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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 19 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. 2016/17 Wheat Yields Break from Trend
2. USW Extends Trade Service to North Asian Customers at Upcoming Conference
3. WTO Negotiations Facing New Realities
4. U.S. Perspective on Consumers Wanting More Information About Food
5. Boyuan Chen to Represent U.S. Wheat Farmers in Taiwan Market
6. Wheat Industry News

PDF Edition: Wheat Letter – October 6, 2016 (See attached file: Wheat Letter - October 6, 2016.pdf)

USW Harvest Report: www.uswheat.org/harvest


1. 2016/17 Wheat Yields Break from Trend
By Stephanie Bryant-Erdmann, USW Market Analyst

It is no secret that U.S. farmers produced a very large wheat crop this year. Looking past the bin-busting numbers, the longer term production trends and divergence from them this year are worth noting.

USDA’s Sept. 30 Small Grains Summary reported that, despite harvesting the smallest area in 46 years, U.S. farmers produced the largest wheat crop since 2008/09. USDA estimated that 2016/17 U.S. wheat production is up 258 million bushels (7.00 million metric tons [MMT]) to 2.31 billion bushels (62.9 MMT). That is a 13 percent increase from last year and 10 percent above the 5-year average of 2.09 billion bushels (57.0 MMT). A 21 percent improvement in average yield more than offset the smaller harvested area.

The low price market signals at planting time last fall encouraged farmers to plant less hard red winter (HRW), hard red spring (HRS) and soft red winter (SRW) wheat. Higher prices for soft white (SW) due to a drought-constrained supply encouraged Pacific Northwest (PNW) farmers to increase planted area slightly. Durum prices were also attractive at planting time, prompting an increase in planted area. However, the increases in SW and durum planted area were not enough to offset the decreases in the other classes. USDA reported U.S. farmers planted 50.1 million acres (20.3 million hectares) of wheat, down 8 percent year over year and 10 percent below the 5-year average.

A mild winter and early spring allowed winter wheat in the reduced planted area to emerge from dormancy in better than normal condition. The early spring also let farmers finish planting spring wheat well ahead of normal in most areas. Beneficial spring rains and favorable temperatures boosted average yields to a record 52.6 bu/acre (3.54 metric tons(MT) per hectare) for all U.S. wheat classes, up 21 percent from 2015/16 and 17 percent higher than the 5-year average of 44.9 bu/acre (3.02 MT/ha).

Over the past 50 years, U.S. wheat average yields increased by 4 bu/acre (0.27 MT/ha) each decade (about 0.20 percent each year) due to breeding improvements and more sophisticated farm management. It is safe to say that this year’s 9 bu/acre (0.60 MT/ha) increase in average yield significantly diverges from the trend line.

If yields had remained near the 5-year average, 2016/17 U.S. production would have been 53.9 MMT, 3 percent less than 2015/16. Therefore, the yield improvement benefits U.S. wheat buyers who can take advantage of decade-low prices to secure an abundant supply of high quality U.S. wheat this year.

With U.S. winter wheat planting well underway, farmers are now looking towards next year’s crop. How much winter wheat they will plant for 2017/18 is still unknown, but wheat prices hovering near decade lows and, for many farmers, below the cost of production would suggest that they will again plant less wheat. If yields return to the historic trend line, then production in the United States could be much smaller next year.

Here is a by-class breakdown of the Sept. 30 report.

Hard Red Winter (HRW). USDA reported 2016/17 HRW planted area at 26.5 million acres (10.7 million hectares), down 9 percent from 2015/16. With exceptionally favorable weather across much of the HRW growing region, USDA estimates total 2016/17 HRW production increased 30 percent to 1.08 billion bushels (29.4 MMT). Yields improved 54 percent and 50 percent from 2015/16 in Kansas and Oklahoma, the top two HRW-producing states.

Hard Red Spring (HRS). In the Northern Plains this year, HRS was not as competitive as pulses, durum and oilseeds, and planted area fell 9 percent from 2015/16 to 11.4 million acres (4.61 million hectares). Average yields in North Dakota, the top HRS-producing state, are projected to fall 4 percent from last year’s record high to 46.0 bu/acre (3.09 MT/ha). USDA projected HRS production at 493 million bushels (13.4 MMT), down 13 percent from the 2015/16 record.

