agriculture Supply and Demand Estimate (WASDE), USDA projected the 2015/16 global wheat crop will reach a record 733 million metric tons (MMT), up 1 percent from the previous record of 725 MMT set last year. An increase in total output for half of the major exporters is expected and for the other half, a decrease.

2015/16 Northern Hemisphere Harvest. USDA estimates the 2015/16 U.S. wheat production increased 700,000 metric tons (MT) from last year to 55.8 MMT, but fell 3 percent below the 5-year average of 57.8 MMT. The slight increase in production resulted from an increase in harvested acres to 47.1 million acres (19.1 million hectares) this year, up 2 percent from 2014/15 and 1 percent above the 5-year average. This increase offset lower planted area and average yields similar to those seen last year. As of Sept. 30, USDA estimates total planted area for the crop harvested in 2015 was 54.6 million acres (22.1 million hectares), down 4 percent from the prior year and 1 percent below the 5-year average. USDA predicts 2015/16 U.S. yields to average 43.6 bu/ac (2.93 MT per hectare) similar to 2014/15 yields, but 4 percent below the 5-year average.

Despite a dry autumn, the Black Sea region — responsible for roughly 14 percent of total global production — produced its third consecutive bumper crop in 2015/16 thanks to timely spring rains and favorable weather conditions throughout most of the growing season. The Russian Agricultural Ministry estimates Russian production reached 63.8 MMT, the largest in 6 years and up 4 percent from last year despite dry conditions in several key wheat-growing regions. Russian exports slowed this summer due to the implementation of a wheat export tax that was reduced on Oct. 1. In Ukraine, spring rains improved yields, but reduced overall quality of the crop. According to the Ukrainian Agriculture Ministry, Ukrainian wheat production was similar to last year’s crop — reaching 24 MMT — but only 40 percent will be of milling quality, down from 54 percent in 2014/15. The Kazakhstan Agriculture Ministry estimates wheat production reached 14.7 MMT, up from 12.9 MMT last year.

According to analyst group Strategie Grains, the European Union (EU) produced 150 MMT of wheat, down 3 percent from last year, but still accounting for 21 percent of global wheat production. However, this year’s crop has few of the quality issues that plagued the 2014/15 crop, with an estimated 72 percent of the crop expected to be of milling quality, up from 60 percent last year and up from the 3-year average of 68 percent. France, the EU’s top wheat producer, produced 40.2 MMT of wheat, up from 37.5 MMT last year.

In its Oct. 22 report, Agriculture and Agri-Food Canada reported a 10 percent decrease in Canadian wheat production to an estimated 28.8 MMT due to a decrease in planted area and droughts in Saskatchewan and Alberta. If realized, production would be slightly ahead of the 5-year average of 28.5 MMT and account for 4 percent of global wheat production. Canadian wheat supply decreased 17 percent year-over-year due to the lower production and lower beginning stocks. While 2015/16 Canadian durum quality improved this year, Canadian wheat export market share will decrease to an estimated 12 percent, due to the decrease in supply compared to 15 percent in 2014/15.

2015/16 Southern Hemisphere Harvest. While the Southern hemisphere accounts for only 7 percent of global wheat production, the hemisphere’s two major exporters, Australia and Argentina, are responsible for 19 percent of global wheat exports.

The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) decreased their estimate of Australian wheat production to 24.0 MMT from 25.3 MMT in their October report due to the El Niño currently affecting the country. According to the International Grains Council (IGC), planted acres of 34.1 million acres (13.8 million hectares) is stable and any fluctuation in production will be due to changes in yield. The country is in the early stages of harvest, and weather will still determine the final yield potential and quality with New South Wales, Australia’s largest wheat producing state, forecast to receive up to 7.87 inches (200 mm) of rain this week.

Argentine wheat production will drop to an estimated 9.5 MMT in 2015/16, 19 percent lower than last year’s 11.8 MMT, according to the Buenos Aires Grain Exchange. According to IGC, wheat planted acres in Argentina fell 28 percent year-over-year due to higher input costs, limited credit availability and unattractive prices. Harvest will start in a few weeks, and weather will still determine the final yield potential and quality.

