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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.

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In This Issue:
1. Premiums for Protein on the Rise
2. Mid-Size Millers from Japan Learn about U.S. Wheat Supply Chain
3. Profiling U.S. Wheat Sustainability: David Clough, Hard Red Spring Wheat Farmer
4. Oklahoma’s Public Wheat Breeding Sows Benefits for Farmers and Customers
5. A Warning to Commerce: National Security Arguments Cut Both Ways
6. Wheat Industry News

PDF Edition: (See attached file: Wheat Letter - June 15, 2017.pdf)

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


1. Premiums for Protein on the Rise
By Stephanie Bryant-Erdmann, USW Market Analyst

Much needed rain across the U.S. Northern Plains this week gave emerging hard red spring (HRS) and durum crops a drink, but the rain was bookended by hot, windy conditions and likely did little to alleviate drought conditions.

Total rainfall for the region ran 60 to 75 percent below average for three months before this week’s storms, with Minot, ND — in the heart of the HRS growing area — recording just 1.23 inches (3 cm of rain) since March. The June 13 U.S. Drought Monitor showed 83 percent of North Dakota is in a moderate or severe drought and the remainder of the state is abnormally dry. Similarly, 79 percent of South Dakota and the eastern third of Montana are abnormally dry or in a moderate to severe drought.

The lack of rain and above normal temperatures is taking an early toll on crop conditions. On June 13, USDA reported 45 percent of spring wheat was in good to excellent condition, down 10 percentage points from the prior week and the lowest rating on record for that week. USDA noted 20 percent of the spring wheat crop was in poor or very poor condition, up from 11 percent the prior week and just 2 percent at the same time last year. Markets will be closely watching next week’s USDA crop condition report, and further deterioration of crop conditions will support Minneapolis Grain Exchange (MGEX) HRS wheat futures.

In the past two weeks, the nearby MGEX HRS wheat futures contract rallied 8 percent or 49 cents to $6.28 per bushel, the highest level since December 2014. Concern about the HRS crop and early harvest reports of low protein hard red winter (HRW) also support widening HRW protein premiums. Last June, the protein premium for 12.0 percent protein HRW (on a 12 percent moisture basis) averaged 12 cents per bushel ($4.59 per metric ton) over 11.0 percent protein HRW. This year, the same premium is 60 cents per bushel ($22 per metric ton).

With 60 percent of high protein wheat exports (13 percent protein on a 12 percent moisture basis or higher) originating from the United States and Canada, protein premiums are also widening due to Canadian crop and soil moisture conditions. In Saskatchewan, where Canadian farmers are wrapping up spring planting, topsoil moisture is rated 40 percent short or very short compared to 8 percent short or very short last year.

Farmers in northern Alberta and Saskatchewan are having the opposite problem — too much moisture. On June 6, the Alberta crop report rated topsoil moisture at 29 percent excessive in the Northeast and 40 percent excessive in the Northwest. Wet fields and harvesting 1.16 million acres (2.86 million hectares) of overwintered crops delayed spring planting progress in the province. Spring wheat planting was 95 percent complete on June 6, up from 84 percent the prior week but behind the 5-year average of 98 percent complete. Agriculture and Agri-Food Canada estimated total Canadian wheat production for 2017/18 will be 29.5 million metric tons (MMT), down 7 percent year over year due to a slight decline in planted area and a return to trendline yields.

“Conditions are variable right now with too much water in many northern areas, too little in the southern areas and probably very good conditions in between the two,” noted Robin Speer Executive Director of Western Canadian Wheat Growers Association. “We think the next two weeks become very important for this crop.”

Though HRS planted area is expected to be 7 percent smaller this year and yield potential for this year’s HRS crop is still unknown, U.S. farmers will continue to have the high quality, high protein wheat the world needs. In its June World Agricultural Supply and Demand Estimate, USDA pegged 2016/17 HRS ending stocks at 5.86 MMT, slightly more than the 5-year average of 5.28 MMT. The larger than normal ending stocks ensure the U.S. wheat store will always be open; the only unknown is how much customers will need to pay.

To read the latest USW Weekly Harvest report, click here.


2. Mid-Size Millers from Japan Learn about U.S. Wheat Supply Chain
By Amanda J. Spoo, USW Communications Specialist

In the world wheat market, milling companies of all sizes can have an impact on wheat exports and purchasing decisions. This is certainly the case in Japan where mid-sized milling companies representing Japan’s National Cooperative of Millers provide input on the functional characteristics those millers need to meet customer demand to buyers at Japan’s Ministry of Agriculture, Forestry and Fisheries (MAFF).

