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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. Milling Quality Wheat Supply Much Smaller than Meets the Eye
2. Welcome Progress on Trans-Pacific Partnership
3. USW Training Partners Help Customers Improve Their Products
4. Quality is Generally Better in the 2016 SRW Crop
5. USW Bringing Indonesian Milling Executives to Experience U.S. Wheat Supply System
6. Wheat Industry News

Online Edition: Wheat Letter – August 25, 2016
PDF Version: (See attached file: Wheat Letter - August 25, 2016.pdf)

USW Harvest Report: www.uswheat.org/harvest


1. Milling Quality Wheat Supply Much Smaller than Meets the Eye
By Stephanie Bryant-Erdmann, USW Market Analyst

By all accounts, European wheat farmers are having a very challenging year, with yields and quality badly hurt by untimely rain. Not to worry, say many market watchers, the large global supply and reports of record yields in Russia will offset the European decline. While total supply gets the most attention, wheat’s real value is as a functional food ingredient, not as a bulk commodity. When you dig a bit deeper, the total supply of milling quality wheat is much different — and it is tightening.

In the European Union (EU), Strategie Grains (SG) forecasts soft wheat milling output at 66 percent of total 2016/17 production, compared to 71 percent in 2015/16. USDA estimates the EU carried in 15.7 million metric tons (MMT) of wheat and will produce 147 MMT of wheat in 2016/17. This puts total supply at an estimated 163 MMT, down 5 percent from 2015/16. With the smaller total supply combined with the lower milling output percentage, SG expects the EU soft wheat milling supply to equal 91.4 MMT. If realized, this would be 15 percent or 16.6 MMT less than in 2015/16 when the EU soft wheat milling supply totaled 108 MMT.

Russian wheat yields this year are definitely up. On Aug. 8, UkrAgroConsult estimated Russian yields were up 5 percent from 2015/16 at 2.42 metric tons per hectare (MT/ha). However, as farmers and market participants know, large yield potential often comes with lower protein content. SG estimates Russian milling wheat output will fall to 69 percent of total 2016/17 production, down from 73 percent in 2015/16. SG’s Russian 2016/17 wheat production estimate of 69.7 MMT would put total milling supply at 48.1 MMT, up 4.0 MMT from 2015/16. Still, the expected increase in Russian milling supply will only offset one-quarter of the 16.6 MMT decrease in European milling supply.

Despite significant planted area reductions, Canada, the United States and Ukraine all expect to have large or record large crops. StatsCan forecast Canadian spring wheat production at 20.2 MMT on Aug. 23. The forecast is in line with 2015/16 production despite a 9 percent reduction in planted area last spring. U.S. spring wheat farmers also planted 9 percent fewer acres this year, but improved yield potential is expected to partially offset that so USDA pegs U.S. spring wheat production at 14.4 MMT, down 6 percent year over year.

Yet these high-yielding crops are not without their own challenges. Preliminary harvest data from USW, UkrAgroConsult and SG indicate winter wheat protein levels are down in the United States, Russia, Ukraine and the EU. Additionally, wet conditions are affecting the Canadian and some portions of the U.S. spring wheat harvest. So, while the yields are expected to be large, final quality results are not yet established.

In order to meet world wheat food demand, at least 60 percent of the global supply needs to be milling quality. The large U.S. carry-in stocks, which can either be used for blending or independently to meet customer requirements, provide buyers with some level of protection. However, that protection has a price. With prices at or below the cost of production, many U.S. farmers are storing their highest protein wheat instead of selling it. This is a strategy other farmers are following. UkrAgroConsult recently noted farmer storage of higher protein wheat is also increasing across Russia, Ukraine and Kazakhstan.

Customers should keep an eye on the milling output percentages and harvest quality reports (the latest USW Harvest report is available at http://www.uswheat.org/harvest) and take the opportunity to secure their needs before the market begins to adjust to the tightening supply of milling quality wheat.

Your local USW representative is available to answer any questions about the current U.S. harvest, the U.S. marketing system or U.S. wheat quality.