2016/17 Crop Planting Progress. Winter wheat planting is underway in the Northern hemisphere, and the markets are closely watching the weather in the world’s largest production areas. According to USDA’s Nov. 2 weekly crop progress report, winter wheat planting in the United States is 88 percent complete, which is 90 percent behind the 5-year average on the same date with 72 percent emergence. USDA estimates 49 percent of the crop is in good or excellent condition, compared to 59 percent last year, while 39 percent is fair and 12 percent is in poor or very poor condition, up from 7 percent last year.

Parts of Ukraine’s wheat producing region are experiencing the driest fall in 50 years, according to a Nov. 2 Reuters report. The drought may negatively affect the country’s wheat production, which accounted for 4 percent of global wheat production in 2015/16 by USDA’s estimates. As of Oct. 27, the Agriculture Ministry of Ukraine estimates Ukrainian farmers will plant 15.3 million acres (6.2 million hectares) of winter wheat for 2016/17, down 1.73 million acres (700,000 hectares) from the prior year. According to UkraAgroConsult, a Black Sea agricultural consultancy, winter wheat planting is 81 percent complete, 15 percentage points behind the 2015/16 pace of 96 percent on the same date.

IGC reports Russian farmers are expected to plant winter wheat on 633 million acres (256 million hectares) in 2016/17, up 1 percent from 2015/16 levels due to increases in domestic prices. Key wheat producing areas had low sub-soil moisture at planting, but recent rains should improve prospects across much of the country. As of Oct. 27, UkraAgroConsult estimates Russian winter grains sowing at 91 percent complete, a little behind the 2015/16 pace.

Buyers can learn more about the 2015/16 U.S. wheat crop by downloading the 2015 USW Crop Quality report at www.uswheat.org/cropQuality.


2. Protein, DNS and Value All Up in the New HRS Crop

Early seeding and generally good conditions helped U.S. wheat farmers produce a hard red spring (HRS) crop with excellent quality for 2015/16. At the same time, global supply and demand favors spring wheat buyers looking for higher protein and sound kernel traits at “bargain” prices.

A warm, dry spring allowed planting to begin in early April, about three weeks ahead of normal. With steady progress, planting was complete in most areas by the end of May. The central and eastern regions produced a larger share of the 2015 crop due to higher planted acres and record yields, as predicted on the spring wheat tour in North Dakota, featured in the July 30, 2015 issue of “Wheat Letter.” In the West, minor to severe drought stressed the crop much of the season, resulting in production falling below 2014 numbers.

This year, the HRS Wheat Quality Lab at North Dakota State University collected and analyzed 805 samples representing approximately 98 percent of the 2015 HRS crop from Minnesota, North Dakota, South Dakota, Montana, Washington, Oregon and Idaho. The samples were segregated by export region (East and West) and composited by protein range: less than 13.5 percent, 13.5 percent to 14.5 percent and more than 14.5 percent.

Wheat and Grade Data. The average grade is No. 1 Dark Northern Spring (DNS) with more than 90 percent of the samples grading No. 1, and more than two-thirds classified as DNS. This is a notable improvement over the 2014 crop. The overall average test weight of 61.6 lbs/bu (81 kg/hl) with 0.3 percent damage and 77 percent vitreous kernels, with 80 percent of test weights averaging more than 60 lbs/ bu (78.9 kg/hl). Average protein is 14.1 percent (12 percent mb), up from 13.6 percent in 2014 and similar to the 5-year average. Protein averages 14.3 percent in the West and 13.9 percent in the East, with each region showing improvement in kernel protein levels compared to 2014. Sixty-four percent of the samples in the West and 60 percent in the East are above 14 percent protein, and less than 15 percent fell below 13 percent protein in both regions.

In its regional HRS report, the North Dakota Wheat Commission (NDWC) spoke to the effect of late-season conditions on protein. "A warmer, drier finish to the growing season favored the higher protein average," the report stated. "An extended period of warm, dry conditions supported the harvest of a sounder, drier crop compared to 2014."