USW welcomed a trade team of four milling executives from mid-sized companies in the co-op to the United States from May 28 to June 4. USW collaborated with the Oregon Wheat Commission (OWC), Washington Grain Commission (WGC) and the Montana Wheat & Barley Committee (MWBC) to organize and host this trade team. Funding also came from the USDA Foreign Agricultural Service (FAS).

“Japan will be the second largest buyer of U.S. soft white (SW) and HRS wheat this year, which means no matter the size of the mill, it is important that these millers are familiar with U.S. wheat value and our marketing system,” said Steve Wirsching, USW Vice President and Director of the West Coast Office. “Japanese millers are always quality conscious and ask good questions about improving overall wheat quality and end-use functionality.”

The team began its trip in Portland, OR, meeting with the OWC, USDA Federal Grain Inspection Service (FGIS) and the Wheat Marketing Center (WMC), to learn more about the U.S. wheat market.

Next the team traveled to Washington to focus on research and breeding, transportation and SW wheat crop conditions.

During a tour at a barge loading facility, the team had an impromptu opportunity to visit the nearby dam and watch a barge and tug boat go through the lock and down the river.

“U.S. wheat growers rely on the river system to move their wheat,” said Mary Palmer Sullivan, WGC Vice President. “The opportunity to see the system in action demonstrated its importance and why periodic closures have to happen so improvements can be made.”

Palmer Sullivan made that point during a visit to the USDA Agricultural Research Service (ARS) Western Wheat Quality Lab, where the team spent time in the greenhouse and observing the wheat breeding process.

“The same traceability that we recognize as important to U.S. millennials is maybe more important to Japanese consumers,” said Scott Yates, WGC Director of Communications and Producer Relations. “They want to know that ingredients in their food was grown to the highest standard.”

While in Montana, the team shifted its focus to HRS wheat production and continued to meet with members of the supply chain. At the center of the schedule was a farm tour with Montana farmer Chris Kolstad, who showed them his spring and winter wheat production, equipment and grain storage while explaining how the technology he uses allows his farm to be more efficient.

“The team was curious about the new varieties we seeded and I shared with them that all of our wheat varieties are tested and proven before they are commercialized for farmers to use,” said Kolstad, who current serves on the USW Board of Directors as Secretary-Treasurer. “Eighty percent of Montana grains are sent to foreign markets, so it is important to demonstrate the work we put in to growing quality wheat.”

Stephen Becker, MWBC Outreach Coordinator added, “We are firm believers in the strength of personal relationships with our trade partners,” he said. “These customers learn firsthand the knowledge our producers carry and the pride they have in producing a high quality crop, which is important to keep top-of-mind among those who make purchasing decisions.”

Ultimately the importance of relationships between U.S. wheat farmers and overseas customers is mutual.

“I think the opportunity to meet with U.S. wheat farmers and breeders is important,” said Shinjo Oda, Odazo Flour Milling Company President. “From wheat breeding to the producer to the country elevator and to the shuttle train or barge, we have a better understanding of the overall flow of the U.S. wheat industry.”


3. Profiling U.S. Wheat Sustainability: David Clough, Hard Red Spring Wheat Farmer
By Elizabeth Westendorf, USW Policy Specialist

David Clough’s career as a farmer has been a journey of constantly evolving technology and improving practices. Clough started farming in North Dakota in 1969. The first few years were difficult because as a first-generation farmer he didn’t have a farm legacy to get him started; he was on his own. Now, he has been farming for almost 50 years, and his farm is thriving. Over the years, Clough has grown HRS wheat, edible beans, sunflowers, soybeans and barley. He says sustainability is a smart business decision and helps ensure his farm’s survival in the future.

Clough is one of six U.S. wheat farmers featured in a USW series on wheat sustainability. These profiles show the differences in wheat production practices across the country and how those farming practices enhance the sustainability of U.S. agriculture.

“As farmers, we have always been conservationists,” said Clough. “The land is our livelihood. We need it, so we try to preserve it in many ways.”

Clough has made a lot of changes on his farm over the years. Now, he uses advanced GPS technology to increase efficiency and conserve resources on his farm. These features mean there are no overlaps when he applies fertilizer or crop protection products, which is good for the environment, but also good for business.

“We weren’t as sustainable when I first started farming almost 50 years ago, but we have changed and adapted and we will keep changing and adapting,” said Clough. “We’re doing it to survive here and to keep our land in good shape for future generations.”

In the years that Clough has been farming, he has had to adapt to new technology, unpredictable markets and lean years. But diversifying his business on the farm helped him weather those changes. Today he has many more crops to plant in rotation, which also helps improve soil health and control weeds. He also sells seed and previously sold farm equipment as a side business. Clough credits his success in farming to his ability to embrace new technology and new sustainable farming practices.

