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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.” The activities of USW are made possible by producer checkoff dollars managed by 19 state wheat commissions and through cost-share funding provided by USDA’s Foreign Agricultural Service. For more information, visit www.uswheat.org or contact your state wheat commission. Original articles from Wheat Letter may be reprinted without permission; source attribution is requested. Click here to subscribe or unsubscribe to Wheat Letter.

In This Issue:
1. U.S. Winter Wheat Seeded Area Reflects Supply, Prices
2. Pattern of Unnecessary Government Intervention Undermines Russia’s Role in World Trade
3. U.S. Wheat Organizations Join Coalition to Re-Establish Trade Relations with Cuba
4. USW Board Team Heads to Taiwan, Philippines
5. USW Leadership Changes in Asia
6. USW Hires New Technical Representatives
7. Wheat Industry News


Online Edition: Wheat Letter – January 15, 2015 (http://bit.ly/1sDIvXy)

PDF Edition: (See attached file: Wheat Letter - January 15, 2015.pdf)

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


1. U.S. Winter Wheat Seeded Area Reflects Supply, Prices
By Casey Chumrau, USW Market Analyst

USDA released a trio of reports this week showing how farmers reacted to weather conditions, relatively high U.S. wheat supplies and relatively low farm gate prices last fall when they seeded winter wheat. Planted area for hard red winter (HRW) and soft red winter (SRW) is down while soft white (SW) winter seedings increased following a shorter Pacific Northwest crop in 2013/14.

USDA’s quarterly Grain Stocks report revealed lower than expected 2014/15 U.S. consumption, which appeared as increased U.S. carry-out stocks in USDA’s monthly World Agricultural Supply and Demand Estimates report (WASDE). Next, the agency’s annual Winter Wheat Seedings report showed winter plantings for the 2015/16 U.S. harvest fell 5 percent from the previous year to 40.5 million acres (16.4 million hectares), including relative declines for two of the three winter wheat classes.

The Grain Stocks report showed 41.5 million metric tons (MMT) of wheat was in U.S. storage bins as of Dec. 1, 2014, up 3 percent from the prior year. Following a recent trend, increased on-farm storage indicates that farmers who have the option are holding their wheat for higher prices. On-farm stocks of 12.9 MMT are up 28 percent from a year ago. The report also revealed lower domestic disappearance than analysts had expected for September to November.

The WASDE report reflected the lower domestic consumption by reducing total projected 2014/15 wheat use by 89,000 metric tons to 32.2 MMT. As a result, the U.S. carry-out stocks estimate increased by the same margin to 18.7 MMT. If realized, carry-out stocks would be 16 percent greater than 2013/14 but still below the five-year average of 21.2 MMT.

The Winter Wheat Seedings report is the first official glimpse at the 2015/16 U.S. wheat crop potential. Estimated acreage was lower than last year and below analyst expectations. At an estimated 29.5 million acres, HRW seedings would be 3 percent lower than last year but slightly more than the five-year average of 29.3 million acres. USDA reports wheat acres dropped significantly in five of the top seven HRW producing states. Seedings in Colorado, Kansas, Montana, Oklahoma and Texas collectively fell 950,000 acres, a 4 percent drop from 2014/15. A combined increase year over year in Nebraska and South Dakota helped offset the decline. According to USDA estimates, HRW acres accounted for 73 percent of total winter wheat acres planted for the 2015/16 crop.

Unfavorable conditions at planting time may have contributed to the drop in Kansas and other states. Kansas Wheat CEO Justin Gilpin told the Associated Press that cold weather and dry soils in the late fall kept some farmers from planting more wheat.

SRW wheat seeded area decreased an estimated 12 percent to 7.50 million acres with acreage dropping in nearly every SRW state. If realized, it would be 6 percent below the five-year average and the fewest SRW acres planted since 2010/11. USDA estimates seedings in Illinois and Missouri fell a combined 26 percent, down 420,000 acres from last year.

Following a drought that cut SW yields in the Pacific Northwest states of Washington and Oregon, farmers there seeded 3 percent more acres of SW winter wheat compared to 2013/14. In Washington, the top white wheat producing state, acreage increased an estimated 100,000 acres to 1.8 million. In Oregon, a 30,000-acre increase offset a decrease in Idaho of the same number. USDA estimates total white winter wheat seeded area at nearly 3.48 million acres, up 2 percent from last year.

