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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. Production Forecast Add Some Balance to Global Supply and Demand
2. USW Discusses Changes in Global Wheat Trade
3. Building Value in U.S. Wheat through Quality Improvement
4. Conference Bringing Buyers Together at Just the Right Time
5. USDA Celebrates Trade Month
6. Wheat Industry News

Online Edition: Wheat Letter - June 16, 2016

PDF Edition: (Attached)

USW Harvest Report: www.uswheat.org/harvest


1. Production Forecast Add Some Balance to Global Supply and Demand
By Stephanie Bryant-Erdmann, USW Market Analyst

In its monthly World Agriculture Supply and Demand Estimate, USDA projected a more balanced Supply and Demand situation for wheat than those seen in recent years. While its latest world wheat production estimate of 731 million metric tons (MMT) is up because of improved growing conditions, USDA also expects 2016/17 global consumption to set a new record for the fourth consecutive year at 716 MMT. The difference of 14.9 MMT in 2016/17 is down 44 percent from 2015/16.

With global supply and demand closer to equilibrium, albeit with abundant supply, weather news going forward will likely be the source of some price fluctuations. . Nearly all of the major winter wheat producing regions received adequate, or even excessive, moisture this year with the notable exception of India and Morocco. Reuters recently reported that a leading Indian agribusiness firm believes India’s 2016/17 wheat imports could jump to 5.0 MMT, compared to about 470,000 MT in 2015/16. USDA pegged Indian 2016/17 wheat production at 88.0 MMT, up slightly from 2015/16 production, but still 4 percent lower than the 5-year average.

USDA expects Moroccan wheat production will fall to 2.6 MMT, down 67 percent year over year. Reuters also reported that Moroccan officials will increase the soft (non-durum) wheat import tariff to 65 percent from 30 percent from June 15 to August 15 to protect the local harvest. Due to the lower domestic production, Morocco will import 5.5 MMT of wheat in 2016/17, up 17 percent from 2015/16, according to USDA.

In Russia and France, yield-enhancing rains are also causing concern about quality. France, the European Union’s top wheat producing country, received more than double its seasonal average rain in May according to Meteo France. On June 9, FranceAgriMer rated 75 percent of French soft wheat in good or excellent condition, down from 79 percent the prior week. Strategie Grains forecast French wheat production at 39.3 MMT on May 19, down 3 percent from 2015/16.

While plentiful rains boosted yield potential in Russian wheat, agricultural consultancy IKAR noted the rain could also affect crop quality. IKAR expects Russian wheat production to reach a record 64.5 MMT, up from its May estimate of 63.5 MMT.

May was also a rainy month for wheat in the United States. It has delayed harvest in the southern Great Plains, but favorable weather so far in June is allowing farmers to make better progress. On June 13, USDA reported winter wheat harvest at 11 percent complete, behind the 5-year average pace of 18 percent complete on the same date. USDA rated 61 percent of the U.S. winter wheat crop as good to excellent, down one percentage point from the prior week. USDA rated 9 percent of the crop as poor or very poor, up one percentage point week-over-week. USDA rated 79 percent of the spring wheat crop in good to excellent condition, on par with wheat conditions at the same time last year and unchanged from the prior week.

USDA increased its forecast for U.S. production to an estimated 56.5 MMT, up one percent from 2015/16. The agency also expects total U.S. supply to climb9 percent to 83.2 MMT, buoyed by the larger production and larger beginning stocks. Beginning stocks totaled 26.7 MMT, up 30 percent year-over-year, and the largest beginning stocks since 1988/89.

With winter wheat harvest underway, weather is still a concern across the wheat growing regions, and U.S. futures markets will react to weather news until the wheat is safely in the bin. To see the latest WASDE supply and demand presentation, click here.