“You’re writing stories as you go through life. How many good stories are you going to write? I have had about 47 chances to tell my farming story. I only get one chance a year to get it right, and some years, you don’t get it completely right,” said Clough. “Each year is a different story, and the way we react cannot be the same either. That is what makes farming challenging and rewarding every year.”

Learn more about Clough and his farm at www.uswheat.org/factsheets. U.S. farmers, ranchers, fishermen and foresters also share their values, sustainability experiences and conservation practices at the U.S. Sustainability Alliance.


4. Oklahoma’s Public Wheat Breeding Sows Benefits for Farmers and Customers
By Jack Money, Excerpted from “The Oklahoman” with Permission

This time of year, talk about wheat always focuses on the harvest. Researchers at Oklahoma State University and land grant universities across the country aren't focused on what's being cut this year, though. Instead, they're thinking about the complex testing they never stop doing to develop the future wheat varieties farmers will want to grow.

Historically, they've geared their work to develop wheat varieties that can hold up in drought conditions and are resistant to insects or disease. They've also worked to develop dual purpose varieties that can be grazed early on and still grow quickly enough to provide a decent yield for harvest at the end of each year's growing season.

Now, their focus is shifting somewhat to developing varieties that have the milling and baking qualities the … food industry desires. Achieving that, they say, will give farmers who grow those varieties the ability to make better money at harvest time — something they hope will encourage more farmers to invest a little more to plant certified seed in their fields.

Sales of that certified seed generates revenues to support further research, something that's a key part of keeping Oklahoma's wheat industry strong, those researchers say.

"We want to see farmers go more for growing the grains that millers are looking for, where they are sourcing wheat grown from a particular region of the state," said David Marburger, a small grains extension specialist and assistant professor at Oklahoma State University (OSU). "In a world where we have a lot of wheat, we need ours to start floating toward the top," Marburger noted. "Right now, people are buying our wheat at a discounted price and that costs our economy money."

In nearly three dozen wheat fields across Oklahoma this year, plots of various wheat varieties were planted and then grown to maturity to both analyze the varieties' performances and to give wheat farmers an opportunity to consider planting them. Marburger made his comments, for example, at a test site on wheat farmer [and past USW Chairman] Don Schieber's land near Ponca City as he and other researchers discussed the strengths, weaknesses and genetic origins of more than a dozen wheat varieties grown at the site.

The breeding program is overseen by Brett Carver, who joined OSU in 1985 to begin a research and teaching career in quantitative genetics and wheat development. In 1998, he assumed leadership of the university's wheat improvement team, becoming just the third person to lead the group since the program began in the mid­ 1940s.

Before that, farmers used to develop new varieties of wheat on their own, and early on in the university's program, researchers pollinated two kinds of wheat just to see what might result. Later, that evolved into crossing varieties of wheat to create a new variety containing positive characteristics from both.

Now, genetics are playing a bigger role. Carver's wheat improvement team, for example, includes three molecular geneticists, an entomologist, a plant pathologist and other specialized researchers.

"The program I direct is all about developing the lines that become varieties. It is a long, complicated process and one that you just don't want to start and stop. You have to keep it going," Carver said.

The process to develop a new hybrid starts, he said, with his improvement team and its technicians working in greenhouses to cross pollinate varieties of wheat to get something new.

"You have to go against the grain, both literally and figuratively, because you have to force it to do that," Carver said. That requires the removal of the male parts of the plant on one type of wheat, and then fertilizing the plant with pollen from another. And it all has to be done by the hands of researchers and their technicians, "like bees moving pollen from one plant to the other," Carver said.

The team seeks to make more than 1,000 cross combinations each year, then evaluates mature plants to see if they are worth further research. If one is worthy, the team spends another five to six years to get the plant ready for field tests, and those take anywhere from three to as many as six years to complete. On average, OSU's team spends 11 years creating and testing a new variety, Carver said.

"When it's released (made commercially available to wheat growers), it's like putting out a song and making it available for public use, but it is still going to be researched and evaluated," Carver said.

Mark Hodges, executive director of Oklahoma Genetics Inc., handles the business side of wheat research in Oklahoma. Oklahoma Genetics, Inc. is an education nonprofit that promotes the stewardship and publicizes and markets the use of certified varieties of wheat. It also promotes educational programs and scientific research for the benefit of crop producers and markets, and supports plant breeding programs designed to meet current and future consumer demands.

Hodges said Oklahoma Genetics was formed in 2005. It also works with OSU and the Oklahoma Wheat Commission to educate farmers about wheat varieties produced by the university's research, and to distribute certified seed from those varieties so they can be sold to farmers.

Seed sales generate royalty revenues that flow back to the university [and other organizations that may hold patents].

"That's extremely important, because it supports the efforts of Dr. Carver and his team to develop new varieties," Hodges said.