The warm, dry harvest also secured a crop with lower kernel moisture and improved crop soundness relative to 2014. Kernel moisture is 12 percent, about one-half percentage point lower than 2014, and the average falling number is 371 sec, up from 337. More than 60 percent of the crop in both regions exceed 400 sec, and less than 2 percent fall below 300 sec. Disease pressures were minimal and more isolated than in 2014. The vast majority of the samples analyzed had no detectable DON with the overall average reported as less than the DON detection limit of 0.5 ppm – the same as 2014 and the 5-year average.

Flour and Baking Data. The overall Buhler Laboratory Mill flour yield averages 67.5 percent, up 1.5 percent from 2014, with similar improvement shown in both regions. Average flour ash content is 0.52 percent, up from 0.45 percent in 2014, paralleling the higher kernel ash in the 2015 crop. Wet gluten values average 34.3 percent, up from 31.9 percent last year and similar to the 5-year average. Amylograph values are very high, reflecting the soundness of the 2015 crop, while extensograph resistance and extensibility are similar to 2014 and the 5-year average. An average W value of 312 (10-4 J) indicates a slightly weaker crop compared to 392 in 2014 and the 5-year average of 365. The P/L ratio fell to 0.71 compared with 0.99 in 2014. Absorption values are similar to 2014, averaging 62.1 percent, but lower than the 5-year average. Absorption values are about 1 percentage point higher in the West compared with the East, but absorption increases with protein in both regions. Farinograph stability time of 10.8 min is up from 9.4 in 2014 and similar to the 5-year average. Specifically in the East, stability times average at 10.4 min, while the West shows slightly stronger values at 11.2 min. Both regions’ stability improved with protein levels, ranging from 8.8 min in the low protein segment to 12.7 min in the high protein.

Buyers should be pleased with the value of such good quality. Dan Maltby, consultant for the Risk Management Group in Minneapolis, MN said in a recent DTN report,This year, so far, there has been a stunning collapse of protein premiums. This is directly a result of this crop averaging almost a full point higher in protein than last year. Fifteen [percent protein HRS] averaged a 90-cent premium in those 10 years (2005/06 to 2014/15) and currently 15s are quoted at a 70-cent premium to 14s, so in my opinion, they are historically a bit of a relative bargain."

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 2015 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 is also 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.


3. Transferring Knowledge Helps Millers Sustain Their Business
By Mark Fowler, Associate Director, IGP Institute, Kansas State University

The mission of the IGP Institute is “to provide innovative and relevant education and technical programs to enhance the market preference, consumption and utilization of U.S. cereal grains, oilseeds and their value-added products for the global grain industry.”

At the end of a 12-year career at the IGP Institute, I reflect on the transfer and sharing of knowledge that I have been part of while contributing to the mission of IGP. Connecting U.S. producers with international processors is a vital part of advancing the wheat industry in the United States and improving the efficiency of the global milling industry helping to feed a growing world population. Both parties benefit with increased understanding of the where and how wheat is grown and processed into flour for a variety of baked goods. When we discuss the enormity of the global wheat market, it is easy to forget that our supply chain begins with dedicated producers harvesting and delivering quality wheat, one truck at a time from the farm to the elevator. Then, on the other side of the world, the supply chain ends as the miller delivers flour one bag at a time to local bakers.

Through the years, the lessons I have learned as an educator can be compared to the lesson John Oades from USW first introduced me to when discussing the value of wheat to the miller. It is a message that remains relevant today.

John said millers should examine value differences of all wheat types to meet the needs of the customer, at the right price, consistently, to maintain repeat business and gain new customers. I have repeated John’s message over the years, incorporating it in to several courses reaching several hundred millers.

As I transition from IGP and Kansas State University, I leave you with this revision of John’s message.

Millers should continue to examine the value of training to meet the needs of the customer by advancing the knowledge and skills of their most valuable resource, their employees. At any price, training of employees pays dividends back to the employer through innovation and employee competence working to improve the process, and profits for the company. By consistently supporting the training needs of employees, the quality of service to your customers improves. Well-trained employees are better prepared to serve the needs of your customers, keeping them happy and helping to maintain repeat business. Finally, well-trained employees help gain new customers by delivering quality service and portraying a positive company image.

