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In This Issue:
1. Wheat Feed Usage Increases as Corn-Wheat Price Spreads Flip Around the World
2. Vince Peterson Named to Follow Alan Tracy as U.S. Wheat Associates President in 2017
3. Crop Outlook and International Durum Forum Addresses Grower Challenges
4. Wheat Growers Urge Congressional Leadership to Allow a Vote on TPP
5. Wheat Industry News

PDF Edition: Wheat Letter – November 17, 2016

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


1. Wheat Feed Usage Increases as Corn-Wheat Price Spreads Flip Around the World
By Stephanie Bryant-Erdmann, USW Market Analyst

In its November World Agriculture Supply and Demand Estimates (WASDE) update, USDA pegged global wheat production at 745 million metric tons (MMT), up 1 percent from 2015/16 and, if realized, the fourth consecutive record high. USDA also increased its estimate for global wheat consumption to 732 million metric tons (MMT), up 3 percent year over year and 5 percent above the 5-year average. In particular, wheat feeding is expected to increase 6 percent to 147 MMT. In the European Union (EU) and Canada, wheat damaged by excessive moisture is bolstering wheat feed usage, but in the United States, the Black Sea and even Brazil, the difference in price, or the spread, between corn and wheat is playing a key role.

USDA expects Canadian wheat feeding to increase 71 percent year over year to 4.5 MMT after excessive rain and, in some cases, snow caused significant harvest delays across Western Canada that reduced wheat and durum quality. According to the Canadian International Grains Institute (CIGI), 24 percent of this year’s Canadian Western Red Spring (CWRS) production, which accounts for 70 percent of Canadian wheat production, graded as Canadian Western (CW) Feed. This is triple the 8 percent of CWRS that graded as CW Feed in 2015/16. Excessive moisture also affected Canadian Western Amber Durum (CWAD). CIGI reported 50 percent of Canada’s durum crop graded as #4 or #5 CWAD, compared to just 19 percent in 2015/16.

USDA estimates the EU used 38 percent of its total wheat production for feed in 2015/16, and this year it expects that to rise to 40 percent. However, the total volume of feed wheat usage will be down compared to last year because the EU’s production was sharply lower. USDA estimates wheat feeding will decrease 5 percent year over year to 58.0 MMT, which is still 6 percent above the 5-year average.

Despite not having a designated “feed grade” for wheat, some wheat feeding occurs in the United States every year. It happens for many reasons that include its local availability, protein levels and even the preferences of the livestock rations manager. Price relative to corn is certainly a factor. Normally, wheat trades at a premium to corn but in the United States and Brazil that spread has flipped, with corn now at a premium to wheat. Wheat cash prices to U.S. farmers at U.S. Southern Plains local elevators averaged about 87 percent of corn cash prices in October, according to the USDA’s Agricultural Marketing Service Texas Hi Plains report. With corn trading at a premium to wheat at local elevators, wheat feeding is much more attractive this year. That is why USDA has increased its wheat feeding forecast in the United States to 7.08 MMT, up 71 percent year over year and 28 percent higher than the 5-year average.

On Nov. 4, Reuters reported Brazilian pork and poultry producers are increasing wheat in their rations because local Brazilian corn prices are $225/MT, compared to wheat at $178/MT. This price dynamic is expected to increase wheat feeding by 50 percent year over year. Brazil typically produces about half of its total wheat consumption. As a result, any increase in wheat feeding should result in an increase in wheat imports. USDA pegged Brazilian wheat imports at 6.6 MMT, which would make Brazil the fourth largest wheat importer in the world this year.

While world production continues to increase, milling quality wheat supply continues to erode. Unfavorable weather damaged quality in two major growing regions, pushing a larger than normal percentage of production into feed wheat channels. In countries where rains boosted yields, a reversed corn-wheat spread is encouraging lower protein, milling quality wheat into feed wheat channels, further constraining milling wheat supplies.

Please contact your local USW representative if you have any questions about current market conditions, U.S. wheat quality or the U.S. wheat marketing system.


2. Vince Peterson Named to Follow Alan Tracy as U.S. Wheat Associates President in 2017

At their fall meeting Nov. 5, 2016, in Denver, CO, the USW Board of Directors unanimously selected Vince Peterson as the next President of the organization replacing Alan T. Tracy, who plans to retire in July 2017. Peterson currently serves as USW Vice President of Overseas Operations.