The university also receives money collected from wheat growers by grain operators at harvest for the Oklahoma Wheat Commission's checkoff program, which captures 2 cents per bushel of harvested wheat.

Mike Schulte, executive director of the Oklahoma Wheat Commission, said the checkoff program [funding goes in part] to OSU to support its wheat research program.

"I think it really is impressive to see the commitment made by Dr. Carver and the wheat improvement team to make these programs happen," Schulte said. "Without the support of the wheat commission, Oklahoma Genetics and the state's wheat producers, it would be extremely hard to keep our public wheat research program at OSU viable, especially given Oklahoma's current economy."


5. A Warning to Commerce: National Security Arguments Cut Both Ways

The U.S. Department of Commerce (DOC) has released public comments, including comments submitted by USW, related to its investigation into the national security implications of steel imports. USW believes that if the United States goes down a road to restricting steel imports, many countries may use the same national security pretense to restrict imports from U.S. wheat farmers. After all, food security has always been tied to national security. To view USW’s full submission, click here.

Under Section 232 in the Trade Expansion Act of 1962, the DOC may investigate the effect of imports on national security. Commerce announced its investigation of steel imports on April 20, 2017. It is the first such investigation since 2001. Findings could lead to a conclusion that protective duties on imported steel should be applied for national security reasons.

“Pursuing a strategy of import protection under the guise of national security would set a dangerous precedent,” said USW President Alan Tracy. “If the United States undermines WTO national security exemptions, it would be handing a gift-wrapped roadmap of protectionism to food self-sufficiency advocates all over the world.”

The World Trade Organization (WTO) allows countries to impose trade restrictions for very few reasons, including national security. This exception is rarely used outside of weapons, nuclear materials and the like because most countries understand that doing so would open a Pandora’s Box of competing national security claims. If the United States went first with a commonly traded product like steel, many countries would be eager to include food security in the exception.

“I am all for challenging unfair subsidies, but farmers like me know you need to use the right tool to fix a problem,” said Jason Scott, USW Chairman and a wheat farmer from Easton, Md. “Citing national security to block imports like this would be like lighting a fire to kill a weed. It might do the job but you could destroy the whole field.”

The DOC has only authorized duties twice after Section 232 investigations, and not once since the WTO was created in 1995. The WTO agreements include an exemption under GATT Article XXI for trade restrictions related to “essential security interests,” which can be defined broadly by the WTO member country.



6. Wheat Industry News
  • Quote of the Week: “In Tanzania, I saw first-hand how wheat farmers can play a significant role in international food aid programs. These programs involve a significant amount of wheat, a fact not lost on farmers with full grain bins and more wheat piled on the ground from last year’s historically high harvest. It is a year when the U.S. needs to be a world leader in helping provide for those in need with these ample supplies.” – Ron Suppes, a U.S. wheat farmer from Dighton, KS, and past USW Chairman, who testified July 7, 2017, on food aid before the U.S. House Committee on Agriculture.
  • The Wheat Marketing Center (WMC) is hiring for two positions: Food Scientist/Assistant Technical Director: Seeking an experienced cereal/food scientist to participate in all aspects of WMC’s expanding research and education program, including research, training, consulting and more. Crop Quality and Marketing Intern: Seeking student for a 5-month internship to help analyze the 2017 wheat harvest, support marketing projects, technical short courses and tours provided for farmers, customers and visitors.
  • National Festival of Breads. The family-friendly festival will be held Saturday, June 17 in Manhattan, KS, and feature baking demonstrations, sampling, a barbecue, live music and more. The festival is sponsored by Kansas Wheat, King Arthur Flour and Red Star Yeast. Follow along online using the hashtag #NFOB17. Learn more about the festival and bread-baking finalists here.
  • Congratulations to USW Vice President of Overseas Operations (President-elect) Vince Peterson and his wife Sandy, who recently welcomed their seventh grandchild, granddaughter Skylar Kate.
  • USW Welcomes Emily McGarry to its Headquarters Office in Arlington, VA, as a summer Policy Intern. She is studying Marketing at Christopher Newport University in Newport News, VA.
  • IGP-KSU Risk Management Course will be held the IGP Institute in Manhattan, KS, Aug. 7 to 11, 2017. Split into Basic and Advanced sections, the course focuses on principles of risk management and commodity price control through the principles of hedging and various hedging strategies. Registration is due July 31. Click here for more information and to register.
  • KSU-Buhler Spanish Executive Milling Course. The IGP Institute will collaborate with Buhler, Inc., to host this course in Manhattan, KS, Aug. 28 to Sept. 1, 2017. The course is designed for mill owners, directors and managers, and will be an introduction to flour milling and quality, grain cleaning and functionality. Registration is due July 20. Click here for more information and to register.


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