Regarding global wheat trade, USDA estimates that exportable supplies from Russia will decline by 2 MMT for 2014/15 (through May 2015) as a result of the government’s decision to impose export duties effective Feb. 1, 2015 (see article below). USDA’s January forecast for 2014/15 U.S. wheat exports was unchanged at 25.2 MMT.


2. Pattern of Unnecessary Government Intervention Undermines Russia’s Role in World Trade
By Vince Peterson, USW Vice President of Overseas Operations

World wheat consumption set a new record in 2013/14 of 713 MMT, the sixth new high in the last 10 years. The only way to meet this demand is for more of the world’s surplus wheat to move from its origin to deficit destinations. In fact, world wheat trade has increased some 50 MMT per year in the past 10 years. USW has estimated that in the next 35 years, by the year 2050, global wheat trade may need to reach or even exceed 225 MMT in order to supply a growing population with improving economic opportunity.

Countries that depend on imports to provide food security to their people need reliability in that supply. The last thing they need is market disruptions and their inevitable price swings. Sadly, the government of Russia has once again fallen back into a troublesome pattern of disruption that has consistently imposed unnecessary economic hardships both on Russian farmers and on many of the world’s most vulnerable buyers and consumers.

In December, the Russian government announced that beginning Feb. 1, 2015, all wheat exports would be levied an export tax at the rate of 15 percent plus €7.50 per MT (with a minimum tax imposition of €35.00). Together with coincidental concern over the Russian winter weather, the announcement of these new taxes helped push global wheat prices rapidly through a 30 percent increase. At today's export values of approximately $260 FOB, the tax calculation would imply an export tax of nearly $48 per MT added to the price of any wheat exported from Russia.

The inescapable fact is that Russia and other countries in the Black Sea region have become critical wheat suppliers to many logistically close markets in the Mediterranean, Middle East, and East Africa. Lower prices (partly reflecting lower quality), small size vessels in some cases and increasing export capacity have drawn nearby wheat importers to the Black Sea. Normally, this would be a positive story of how increasing regional supplies are meeting increased world demand.

However, looking back through the headlines of recent history, a darker story emerges. Five times in just the past seven years, the Russian government has restricted or threatened to limit access to exportable wheat supplies, sometimes even cutting across existing contracts. Each time, the markets responded with a correspondingly sharp price rally (see chart).

These are not just isolated, sensational headlines. Governmental intervention has unexpected, real-life consequences. While repeated interference by the Russian government has not been the only stimulant, intervention greatly magnified temporary supply shortages into full-blown price and supply crises. The result, of course, has forced buyers to seek alternative supplies at artificially high prices.

Yet, drawn in by cheaper prices that Russian exporters must offer to rebuild demand, importers have been relatively forgiving, opting to quickly return each time to Black Sea supply sources after the export restrictions were lifted. However, Egyptian Minister of Supply, Khaled Hanafi may have revealed a crack in that tolerance on Dec. 29 in public remarks about the latest Russian export taxes.

"Egypt has alternatives and would accept offers based upon dependability as well as cost, quality and timing," he said.

Food security is clearly among the top priorities for Minister Hanafi and he must have reliable supply partners to deliver it. We take the Minister's words seriously and believe that he expressed a sense of frustration shared by many importers.

The U.S. government long ago learned from experience that disrupting export grain trade only brings logistical problems and potential economic catastrophe for every segment of the market, including farmers. Fortunately, we said ‘no more.’ Short of a massive, and highly unlikely, crop failure, by law the only way to block U.S. grain exports is through a presidential declaration of national emergency. Importantly, a national emergency does NOT include short-term, fundamental rises in wheat prices. Further, export taxes are expressly forbidden by the U.S. Constitution.

Russia need not be an island unto itself, continually throwing up walls to exporters and importers as the means of managing domestic supply and prices — stifling growth of its own agricultural sector in the process. Someday, Russia may benefit from embracing open markets and free trade rather than continually rushing in and out of the marketplace on a political whim. For example, opening trade would ensure that, even in times of a particularly short wheat crop, supplies would freely move into Russia from surrounding countries or from surplus areas abroad and quickly balance and quell any concern about local food supplies. Russia’s government should be in a position of confidence to be able to assure its citizens that no Russian is going to suffer in the face of rising wheat prices without imposing that suffering on other dependent nations. A failure to accept this reality may well doom Russia’s export-oriented agricultural economy and many dependent importing nations to another decade of this continual feast or famine turmoil.