2. Welcome Progress on Trans-Pacific Partnership
By Dalton Henry, Vice President of Policy

By submitting the draft “Statement of Administrative Action” (SAA) to the U.S. Congress on Aug. 12, 2016, the U.S. Trade Representative moved one-step closer to final consideration of the Trans-Pacific Partnership (TPP). The SAA describes actions necessary to implement the provisions of TPP and contains details about how U.S. law would need to change to adopt TPP. Submission is required under the terms of the Trade Promotion Authority (TPA) bill passed in 2015 before Congress can consider the agreement.

Under TPA, the President has authority to conclude trade agreements and submit them to Congress for an up or down vote. This pre-empts legislative amendments from derailing the careful balance struck in trade agreement negotiations. Less well-known TPA provisions give Congress an opportunity to establish priorities in negotiations, specify necessary reports and provide timelines for consideration of agreements. TPA states that a draft SAA must be submitted to Congress at least 30 days prior to submission of the draft legislation that implements a trade agreement, setting up a potential vote on TPP this fall.

To continue compliance with TPA, the U.S. Trade Representative must still produce three reports detailing the agreement’s impact on key areas such as the environment, labor laws and U.S. employment, and then work with Congress to submit the draft implementing bill for a vote. As work continues to address congressional concerns about the agreement that are predominately related to non-agricultural issues, the Administration has not yet signaled when the implementing bill will be ready.

President Obama maintains that final consideration and approval of TPP can and should be accomplished this year, despite increasingly negative rhetoric on trade coming from the U.S. presidential campaigns. TPP and the Asian and Latin American markets it affects are also key priorities for the wheat industry. The agreement stands as the only potential answer from the United States to competitors gaining more favorable trade access for their farmers within the Pacific Rim by continuing to negotiate and implement separate trade agreements. The submission of the SAA this month is a step in the right direction for U.S. farmers and their customers who need a wider variety of wheat classes and quality to meet growing demand for new wheat foods.


3. USW Training Partners Help Customers Improve Their Products

It is USW’s mission to “develop, maintain and expand international markets to enhance the profitability of U.S. wheat producers and their customers.” Through technical training and trade servicing, USW works side-by-side with its customers to help them successfully understand and apply the quality, value and reliability of U.S. wheat to improve or expand their products. USW often turns to its partner educational institutions to connect customers with those leading their fields in research, education and training.

“Courses offered by our educational partners directly help build the confidence that customers have in U.S. wheat,” said USW Country Director CY Kang from the USW Seoul Office. “Each program takes a hands-on learning approach, addressing real challenges with solutions that optimize the value of U.S. wheat while prioritizing the customers’ needs.”

The Wheat Marketing Center (WMC) in Portland, OR, conducts wheat utilization research and offers courses to educate the wheat industry on end-use quality characteristics. Recently, a USW sponsored team of three customers representing two of the largest cookie and cracker manufacturers and a major flour mill in Korea traveled to the WMC for a technical training and product development course. Led by Kang and Bakery Technologist David Oh, the team’s objective was to find the best formulations for blending whole wheat and refined flour to produce the most desirable soft chocolate cookie and various types of crackers. The team also wanted to learn about how different protein levels of soft white (SW) wheat affected end product quality.

The team first focused on analyzing several formulas and different combinations of SW whole wheat and refined SW flour at various protein levels in biscuits (cookies). Their preferred combination was an equal blend of whole wheat and refined flour and they did not identify any quality differences between 10.5, 11 and 11.5 percent protein levels for the SW flour.

In between batches of cookies and lectures, the team tested different flour formulations for both enzyme and soda crackers using the WMC’s pilot scale cracker line. Their preferred enzyme cracker combined flour made from 70 percent refined SW flour and 30 percent whole wheat SW flour, while the preferred soda cracker was made from 55 percent refined SW flour, 15 percent refined hard red winter (HRW) flour, and 30 percent whole wheat SW flour.

WMC conducted its first whole grain product baking short course with USW for Korean millers and bakers in 2009. As a result, the Korean flour milling and food processing industries have actively introduced whole grain products to consumers in recent years.