2. USW Discusses Changes in Global Wheat Trade
By Dalton Henry, USW Director of Policy

USW President Alan Tracy joined the International Grains Council (IGC) for their 25th annual conference June 14 to present an overview of changes in global wheat trade, trade distorting government policies and the United States’ shift to quality-based wheat markets. More than 200 attendees at the conference in London, United Kingdom, came from grain importing and exporting countries around the world to hear updates on production prospects and discuss major issues facing the grain trade.

One of the biggest shifts in the world wheat market in the last 15 years has been the emergence of Russia as a major wheat exporter, averaging 17.9 MMT from 2011/12 to 2015/16. With that growth, Russia has become a primary supplier of wheat to price-sensitive markets across the Middle East and North Africa, displacing other traditional suppliers including the United States, Canada and the European Union (EU).

USW has narrowed its activities in markets now served mainly by Black Sea suppliers but increased its resources in growing quality-sensitive markets, primarily in Southeast Asia and Latin America. An increasing majority of flour millers and wheat food processors in those markets see wheat as a food ingredient with specific value, rather than as a bulk commodity sourced merely on price. Connecting with these new markets provides more value for overseas customers and, in turn, helps U.S. farmers capture more revenue per acre for the high-quality wheat they produce.

Tracy also discussed government policies that distort trade. Reflecting on previous IGC meetings, he recalled long-past discussions on the harm caused by rival country export subsidy programs — which are largely no longer in use. Today, instead of export subsidies, the biggest market distortion comes from domestic support programs, primarily in several advanced developing countries.

Every WTO member country has agreed to specific limits and rules on agricultural support programs. However, many countries exceed those limits and fail to report their programs accurately. When an importing country provides a government support price above world market prices, they encourage domestic production. That offsets imports to the detriment of the global trading system and to farmers in other countries.

USW has spent the last five years documenting and quantifying the effects from these programs. The forum presented an ideal place to share and discuss the data as out-of-compliance programs not only harm the United States, but also exporters around the world.


3. Building Value in U.S. Wheat through Quality Improvement

The basis for the U.S. wheat industry’s position as the world’s most reliable supplier extends far beyond having highly efficient grain production, transportation and inspection systems.

“U.S. wheat offers excellent value to our overseas buyers and their customers,” said Steve Wirsching, USW Vice President and West Coast Office Director. “That value comes from a unique combination of quality, price and service — with quality being one of the most important benefits.”

U.S. wheat producers and a range of public and private wheat industry organizations including USW are making substantial investments in continually improving milling and baking quality in high-yielding wheat varieties. The following programs focus on enhancing wheat quality that is so important to the U.S. wheat value and reliability proposition.

The Wheat Quality Council cooperates with USDA Agricultural Research Service (ARS) wheat quality laboratories to connect wheat breeders with U.S. millers and bakers to test and share varietal quality information at an annual meeting. The Wheat Quality Council also sponsors annual tours of hard red winter (HRW) and hard red spring (HRS) production in the field. This first-hand experience offers an important early look at the U.S. crops and the chance to network with wheat industry experts. More information is available on the Council Web site at wheatqualitycouncil.org.

For many years, USW has operated an Overseas Varietal Analysis (OVA) program designed to give U.S. wheat breeders insight to meet the quality needs of international customers. “OVA has closely coordinated with the Wheat Quality Council program,” said Wirsching. “Breeders submit varieties to ARS labs, and USW distributes samples to buyers for analysis. We appreciate the commitment those cooperators have shown over the years, which demonstrates the value of the effort.” USW distributes results by class to customers and is now bringing long-term cooperators to the United States to meet with breeders, quality specialists and state wheat commissions at by-class OVA Technical Conferences like the recent HRW conference in Manhattan, KS. “The face-to-face experience adds strength and impact to the effort,” Wirsching said. USW is currently reviewing the OVA program and discussing ways to make it even more effective.

USW also sponsors occasional Wheat Quality Improvement Teams of U.S. breeders and wheat quality specialists to visit overseas customers. Teams have visited Asia, Europe and Latin America, and breeders have reported that they have adjusted their breeding targets to reflect the concerns of overseas customers.