Soft Red Winter (SRW). USDA estimated total 2016/17 SRW area at 6.58 million acres (2.66 million hectares), 7 percent lower than 2015/16 and 20 percent below the 5-year average. USDA expects SRW production will total 370 million bushels (10.1 MMT), up 3 percent from 2015/16, but 18 percent below the 5-year average of 451 million bushels. To read the 2016/17 USW SRW Crop Quality report, click here.

Soft White (SW). Though fall planting in the PNW occurred during the third consecutive year of drought, wheat planted area increased slightly year over year to 4.15 million acres (1.68 million hectares). Then timely rains boosted yield potential across the PNW. USDA forecasts 2016/17 white production at 285 million bushels (7.78 MMT), a 27 percent increase year over year and 8 percent above the 5-year average of 257 million bushels (7.00 MMT).

Durum. Durum acreage increased again this year as farmers responded to higher prices. Northern durum is grown primarily in North Dakota and Montana, while Desert Durum® is grown in Arizona and California. USDA estimates 2.14 million acres were planted to durum, up 24 percent from 2015/16 but still 5 percent below the 5-year average of 2.26 million acres. USDA estimated 2016/17 U.S. durum production at 104 million bushels (2.25 MMT), up 24 percent from 2015/16 after generally favorable weather boosted yields in the Northern Plains.


2. USW Extends Trade Service to North Asian Customers at Upcoming Conference

USW and several of its state wheat commission members look forward to welcoming wheat buyers and food processors from Japan, Taiwan and Korea to Guam to a North Asia Marketing Conference the week of Oct. 10, 2016. This is the third such conference since 2012, providing an opportunity to thank our valued customers and help them produce some of the finest food products in the world using U.S. wheat.

“We very much appreciate the loyalty and consistent preference these customers have for many U.S. wheat classes and this conference expands our opportunity to provide the latest information they need to continue growing their business opportunities,” said Vince Peterson, USW Vice President of Overseas Operations. “We will spend a lot of time talking about the results of our annual crop quality survey and several noted speakers will provide important insight into food industry marketing.”

For example, Michael Every with Rabobank’s Asia-Pacific office in Hong Kong will provide a global financial outlook, and Dr. John Stanton, Professor of Food Marketing, Saint Joseph’s University, will share perspectives on major retail trends affecting the North Asia food industry. A favorite speaker at USW meetings, Mike Krueger, President of The Money Farm, will review supply and demand factors at work in today’s volatile grain markets. Dr. Kimberly Vachal, Senior Researcher & Program Director, Agriculture and Industrial Freight Center at North Dakota State University, will provide a detailed look at rail transportation of grain, followed by USW Vice President and West Coast Office Director Steve Wirsching who will detail how the supply chain is preparing to keep grain flowing during the closure of the Columbia River system from December 2016 to March 2017.

“We have also planned this conference to help our customers build stronger relationships with their reliable U.S. wheat industry partners,” said USW President Alan Tracy. “I want to thank them for joining us and thank our member organizations for their support.”

Those sponsors include the Washington Grain Commission, Oregon Wheat Commission, Idaho Wheat Commission, Montana Wheat and Barley Committee, North Dakota Wheat Commission and USDA’s Foreign Agricultural Service.


3. WTO Negotiations Facing New Realities
By USW Deputy Director of Policy Ben Conner

After attending a series of World Trade Organization (WTO) meetings in Geneva in September, it appears to me that member representatives are at the intersection of two trends influencing agricultural trade negotiations.

First, there is growing recognition that the Doha Round approach to future trade negotiations is not viable , so some countries are casting about for new approaches, while others are digging into seemingly unworkable positions. Second, more countries understand that the policy environment has shifted dramatically since the Doha Round started in the early 2000s. Many now see that the vast majority of trade distortions in agriculture now come from developing country policies.

This second point was felt like an earthquake in Geneva when the United States initiated a first-of-its-kind dispute against China’s price supports for wheat, corn and rice. U.S. industry and government officials had been talking about the problem of advanced developing country farm subsidies for years, but it was easy to ignore as long as no one thought anything would be done. What is hard to ignore now is this: one Chinese program covering three crops provides more than $100 billion in support, which is greater than the GDPs of more than 100 WTO member countries.