Training extends beyond any one company or one training institution. Continuous education and training is central to advancing the wheat and milling industry. While I will no longer be a full-time educator at Kansas State University, I will continue the practice of sharing and transferring knowledge with colleagues at my new company as well as consulting and participating in courses at Kansas State, USW and throughout the industry.

Editor’s Note: Mark Fowler recently joined Farmer Direct Foods, Inc., as President and Chief Executive Officer. Farmer Direct Foods is a Kansas farmer owned cooperative that markets high-quality baked products made with flour from hard white wheat. Read more at the Farmer Direct Foods website. USW thanks Mark for his dedication to milling education and service to U.S. farmers and their customers around the world.


4. National Trade Estimate Report Supports Growers and Wheat Market
By Ben Conner, USW Deputy Director of Policy

Imagine your boss asked you to write a report each year covering all trade barriers — of every kind, in every industry, imposed by every country — and you might have some understanding of the monumental task Congress gave to the Office of the U.S. Trade Representative (USTR) more than 30 years ago. The agency releases the report, titled the National Trade Estimate (NTE), every year as the culmination of months of information gathering on the policy challenges facing the wide variety of goods and services exported from the United States.

The office of the USTR again asked for help from the industries confronted by these barriers on a daily basis to complete its 31st report. Policy challenges are a common theme for the U.S. wheat industry, so last week USW again submitted its NTE submission to USTR.

Most of the policy challenges U.S. wheat exports face are not new, though over time our understanding of the impacts has improved. We group these challenges into four broad categories: market access; sanitary and phytosanitary (SPS) barriers; domestic subsidies; and export subsidies.

Anything preventing a product from entering a country or makes entry artificially expensive is a market access barrier. Most commonly, these are tariffs and quotas. Because there are so many common barriers allowed under the rules of the World Trade Organization (WTO), the NTE focuses on the issues that conflict with WTO rules. Sometimes these relate to tariff administration and quotas, such as China’s refusal to reallocate unused portions of the state-run share of its quota – something it is required to do under WTO rules. There are also technical market access barriers that make a product artificially uncompetitive, such as Canada’s law that automatically assigns imported U.S. wheat, with no quality consideration, to the cheapest class, vastly reducing any potential returns to farmers.

One particular form of a market access barrier is an SPS restriction. This sort of measure prevents imports due to health, safety or environmental concern. However, there are numerous examples of countries using SPS barriers to protect domestic producers from imports when there is no scientifically legitimate reason to do so.

Another major concern is domestic subsidies to wheat farmers in foreign countries that are out of compliance with WTO commitments. Every country has a right to support their farmers, but the purpose of WTO rules is to prevent countries from subsidizing their farmers in a way that has a negative effect on farmers in other countries. A recent study found that subsidies in China, India, Turkey and Brazil are costing U.S. farmers nearly a billion dollars in annual revenue. Export subsidies, provided by Turkey and slightly less frequently by Brazil and India, provide a more direct spillover effect.

The task Congress entrusted to USTR is an unenviable but important one. Countries need to play by the rules so producers in every country can compete on an even-playing field. Trade agreements and WTO commitments will slowly lose their relevance to trade if countries continue breaking the rules and their offenses are not addressed. There will be very few winners if that happens.

USW’s latest NTE submission is posted online.


5. Food Aid Donors Defend Benefits of Monetization
By Elizabeth Westendorf, USW Policy Specialist

At the end of September, the House Committee on Agriculture held a hearing on U.S. International Food Aid Programs, focusing on stakeholder perspectives. Witnesses included the Catholic Relief Services, Food for the Hungry, Didion Milling, Breedlove Foods, Inc., American Soybeans Association and USA Rice. Wheat is the largest commodity used in international food aid programs, making up 40 percent of donations. The hearing was important because it pushed back against the false premise that agricultural groups no longer care about food aid programming, a message shared in hearings among the foreign affairs committees on food aid “reform.” Not only would reform minimize the role of U.S. agriculture in food aid, it would be a loss to current programming efforts and the unique benefits of using U.S. food in food aid.

We have seen these kind of benefits in practice time and again, most recently in monetization successes in Ethiopia, Malawi and Mozambique. Sending in-kind aid to these countries helps in ways a cash donation or locally purchased food cannot.