The quality preference and varietal data gathered from customers helped provide the basis for Wheat Class Quality Targets developed by Wheat Quality Council committees and U.S. wheat class organizations. The targets are a useful tool for breeders and producers, and help promote U.S. wheat around the world. Quality targets are now in place for five of the six U.S. wheat classes. In addition, several wheat-producing states publish recommended variety lists, based on multi-year varietal quality data and quality targets, to encourage seeding of higher quality varieties.

Finally, USW reports extensively to customers on annual harvest and export quality by class, protein and port regions through its published Crop Quality Report and at its annual series of Crop Quality Seminars. State wheat commissions and class-specific organizations such as Plains Grains, Inc., are essential to the quality reporting effort each year and publish more detailed regional class-specific quality reports. Click here for more information.

“U.S. wheat producers recognize the critical nature of quality in assuring value to both domestic and export markets,” Wirsching says. “The considerable efforts to improve quality are helping assure that superior value will always be a good reason to buy U.S. wheat.”


4. Conference Bringing Buyers Together at Just the Right Time
By Steve Mercer, USW Vice President of Communications

USW is excited to welcome wheat buyers from the Americas to Portland, OR, the week of June 20, 2016, for a Latin American and Caribbean Buyers Conference. Several circumstances are coming together to attract a record number of buyers from 15 countries, and as we start the new 2016/17 marketing year (June to May), the timing of the conference is ideal.

“The buyers who accepted our invitation represent nearly every major milling and importing group in two USW marketing regions that make up about 40 percent of total U.S. wheat exports,” said USW Vice President of Overseas Operations Vince Peterson. “This is, quite literally, an all-star team of buyers who are going to be in the right place at the right time for their business and for U.S. wheat.”

The challenges of record world wheat production for U.S. farmers is also an opportunity for wheat buyers. The United States is carrying abundant stocks into 2016/17, and the quality, especially of HRW and HRS, is excellent. At the same time, the export price spread between U.S. and most competing supplies has narrowed significantly. Peterson also noted that there probably is a floor for U.S. prices.

“Since the second half of 2015/16, hard red winter futures prices have tested and bounced several times off the ten-year price floor of about $4.40 per bushel,” he said. “Carry in is quite large, but they have been this large before. At the start of 2010/11 for example, we carried in 26.6 million metric tons, and Kansas City July wheat futures prices hit $4.50 per bushel before bouncing back up in part because Russia had a supply disruption. Can something happen that might be more bearish? Yes, but the production and consumption outlook is balanced for the first time in four years, so there is reason to think buyers are looking at the best U.S. wheat value right now.”

Brazilian wheat buyers have a real incentive to look at U.S. HRW now because both the supply of milling quality wheat from Argentina and the Brazilian domestic crop are down. They will be particularly interested in presentations on HRW quality, value and supply at the conference in Portland. Representatives from state wheat commissions and private exporters will also review quality and supply factors for HRS, soft red winter (SRW), soft white (SW) and durum at the event.

The conference agenda includes topics that extend the trade service and technical support USW representatives offer locally to customers, including supply chain logistics, flour blending and ideas on how to increase end-product value.

“Even though consumer tastes are changing, prices are volatile and trade policies are uncertain, we believe there is great opportunity ahead for our customers to grow their businesses,” said USW President Alan Tracy. “This conference will give them new insight and help them build stronger relationships with their reliable U.S. wheat industry partners.”

USW thanks the organizations that made this conference possible, including Washington Grain Commission, Oregon Wheat Commission, North Dakota Wheat Commission, Colorado Wheat Administrative Committee, Texas Wheat Commission, Montana Wheat and Barley Committee, Maryland Grain Producers Utilization Board, Nebraska Wheat Board and USDA’s Foreign Agricultural Service.