Negotiators are still digesting the potential impact of that case, but everyone should know that this is not simply symbolism meant to bolster the prospects of trade agreements like the Trans-Pacific Partnership (TPP). This reflects the serious problem of developing country subsidies that must be addressed. Any new negotiations need to be based on reality, particularly this reality. We at USW believe that developing country subsidies are by far causing the greatest distortions in world wheat trade today.

Outdated frameworks, in which the least ambitious participant dominated, have bogged down negotiators for years. Now, many countries are approaching the negotiations with fresh eyes, ready to tackle specific topics and go beyond the old multilateral model.

However, that is not to say that an agricultural outcome will have the effect of opening trade in wheat. In fact, the last two agriculture agreements actually had the opposite effect.

At the Bali ministerial meeting in 2013 and the Nairobi meeting in 2015, the agricultural agreements reversed some of the progress made by the WTO Agriculture Agreement. In Bali, India and other countries negotiated language, that masquerades trade-distorting price supports as food security programs. At Nairobi, WTO members notably agreed to eliminate all export subsidies but, at the same time, granted an eight-year, unlimited exemption for certain export subsidies commonly used by developing countries in violation of the original WTO Agriculture Agreement.

The next ministerial meeting will be in Buenos Aires in 2017. There, trade ministers will be under pressure to deliver something on agriculture. Again, certain advanced developing countries will try to reverse the progress already been made on trade liberalization and protect current trade-distorting programs.

The United States has clearly sent a strong signal with the China case that not following the existing rules will no longer be ignored. The top priority in Buenos Aires should be preventing further erosion of the trade liberalizing provisions of the WTO Agriculture Agreement, even if that means no new agreement on agriculture.


4. U.S. Perspective on Consumers Wanting More Information About Food
By Steve Mercer, USW Vice President of Communications

While USW recognizes that not every food trend in the United States is applicable to many other countries, some American consumer behavior may be relevant to our wheat milling and food processing customers. Recently, The Center for Food Integrity (CFI) shared research showing that the demand for information about food continues to grow in the United States, which certainly applies to many U.S. wheat markets. CFI is a not-for-profit U.S. organization focused on helping participants in the U.S. food system earn greater consumer trust.

Noting that the research confirms good progress on informing its consumers, the U.S. food industry “still has work to do,” said CFI’s CEO Charlie Arnot. He said the research showed consumers want transparency in very specific areas, including how food affects health, food safety and environmental sustainability.

In announcing the research results, CFI shared the experience of The Hershey Company, which publicly states that consumers have a right to know what is in their food and where it comes from. The company has initiated a “SmartLabel” program that gives consumers the opportunity to link from the package to web-based information about its products and ingredients.

CFI offered more information about how food companies can make a real connection with their customers and consumers. Arnot suggested using a variety of channels including websites, social media, promotional campaigns and videos. The key is to make the information accessible and easy to understand, and to actively engage with customers.

CFI has developed a “trust model showing that trust can be built by demonstrating shared values with consumers. Consumers “simply want balanced, credible information so they can decide for themselves,” Arnot said.

The statement USW makes about U.S. wheat being “the world’s most reliable source” is built on the kind of transparency and shared values more consumers around the world are seeking. No government agency sets U.S. wheat prices directly nor in collusion with sellers. Buyers have third-party certification that U.S. wheat meets their standards. USW is expanding access to information about U.S. wheat production through online resources including our page at www.facebook.com/uswheat, sharing news and information on Twitter at www.twitter.com/uswheatassoc and an expanding range of video stories at www.youtube.com/uswheatassociates.

USW also provides information our customers can use to demonstrate that U.S. wheat farmers work every day to make the United States a sustainable source of wheat for export (http://bit.ly/2dyfYAh). Sustainability is reflected in agronomic practices that reduce inputs and in research and development that improve wheat varieties to increase yields and provide consistently high quality wheat to customers around the world.

To learn more about how to find and share more information about U.S. wheat production, quality and other consumer benefits, contact your local USW representative or write to info@uswheat.org. For more information about CFI’s research, email learnmore@foodintegrity.org or click on the following: “A Clear View of Transparency and How it Builds Trust.”