“First I want to thank the board for their confidence in me following the great work that Alan has done leading this organization for the last 20 years,” Peterson told the farmer directors. “This day would not be possible for me without the work and support of all the overseas staff and my colleagues here in our U.S. offices. I want all of them and the board to know that I will do all I can to continue this organization’s strong service to American wheat farmers and their overseas customers.”

“Protecting and expanding export demand for wheat has always been critical, but never more so than in this depressed market,” said 2016/17 USW Chairman Jason Scott, a wheat farmer from Easton, MD. “The entire board believes that Vince Peterson is the right person at the right time to fill the President’s position after Alan retires. He has spent his entire career in the grain trade and has been a steady hand directing overseas marketing efforts for USW over the last 31 years. This also represents a very practical way to make this transition.”

After Tracy informed the board in July 2016 of his intention to retire, Scott formed a search committee and appointed USW Past Chairman Brian O’Toole, a wheat farmer from Crystal, ND, as its chair.

“During our initial meetings, the committee decided to focus the search for Alan’s replacement inside the wheat industry,” O’Toole said. “Vince expressed his interest in the position and it quickly became clear that he was the most qualified candidate with obvious respect across the entire wheat industry. The committee voted unanimously to recommend him to the directors, and they agreed with us.”

“From the start of this process I expressed my hope that this would be a smooth transition,” Tracy said. “Vince has been one of my senior staff colleagues from the time I accepted this position in 1997 and I had no hesitation recommending him as my replacement. We will have plenty of time to look back at my work here, but for now I offer my sincere congratulations to Vince and I look forward to working with him and the board to make sure this organization doesn’t miss a beat.”


3. Crop Outlook and International Durum Forum Addresses Grower Challenges

Members of the U.S. durum industry met this week in Minot, ND, for the 2016 Crop Outlook and International Durum Forum. The annual event, hosted by the U.S. Durum Growers Association and the North Dakota Wheat Commission (NDWC), brings growers and members of the grain industry from across the United States together to hear from experts, participate in panel discussions and hold breakout sessions on some of the crop’s most pressing challenges. The event also provides a unique opportunity for producers, millers, grain trade and pasta manufacturers to interact and share information.

“Not only does the forum provide information on timely durum related topics, it also provides a platform for the industry and growers to discuss issues that affect the industry as a whole and work together toward common goals,” said NDWC Administrator Neal Fisher. ­“The connections made at this meeting every year are priceless and provide the necessary link from producer to processor to consumer.”

Many speakers focused their presentations on addressing vomitoxin (DON) levels. The northern plains durum crop is coming through a year of adverse environmental conditions that favored the development of Fusarium head blight or scab and challenged even the most vigilant of growers. North Dakota State University (NDSU) Plant Pathologist Dr. Andrew Friskop highlighted the environmental conditions necessary for scab development and recent field trials evaluating the effectiveness of various control methods. NDSU Food Safety Program Director Dr. Paul Schwarz shared a basic history of the fungal pathogen, including background on how current regulatory DON limits were established. Schwarz spends the majority of his research time working with barley and the brewing industry, which faces many of the same DON challenges as durum growers and end users. Brian Adams, from the Federal Grain Inspection Service (FGIS), spoke on DON testing, including efforts to ensure consistent test results across laboratories, methods and locations. FGIS is working on studies to evaluate variables in procedures, such as how the particle size of wheat after grinding for the DON test may affect results.

Though there seem to be no easy answers to reducing DON levels, particularly in years with wet, humid growing conditions during the flowering stage of the durum plant, a great deal of work continues to identify best practices for growers and using technology to find long-term solutions.

Also at the conference, USW Vice President of Policy Dalton Henry appeared on a panel titled “Current and Future Durum Policy” with National Association of Wheat Growers (NAWG) President Gordon Stoner and Ward County Farm Service Agency (FSA) Director Grant Buck. Henry highlighted USW’s work overseas and discussed export trends and the role that trade policy plays in facilitating exports of U.S. grown commodities. The panel answered questions about how best to adjust current U.S. farm policy to encourage durum production, possible trade priorities of the next U.S. administration and the need to continue improving market access for U.S. growers and their customers overseas. Other presentations included national pasta consumption trends and supply and demand outlooks for durum and hard red spring wheat.

The 2016 Crop Outlook and International Durum Forum is just one example of a number of meetings this season that involve growers in key discussions about the future of their industry. Active wheat grower organizations and grower leaders help facilitate positive changes in the U.S. industry that work to the benefit of wheat producers and enable them to better meet end-users needs year after year.