5. USDA Celebrates Trade Month
By Amanda J. Spoo, USW Communications Specialist

Throughout June, USDA is celebrating “Trade Month” by highlighting its success in expanding markets and agricultural exports through trade and collaboration with partners like USW. The highlights include launching a new chapter of the USDA Results project, a year-long communications effort focused on the positive impact USDA programs have on the U.S. agriculture industry — and those living, working and raising families in rural America.

The new chapter, “As Ag Exports Dominate, America’s Rural Communities Benefit,” focuses on the many ways U.S. agricultural exports have served as a bright spot for U.S economy and how the USDA has promoted a strong role for agriculture in international trade and food security. Topics include trade policy and barriers — such as current work on TPP and Cuba — as well as innovation, research and technology, global food security, opening new markets and rural development.

The U.S. wheat industry depends on trade. Each year approximately 50 percent of the harvested crop is available for export. USW represents U.S. wheat farmers in overseas markets by providing trade servicing and technical assistance to train millers and end-product manufacturers about the benefits of U.S. wheat quality, value and reliability. USW provides objective, transparent information, facilitates communication between the exporting and importing industries, helps to resolve plant safety and wheat quality issues and works with governments to lower trade barriers. Overseas staff have their fingers on the pulses of these markets and can help farmers adjust to economic, demographic and demand shifts.

None this would be possible without the support of USDA Foreign Agricultural Service (FAS) market development programs such as the Market Access Program (MAP) and the Foreign Market Development program (FMD). These programs provide benefits to the entire agricultural supply chain, from wheat farmers and country elevators to the dock workers loading vessels for export and beyond to overseas millers and wheat food processors.

The month-long celebration utilizes the news platform Medium and various social media outlets to share resources and graphics on these topics and their positive impact of U.S. agricultural exports. Additional resources include articles such as, 22 Facts You May Not Have Known About Trade, and audio interviews such as with Dr. Rob Bertram, chief scientist in USAID’s Bureau for Food Security, on Feed the Future.

Join USW and USDA in celebrating Trade Month on social media by following the hashtag #USDAResults. For more information and to access these resources, click here.


6. Wheat Industry News
  • Wheat Sequencing Consortium Releases Key Resource to the Scientific Community. Following the January 2016 announcement of the production of a whole genome assembly for bread wheat, the International Wheat Genome Sequencing Consortium (IWGSC) has completed quality control and is now making this resource available to wheat breeders and scientists around the world. The consortium said the dataset will help accelerate crop improvement programs and wheat genomics research to produce improved wheat varieties for farmers and their customers. The Kansas Wheat Commission and Kansas State University (KSU) provided funding for this project co-led by Jesse Poland, KSU assistant professor in plant pathology. Read the full announcement here.
  • Wheat Foods Council Publishes June Issue of Kernels. Each month, Wheat Foods Council publishes an online magazine providing science-based information on wheat and wheat foods nutrition. This month’s issue features highlight such as “The Truth About Wheat Lies in the Seed” by Brett Carver, Oklahoma State University wheat breeder and a feature story on AIB International, “Where Baking Science Begins.” Click here to read the full issue.
  • Good Start for HRS. North Dakota Wheat Commission reported that as of June 12, HRS conditions remained stable with 79 percent of the crop rated as good to excellent with a range from 68 percent good to excellent in Minnesota and South Dakota to 85 percent good to excellent in North Dakota. The northern tier of the region received precipitation over the last week which was mostly beneficial for crops, but most of the southern tier did not and some areas are becoming abnormally dry. That includes some durum producing regions, but for the most part the northern durum crop is faring well. Read more here.
  • IGP Institute Risk Management Short Course. This course, scheduled for Aug. 1 to 5, 2016, at the IGP Institute Conference Center in Manhattan, KS, focuses on principles of risk management and commodity price control. The course includes basic and advanced sections on why, when and how to trade commodity futures and options. For more information and registration, visit www.grains.k-state.edu/igp/.
  • 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, additional photos at www.flickr.com/photos/uswheat, plus video stories at www.youtube.com/uswheatassociates.

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