In the meantime, the U.S. wheat industry offers reassurance in the fact that our doors are open for business 365 days per year. In our collective efforts to offer and efficiently supply the widest range of the highest quality wheat in the world, we are able to live up to our claim as the world's most reliable supplier.




3. U.S. Wheat Organizations Join Coalition to Re-Establish Trade Relations with Cuba

USW and the National Association of Wheat Growers (NAWG) have joined more than 30 other U.S. food and agriculture organizations in forming a coalition that seeks to advance trade relations between the United States and Cuba and end the embargo policy. The U.S. Agriculture Coalition for Cuba (USACC) came together in the new year following the Obama Administration’s unexpected shift in U.S. policy on Cuba. Then just today, the U.S. Treasury Department announced sweeping changes in trade regulations that represent another very encouraging step toward opening the Cuban market.

“We are still analyzing the effect the new regulations may have on wheat trade with Cuba,” said USW President Alan Tracy. “Our initial read is that new rules related to banking relationships, timing of payment for imports and more liberal rules on vessel logistics are the kind of regulatory change we hoped to see.”

Tracy was one of several industry leaders who addressed the media at a news conference introducing USACC Jan. 8, 2015, in Washington, DC.

“In 1998, the Kansas Wheat Commission, the North Dakota Wheat Commission and other states donated 20 metric tons of flour to Cuba,” Tracy said. “USW facilitated that shipment and Cuban bakers loved it! As soon as U.S. legislation allowed it in 2002, we began to make sales and reached up to half the Cuban market. However, that tapered off to zero in 2011 because the Cubans got frustrated with us…and our competitors found their way back in there. With changes in U.S. law, we think there is pent up demand for high-quality U.S. wheat in Cuba that will help lift farm gate prices at home. USW and NAWG know there is a lot of work to do, and only Congress can end the embargo, but we look forward to working with the Administration, Congress and other groups to foster trade with Cuba.”

USACC is now organizing a “Learning Journey to Cuba” for coalition members. This would be the first major U.S. business delegation to Cuba since President Obama’s announcement. USACC notes that the Cuban government welcomes this initiative and it expects final approval soon.


4. USW Board Team Heads to Taiwan, Philippines

Over the next two weeks, USW Market Analyst Casey Chumrau, two U.S. wheat farmers and a state wheat commission administrator will visit Taiwan and the Philippines after briefings in Portland, OR, today.

This USW Board Team includes Leonard Schock, a wheat farmer from Vida, MT, a past USW chairman and a current USW director representing the Montana Wheat and Barley Committee. Robert Delsing, a wheat farmer from Hemingford, NE, is representing the Nebraska Wheat Board. Mary Palmer Sullivan, Vice President of the Washington Grain Commission, is representing farmers from her state.

USW Board teams are intense, regional visits that help educate USW board members and state wheat commissioners about the day-to-day work of USW’s overseas offices. Additionally, board teams help build personal connections between our overseas customers, the farmers who grow our high value wheat and other industry stakeholders.

The team will be posting regular updates and photographs of their travels. Follow the team’s progress on the USW Facebook page at www.facebook.com/uswheat.


5. USW Leadership Changes in Asia

USW announces changes to its leadership team in Asia following the departure of Regional Vice President Mike Spier who recently joined Columbia Grain as Southeast Asia Representative.

Matt Weimar is named Regional Vice President for South Asia and will relocate to USW’s regional office in Singapore after many years of service in Hong Kong as Regional Vice President for China. In addition to supervising staff and directing strategic planning and activities in USW’s 32-nation South Asia region, Weimar will continue to supervise USW activities in China and Taiwan. He will be assisted by Joe Sowers who is promoted to a new position as Assistant Regional Vice President. Sowers will continue to work from USW’s office in Manila, Philippines, but with new responsibilities now including supervisory and marketing support for USW activities in Korea.

“Both Matt and Joe have earned the trust of their customers and colleagues over many years of work on behalf of U.S. wheat farmers, and we are confident they will be very successful in their new positions,” said USW Vice President of Overseas Operations Vince Peterson. “Not wanting to squander his 30 years of work in China, Matt will stay engaged with customers there.”