5. Boyuan Chen to Represent U.S. Wheat Farmers in Taiwan Market

USW is pleased to announce that Boyuan Chen will become Country Director in the organization’s Taipei, Taiwan, office starting Nov. 1, 2016. Chen will manage U.S. wheat market development programs and USW’s business and government relationships in a market that imports on average about 38 million bushels of U.S. wheat every year. Chen will replace long-time Country Director Ron Lu, who is transitioning to retirement at the end of 2016 after 33 years with USW.

“Boyuan Chen is an ideal manager for this position who will draw from 20 years of experience in food and feed commodity procurement with Uni-President Enterprises,” said USW Regional Vice President Matt Weimar. “He joins our history of strong leadership since Western Wheat Associates opened an office in Taipei more than 50 years ago. By helping Taiwan’s flour millers and wheat foods industry constantly improve their products, we have developed very loyal customers for U.S. dark northern spring, soft white and hard red winter wheat farmers.”

After three years in banking, Chen started with Uni-President, Asia’s largest food production corporation, in 1997 as a grain market analyst and gained experience in the company’s soybean procurement group. In 2001, he moved up to assistant chief of the company’s Taipei procurement section working closely with the Taiwan Flour Mills Association (TFMA), the Taiwan Feed Industry Association and the Taiwan Vegetable Oil Manufacturers Association. Chen’s last position with Uni-President was as section chief of import affairs from 2009 to 2016. He earned a bachelor’s degree in Agricultural Economics from National Taiwan University, Taipei, in 1989 and a master’s degree in Financial Management from Syracuse University in 1994.


6. Wheat Industry News
  • Dr. Brett Carver’s Vision. Last week, Carver, wheat breeder on the Oklahoma State University Wheat Improvement Team, met with a group of flour millers from one of Mexico’s the largest milling companies. “Oklahoma Farm Report” Farm Director Ron Hays spoke with Carver about what his program is doing to help overseas and domestic customers. Carver stressed the fact that his program is focused on quality, as wel as high yields and. Read and hear more here.
  • FY 2017 Funds Available for Export Credit Guarantee Program (GSM-102). On Oct. 3, the USDA FAS allocated fiscal year 2017 funds for the Export Credit Guarantee Program (GSM-102). Details are available at www.fas.usda.gov/.
  • Doug Keesling and the U.S. Agricultural Coalition for Cuba (USACC) Advocate for Change. In September, the Kansas farmer participated on a panel discussion on “The Future of U.S.-Cuba Relations” at the Association of American Chambers of Commerce in Latin America and the Caribbean (AACCLA) annual conference. In addition to speaking with several media outlets, Keesling wrote an opinion editorial, “Lifting the U.S. trade embargo on Cuba: The Time is Now,” featured in the High Plains Journal. Learn more about USACC here.
  • Congress Ratifies Long-Awaited Treaty Tied to Global Food Security. First signed by President George W. Bush and pending for nearly 15 years, the now ratified International Treaty on Plant Genetic Resources for Food and Agriculture will ensure U.S. public and private sector plant breeders have secure access to global plant materials as they work to develop the next generation of plant varieties to meet the needs of a growing population. Under the Treaty, a Standard Material Transfer Agreement ensures that the terms for access to germplasm are uniform and transparent for all contracting parties. For more information on the Treaty, see the American Seed Trade Association’s (ASTA) briefing paper and testimony from the Senate Foreign Relations Committee hearing in May 2016. Read the full article here.
  • Registration is Open for the International Food Security Conference. USDA and the U.S. Agency for International Development will host the International Food Assistance and Food Security Conference in Des Moines, IA, Oct. 10 to 11. The conference, held in conjunction with World Food Prize events, will bring together public and private sector partners to discuss issues and challenges related to delivering programs to alleviate hunger and promote long-term food security throughout the world. To register, visit https://goo.gl/forms/Miku5hQyM2Uspitq1. For information on World Food Prize events visit https://www.worldfoodprize.org/.
  • IGP-KSU Grain Purchasing Training. Registration is now open for this course planned for April 2017 at the IGP Institute in Manhattan, KS. This course benefits individuals who are responsible for buying U.S. food and feed grains, and is divided into continuous back-to-back one-week sessions. The first week will investigate how grain is traded and transported, while the second week will focus on commodity price risk management. For more information and to register 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 or unsubscribe.
  • 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.

Nondiscrimination and Alternate Means of Communications
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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