“The success of the latest whole wheat cookie and cracker development short course proves U.S. wheat is capable of producing high quality whole-wheat products and helps expand whole grain food market in Korea by introducing new varieties with good nutrition and taste,” said WMC Technical Director Dr. Gary Hou, who directed the course. WMC faculty member Dr. Meera Kweon, formerly of Kraft Foods, Pepperidge Farm and the USDA Agricultural Research Service, assisted Hou.

At Kansas State University (KSU), the IGP Institute offers innovative technical programs to enhance market preference, consumption and utilization of U.S. wheat. Nine millers from Nigeria and South Africa attended a recent USW sponsored course focused on the U.S. grain inspection system, flour and dough testing, and milling systems and mill performance. Participants performed hands-on exercises in the milling and baking labs and the KSU Hal Ross Flour Mill, then toured a grain elevator and wheat farm during harvest for real-world perspective.

In step with USW’s other partners, the Northern Crops Institute (NCI), located on campus at North Dakota State University (NDSU), supports regional agriculture and value added processing by conducting educational and technical programs that expand and maintain domestic and international markets for crops grown in the northern United States. Seventeen participants from eleven countries in Africa and Latin America recently attended the USW sponsored “Utilization of Wheat Classes in Pasta Production” course. The focus was on physical and rheological testing, commercial pasta production, quality assurance and hands-on pilot pasta processing. USW Technical Specialist Marcelo Mitre from the USW Mexico City Office and Regional Program Coordinator Domenique De Oliveira Opperman from the USW Cape Town Office led this team.

These are a few examples of the educational opportunities offered by USW’s partners, who also receive support from the state wheat commissions and other wheat industry partners. For more information on these programs and the courses they offer, please visit www.wmcinc.org; www.grains.k-state.edu/igp/; and http://www.northern-crops.com/.


4. Quality is Generally Better in the 2016 SRW Crop

The new USW 2016 Soft Red Winter (SRW) Quality Survey Report is now posted online at www.uswheat.org/cropQuality. To complete the report, Great Plains Analytical Laboratory in Kansas City, MO, collected and analyzed 484 samples from 18 reporting areas in the nine states that typically account for 60 to 70 percent of total SRW production. USW and the USDA Foreign Agricultural Service fund the annual survey.

Wheat farmers responded to market signals and planted significantly less area to SRW for the 2016/17 crop, followed by a mild winter and adequate moisture that kept production up slightly compared to last year, but still below the 5-year average. The analysis shows good overall quality in SRW available from the Gulf this year, while the East Coast had growing condition issues that resulted in lower test weights in many areas. Some Midwestern states such as Ohio had excellent yields and test weights. Sprouting is generally absent this year, and the vast majority of samples had falling number (FN) values above 300 seconds. There should be no problem meeting 2 ppm DON specifications and countries that require even lower limits may find it this year from the Gulf region.

This final report includes higher test weight averages as well as significant changes in other averages compared to those published in USW’s weekly Harvest Report. That is because final crop average SRW values are weighted for production while the weekly report values are not. Some areas with unusually low test weights this year also had relatively low production and areas with higher test weights had relatively high production. As a result, production weighting magnified the differences between the SRW averages reported in the 2016 weekly Harvest Reports and the final 2016 SRW Quality Survey Report.

The overall average 2016 SRW grade is U.S. No. 2. The overall weighted average test weight is 58.6 lb/bu, similar to the 5-year average and well above the 56.9 lb/bu average of 2015, but again with significant variation between East Coast (59.3) and Gulf Port (56.0) averages. Overall protein, dockage and moisture averages are all lower than last year and the 5-year averages.

Average wheat protein content of 9.4 percent (12 percent moisture basis) is below last year and the 5-year average. The Gulf Port protein average of 9.1 percent is well below previous values, while the East Coast average of 10.4 percent is above 2015 and the 5-year average. Sedimentation and wet gluten values show similar regional variation. The overall DON average of 0.6 ppm is well below the 2015 value of 2.2 ppm and the 5-year average of 1.4 ppm, indicating that the crop that was sampled is relatively free of DON.