Thanks to monetization through Title II funding, Mozambique grew from two mid-sized mills in the 1990s to more than seven in 2015. Monetization transactions have less restrictive payment terms than commercial or cash interactions, allowing millers time to build capital with longer payment periods. Additionally, the mills were able to conduct transactions in their local currency when access to foreign currency was limited. The monetization programs allowed the mills to produce better quality wheat flour because high quality U.S. wheat was readily available to them, and because USW followed up on those wheat purchases with technical support to millers and bakers in the country. These benefits are all in addition to the developmental gains to the country from the original NGO project the sale funded.

USDA FAS reports positive results from the monetization of wheat in Ethiopia. Introducing the superior quality of U.S. wheat to a traditionally price-driven market has given U.S. wheat a favorable view in the mind of one of Ethiopia’s larger mills, a positive experience makes the mill more likely to buy U.S. wheat in the future and benefits an agricultural development project with funding.

A miller in Malawi pleaded for a wheat monetization project through the FY 2016 Food for Progress application cycle, saying, “With the dire need for food support due to a bad maize crop, and with bread being considered a ‘staple food’ the supply of wheat into Malawi will benefit the population extensively.” The country anticipates a slowdown in the availability of foreign currency as the tobacco season ends. Monetizing wheat would provide high quality supplies of a staple commodity they may not be able to access otherwise.

USW foreign offices play an important role in implementing food aid programming as a part of its overall commitment to quality and service. Technical support helps new mills adjust to using high quality U.S. wheat and allows them to make the most of the superior inputs to which they would otherwise not have access. USW goes beyond expectations for both food aid monetization recipients and traditional, long-term buyers. This commitment ensures wheat sent to countries in need not only provides funding to a non-profit project but also exposes domestic mills to using higher quality wheat in their products.

These programs are important not only for the good they do in the recipient country, but also because they find a way to connect U.S. farmers to humanitarian work. U.S. wheat farmers are proud of the fact their wheat is going to feed hungry people and equally proud that their wheat is an essential ingredient in high quality products around the world.


6. Wheat Industry News
  • IGP Institute Names Brandi Miller as Interim Associate Director. Formally, the Institute’s assistant director and distance education program coordinator, “Under Brandi’s leadership, the distance education program has grown significantly. We are excited to have Brandi’s innovative ideas and outstanding leadership guiding the programing and team at the IGP Institute,” said Gordon Smith, IGP Institute director and grain science and industry department head. Read the full announcement at www.grains.k-state.edu/igp/
  • FY 2016 Funds Available for Export Credit Guarantee Program (GSM-102). On Nov. 2, USDA’s Foreign Agricultural Service (FAS) allocated fiscal year 2016 funds for the Export Credit Guarantee Program (GSM-102). Details are available at www.fas.usda.gov.
  • Wheat Marketing Center Selects Janice Cooper as Executive Director. "Janice has spent six years as the Executive Director of the California Wheat Commission (CWC) and has relevant industry and management experience," said David Clough, WMC board member from North Dakota. "We believe that her skills and experience, combined with the talents of the outstanding WMC staff, will carry the Wheat Marketing Center to a new level of excellence." Cooper will begin her new position Dec. 1, 2015. In addition, Cymantha Fredrickson, Assistant Director, who recently completed 20 years of service, is also planning to leave CWC later this month. "We wish Janice and Cymantha well in their new endeavors and we thank them for their many years of service to the California Wheat industry," said CWC Chairman and USW Past Chairman Roy Motter. "We are initiating a search for a new Executive Director." Look for details about the Executive Director position on the CWC website www.californiawheat.org.
  • With Great Sympathy. USW colleagues were shocked to learn of the tragic death of Luke Schemm, son of David and Lisa Schemm of Sharon Springs, KS. David is an officer with the National Association of Wheat Growers and a Kansas Wheat Association leader. His son was a star high school athlete who collapsed during a football game Nov. 3 and died in hospital of a brain injury. Our sincere thoughts and prayers go out to the Schemm family.
  • Subscribe to USW Reports. USW has added a “Subscribe” menu at www.uswheat.org where visitors may subscribe to this newsletter, the weekly Price Report and the weekly Harvest Report (available May to October.) Click here to subscribe.


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