4. Wheat Growers Urge Congressional Leadership to Allow a Vote on TPP

Nine months ago, following the signing of the 12-nation Trans-Pacific Partnership (TPP), NAWG and USW called on Congress to rapidly consider and ratify the agreement. After a long and disappointing wait, a real window of opportunity for a vote on TPP will soon open when the legislative session resumes next week. We call on Congress again, to urge its leadership to allow an implementing bill to be considered as soon as possible.

Wheat is the most export-dependent grain commodity grown by U.S. farmers. Since February, many national and state wheat grower association members visited congressional offices to stress their support for the agreement. Since February, however, those same growers have seen their average cash prices drop from an already unprofitable $4.90 per bushel to a devastating $3.50 per bushel.

“Wheat growers depend on export markets like those in South Asia and Latin America that are growing, but highly competitive,” said NAWG President Gordon Stoner, a wheat farmer from Outlook, MT. “When implemented, TPP will help ease the pain of low prices by expanding demand for our wheat in those markets. Now more than ever, we cannot afford to lose even more momentum in these markets from Congress letting this opportunity to ratify TPP slip by.”

Asia is a growing region and TPP has the potential to increase economic opportunity and wheat demand even in countries where we already have duty free access. That is critically important because competitors like Australia are moving ahead with bilateral agreements that eliminate tariffs on wheat imports with countries like Vietnam. Moreover, U.S. wheat exports face similar tariff disadvantages in several other countries that want to join TPP but cannot apply for membership until after Congress and governments of the other countries ratify the agreement.

“The high standards in the TPP agreement should help us be more competitive and hopefully lead to even more opportunity for our wheat as new countries join TPP in the future,” said USW Chairman Jason Scott, a wheat farmer from Easton, Md. “The Obama Administration has taken strong actions that show trade agreements, when enforced, work for agriculture. At such a critical time, America’s farmers and ranchers need this agreement as a platform for expanding global markets for years to come.”


5. Wheat Industry News

Wheat Quality Council (WQC) Names New Executive Vice President. Dave Green will take over as WQC executive vice president on Jan. 9, 2017 and will be responsible for the oversight of all operations for the Council. He will replace the long-time executive vice president, Ben Handcock. “Dave Green brings a wealth of technical expertise and practical knowledge to the position. The Wheat Quality Council is confident that with Dave’s exceptional leadership and comprehensive abilities, the organization will not only maintain our mission and vision but will further develop the Council to an enhanced level,” said Lee Sanders, WQC Chair. Green brings 30 years of experience working for ADM Milling Company, most recently as Director of Quality Control and Laboratory Services. He is also a past WQC chair and has been an active participant in several of its technical committees. Read the full announcement here.

Sullivan Joins Texas Wheat Staff. The Texas Wheat Producers Board and Association recently hired Darby Sullivan as Director of Communications and Producer Relations. Sullivan will manage communications between producers and industry professionals, and with state and national partner organizations. Sullivan graduated from Texas Tech University in 2015 with a bachelor’s degree in agricultural communications. She is originally from Canyon, TX, and comes from several generations of farmers and ranchers. “It’s an honor to be working in an industry that I’m so passionate about, especially when the importance of agriculture needs to be recognized now more than ever,” Sullivan said.

IGP-KSU Grain Purchasing Training. Registration is now open for this course in April 2017 at the IGP Institute in Manhattan, KS, designed to benefit individuals who are responsible for buying U.S. food and feed grains. It is divided into back-to-back one-week sessions. The first week investigates how grain is traded and transported; the second week focuses on commodity price risk management. For more information and to register visit www.grains.k-state.edu/igp.

IGP-KSU Flour Milling and Grain Processing Courses. Registration is open for three 2017 courses at the IGP Institute in Manhattan, KS. The Introduction to Flour Milling course will be held Jan. 16 to 20 and repeated July 31 to Aug. 4, covering all aspects of flour milling from wheat selection to flour blending and functionality. The Basic Milling Principles course is set for June 5 to 9 and will help participants develop a conceptual understanding of the milling process with a focus on mill balance and setting the break system. The Advanced Milling course is on schedule for June 12 to 16 and will focus on quantitative tools and practices to influence flour quality in the mill. For more information and to register visit www.grains.k-state.edu/igp.

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