A summary of flour and baking data shows Buhler laboratory mill flour extraction averages are below the 5-year averages overall and for both East Coast and Gulf Port states. Farinograph peak, stability and absorption values are all similar to the 5-year averages. Alveograph P values are similar to the 5-year averages, and the L and W values are all higher than the 5-year averages. The overall and Gulf Port cookie spread ratios are higher than last year and the 5-year average while the East Coast ratio is similar to past values. Overall Gulf Port and East Coast average loaf volumes are all above last year and the 5-year averages.

Buyers are encouraged to construct specifications carefully to be sure that they receive qualities that meet their needs either for traditional soft wheat products or for blending with higher protein wheat.

USW will share complete data for all classes of U.S. wheat with hundreds of overseas customers at several upcoming events, including USW's annual Crop Quality Seminars, and in its annual Crop Quality Report.


5. USW Bringing Indonesian Milling Executives to Experience U.S. Wheat Supply System

Three top-level executives from Indonesia’s largest flour milling company are currently in the United States with USW to learn how they can select and efficiently import different classes of U.S. wheat. The millers work for Bogasari, which operates four separate flour mills in Indonesia. These managers in quality and product development, production planning and finance will see and hear how U.S. HRS, HRW and SW wheat can help them meet the needs of their growing market.

Funding for this trade team visit comes from USDA through its Foreign Agricultural Service export market development programs and from in-kind contributions from the Idaho Wheat Commission, the Washington Grain Commission, the Oregon Wheat Commission and the Wheat Marketing Center in Portland, OR.

“We have had success demonstrating to Indonesian mills the processing advantages of flour made from U.S. hard red spring and winter wheat for bread products,” said USW Regional Vice President Matt Weimar, who is leading the Bogasari team. “We are also promoting soft white for superior performance in cakes, cookies and other soft wheat products. This visit supports those strategies very well.”

The team started its visit in Fargo, ND, with the North Dakota Wheat Commission, North Dakota State University and Northern Crops Institute focusing on the advantages of HRS and the on-going work to improve functional performance. Next was a visit to Greg Svenningsen’s farm in Valley City, ND, and a country elevator owned by Columbia Grain before the team flew west to Portland. The visit there and then travel to eastern Washington and northern Idaho will provide a complete picture of the U.S. Pacific Northwest wheat supply system and a detailed look at SW advantages.

“With U.S. wheat having been at a price disadvantage compared to Canadian wheat the last couple years and with Australia’s strong influence with Indonesia nearby, it is important to bring top-level managers from a large mill like Bogasari that has a majority market share to the United States to put a face on our advantages,” said Weimar. “It makes a difference when the buyer meets the breeders, farmers and grain handlers who actually make U.S. wheat the world’s most reliable supply.”

Click here for pictures of the team’s visit to North Dakota, shared by the NDWC.


6. Wheat Industry News
  • Annual Crop Quality Survey. Together with its partner organizations across the United States, USW is testing more than 2,000 samples of wheat this year for its annual Crop Quality survey. The preliminary results are reported every Friday in the USW Harvest Report, and the final results for all classes are published in a Crop Quality report near the end of October. Please contact your local USW representative for more information about the USW Crop Quality survey, report or seminars.
  • Researchers Discover a Special Power in Wheat. A new photosynthesis discovery at The University of Queensland may help breed faster-growing wheat crops that are better adapted to hotter, drier climates. A research team led by Queensland Alliance for Agriculture and Food Innovation Professor Robert Henry has published a paper in Scientific Reports showing that photosynthesis occurs in wheat seeds as well as in plant leaves. “This discovery turns half a century of plant biology on its head,” said Professor Henry. Read the full story here.
  • Dr. Brett Carver of Oklahoma State University has been named the 2016 recipient of the National Association of Plant Breeders’ Plant Breeding Impact Award. The national award recognizes an individual responsible for significant advancements in the field of plant breeding, specifically in the area of germplasm or technology development, who has demonstrated a measurable impact on crop production. Read the full announcement here.
  • 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.
  • Follow USW Online. Visit our page at www.facebook.com/uswheat for the latest updates, photos and discussions of what is going on in the world of wheat. Also, find breaking news on Twitter at www.twitter.com/uswheatassoc and video stories at www.youtube.com/uswheatassociates.

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USW prohibits discrimination in all its programs and activities based on 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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