Weimar started with USW as country director in the Beijing office in 1987 and was assigned as regional director in 1993 in the Hong Kong office. Weimar hails from a wheat and cattle ranch near Arlington, OR, where he worked in his family’s business and helped manage adjacent wheat and cattle ranches. Weimar received a bachelor’s degree in agricultural and resource economics from Oregon State University in 1982, graduating with high honors after being named both outstanding undergraduate and senior in OSU’s College of Agriculture. His other work experience includes marketing livestock feeds and supplements for Loomix, Inc., and value-added product promotion in Asian markets for the Oregon Department of Agriculture.

Sowers joined USW in 2005 as a market analyst in Washington, DC, and earned a promotion to senior market analyst before moving to the USW office in Mexico City as assistant regional director with responsibility for Mexico, the Caribbean, and Central America. In 2011, he accepted his most recent post as assistant regional director for South Asia in Manila. He earned a bachelor’s degree in agronomy and a master’s degree in agricultural economics from Virginia Polytechnic Institute and State University. From 2000 to 2004 Sowers analyzed global grain and oilseed markets with the economic consulting firm, Global Insight, stationed in Philadelphia and Barcelona, Spain.


6. USW Hires New Technical Representatives

USW has added two new technical service representatives to its overseas staff. Shin Hak (David) Oh joins as Food/Bakery Technologist in the USW office in Seoul, Korea, and Tarik Gahi joins as Milling and Baking Technologist serving markets in the Middle East and North Africa from the USW office in Casablanca, Morocco. USW is the wheat industry’s export market development organization working to promote all six classes of U.S. wheat in more than 100 countries.

“I am delighted to welcome Shin Hak to our team in Korea,” said Chang Yoon Kang, USW country director. “He has excellent skills and experience in research and product development that will be very valuable to our Korean customers and U.S. wheat farmers.”

Most recently, Oh was a senior researcher and bakery section leader with SPC Group, Korea’s leading bakery and confectionary products company. His work focused on bread products including ingredients and improvers. Oh developed a commercially successful sugar-free white pan bread and served on a team that implemented Hazard Analysis & Critical Control Points (HACCP) food safety management systems. He earned bachelor’s and master’s degrees in food and biotechnology from Korea University and Seoul National University respectively, and he successfully completed bakery and sanitation courses at AIB International, Manhattan, KS.

“Tarik Gahi is a professional miller who is well prepared to expand our technical assistance to flour mills, bakeries and biscuit manufacturers in this region,” said Ian Flagg, USW regional director for the Middle East and North Africa. “His work will focus on reinforcing the superior end-use characteristics of U.S. wheat through service and in-house milling and baking activities.”

Gahi is a 2002 graduate of IFIM, the Moroccan Milling School, who worked as a shift miller at Al Ghurair Food Group in Dubai, United Arab Emirates from 2002 to 2008. He then became a milling operations manager for Seaboard West Africa Limited in Freetown, Sierra Leone, before returning to his native Morocco as head miller/operations manager at Moulins Fassia. Gahi will apply a wide range of experience managing bread and durum wheat milling lines and related baking operations in his new position with USW.


7. Wheat Industry News
  • The Ohio Small Grains Marketing Program (OSGMP) welcomes Stacie Seger as communication manager. The OSGMP works to improve wheat production, wheat qualities and to strengthen markets for wheat in Ohio as well as wheat export markets.
  • Our sympathy to the family and friends of Robert S. French, a grain merchandiser with ADM, who passed away unexpectedly in late December. He started his career as a grain merchandiser in Portland, OR.
  • Wheat Innovation Takes Wing. Daljit Singh, a Kansas State University plant pathology doctoral student is using an unmanned aerial system, or drone, and near infrared photography to identify more productive experimental wheat lines. This should help researchers move promising lines into development and to farmers’ fields faster and more efficiently. Read more in a report by Kansas Wheat at bit.ly/1BqM05O.
  • USW, Here and There. Policy Specialist Elizabeth Westendorf and Programs and Planning Assistant Stephanie Bryant-Erdmann are in Manhattan, KS, participating in the IGP Institute Introduction to Flour Milling short course. On Jan. 17, Vice President of Planning Jim Frahm, Vice President of Overseas Operations Vince Peterson and USW Secretary-Treasurer and Maryland wheat farmer Jason Scott travel to Spain to start USW’s annual planning process. There will be additional planning meetings at the Arlington, VA, headquarters and in Vietnam. In addition, the USW board of directors will hold its winter meeting Jan. 28 to Feb. 1, 2015, in Washington, DC; it is a joint meeting with the NAWG board of directors.


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