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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. Taking Stock of the World Wheat Crop
2. Wheat Growers Welcome Trade Enforcement Action on Chinese Market Support Programs
3. Cuban Flour Millers Exchange Information with Kansas Wheat Farmers
4. U.S. Wheat Associates Bids Farewell to Taiwan Colleagues Ron Lu and Serena Wu
5. U.S. Wheat Associates Promotes Rutger Koekoek to European Regional Marketing Director
6. Wheat Industry News

Online Edition: Wheat Letter – September 22, 2016 ( )

PDF Edition:

USW Harvest Report: www.uswheat.org/harvest


1. Taking Stock of the World Wheat Crop
By Stephanie Bryant-Erdmann, USW Market Analyst

As a very informative Grain Risk Management and Procurement course at the Northern Crops Institute wraps up this week, many of the 24 other participants from 16 countries have been discussing the world’s 2016/17 wheat crop. While production volume and supply are once again remarkably high, the buyers here are concerned about how much of the new crop will meet quality and milling requirements.

USDA’s latest forecast of total world wheat production stands at 745 million metric tons (MMT). That is up 1 percent from 2015/16. At the same time, USDA expects global wheat consumption to be 4 percent higher at 737 MMT, compared to 709 MMT in 2015/16. The following is a look at production and quality expectations for major exporting regions and countries outside the United States.

Black Sea. On Sept. 19, Russia’s Ministry of Agriculture reported that wheat harvest there was 90 percent complete. To date, the reported average yield is 2.90 metric tons per hectare (MT/ha) compared to 2.65 MT/ha on the same date in 2015. Russian consultancy SovEcon pegged 2016/17 Russian wheat production at 70.8 MMT, down 500,000 MT from its previous estimate, but still up 16 percent from 2015/16 levels. Strategie Grains (SG) has reported that Ukrainian farmers harvested 24.2 MMT of wheat this year, down 5 percent from 2015/16 despite a record yield of 3.9 MT/ha. Kazakhstan wheat harvest is advancing despite scattered showers. SG pegged 2016/17 Kazakh wheat production at 17.9 MMT, which would be up 31 percent from 2015/16. USDA expects Black Sea exports to total 53.5 MMT, up 6 percent from 2015/16, if realized.

SGS Russia, an independent crop inspection service, classified 31 percent of the Russian wheat crop as feed wheat compared to 26 percent in 2015/16. The milling quality wheat supply (with protein of 11.0 percent to 12.3 percent on a 12 percent moisture basis) remains large because of the overall larger crop size. SGS reports that some areas have more Fusarium damage than in 2015 and some areas have high levels of sprout damage and very low falling numbers; there are also areas with a larger share of high test weight values than seen last year. SGS reports the average protein of Ukraine's 2016 wheat crop as 10.5 percent (12 percent mb) compared with 9.9 percent in 2015. The crop has lower average moisture and a much higher average falling number compared with 2015.

Canada. In its Sept. 20 report, StatsCan projected a 4 percent increase in spring wheat production at 20.6 MMT due to an estimated 13 percent improvement in yields year over year. This more than offset a 9 percent decline in spring wheat planted area. Canadian durum production is estimated at 7.30 MMT, up 36 percent year over year due to a 4 percent increase in planted area and a 30 percent year over year increase in yields.

According to crop reports from the province of Alberta, rainfall is slowing spring wheat harvest and damaging quality. As of Sept. 16, only 31 percent of the crop there had been harvested compared to 60 percent at this time last year. Producers in Saskatchewan are also fighting wet conditions with quality issue. As of Sept. 15, Saskatchewan spring wheat and durum harvests were 29 and 30 percent complete, respectively, compared to 23 and 26 percent complete the week prior. Preliminary durum grade data from the Saskatchewan weekly crop report shows 51 percent of the crop graded as #4 or #5 Canadian Western Amber Durum (CWAD). On average, Saskatchewan produces 85 percent of the Canadian durum crop.

European Union. Stratégie Grains (SG) forecasts total European Union (EU) wheat production at 146 MMT, down 9 percent year over year. Durum production is expected to increase to 9.10 MMT, up from 8.10 MMT in 2015/16, but soft (non-durum) wheat production will fall 10 percent to 136 MMT. Persistent rain hurt yields in top wheat producers France, Germany, United Kingdom and Poland. The rain also damaged wheat quality in France, Poland and parts of Germany, resulting in milling output percentages below their 5-year averages. Current SG estimates peg EU milling quality wheat output at 59 percent of total 2016/17 production, putting total EU soft wheat milling quality production at 81.1 MMT. That is 14 percent below the 5-year average and 25 percent lower than 2015/16. SG expects EU total wheat exports to fall to 26.6 MMT, down 21 percent year over year, if realized.

Argentina. Bolsa de Cereales Buenos Aires (Buenos Aires Grain Exchange) recently estimated farmers in Argentina planted 4.30 million hectares (10.6 million acres) of wheat for 2016/17, up 19 percent from 2015/16 in response to President Macri’s elimination of the wheat export tariff and currency devaluation. As of Sept. 1, Bolsa rated 63 percent of Argentine wheat in very good to excellent condition compared to the prior year when excessive rain damaged the crop. IGC pegged Argentine wheat production at 14.2 MMT, up 20 percent from 2015/16 if realized. However, the expected higher production will not offset an estimated 78 percent decrease in carry-in stocks, which fell to 1.0 MMT. Total Argentine wheat supply is predicted to fall 4 percent year over year to 15.2 MMT. Despite the smaller supply, IGC expects Argentina to export 8.50 MMT, on par with 2015/16 levels.

Australia. The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) forecasts 2016/17 wheat production at 28.1 MMT, up 16 percent from 2015/16 due to very favorable weather conditions. If realized, production volume would be the second largest ever, behind the 2011/12 harvest of 29.6 MMT. Australian farmers increased planted wheat area for 2016/17 to 12.9 million hectares, up one percent from 2015/16. USDA expects Australian exports to increase to 19.5 MMT, up 22 percent from 2015/16 and 3 percent above the 5-year average.

Just this week, ABARES also reported that China’s wheat crop may also have quality problems and said, "the margins between milling and feed wheat prices are expected to be larger than usual" for the 2016/17 crop.

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 by-class reports and in our annual 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.


2. Wheat Growers Welcome Trade Enforcement Action on Chinese Market Support Programs

USW and the National Association of Wheat Growers (NAWG) welcomed the Obama Administration’s new trade enforcement action against China at the World Trade Organization (WTO) announced Sept. 13, 2016. The significant investigative effort by the Office of the U.S. Trade Representative (USTR) and USDA followed five years of work by USW, NAWG and other industry partners to demonstrate how China’s domestic support policies hurt U.S. farmers.

This enforcement action challenges the level of China’s trade-distorting market price support programs for wheat, corn and rice. In describing its action, USTR said, “the level of support provided through these programs in excess of China’s commitment was nearly $100 billion.”

These programs cost U.S. wheat farmers between $650 and $700 million annually in lost income by pre-empting export opportunity and suppressing global prices, according to a 2016 Iowa State University study sponsored by USW. That loss estimate is actually 19 percent more than the losses estimated by a similar 2015 study due to the effect of increasing global stocks and resulting market price decline.

“Wheat production subsidies in China and other advanced developing countries are the single biggest policy issue affecting our farm gate prices and global trade flows,” said USW President Alan Tracy. “In taking this step, USTR and USDA are demonstrating that trade enforcement can ensure that our many trade agreements and a pro-trade agenda really work for American farmers.”

“This enforcement action shows a welcome willingness to defend farmers against governments that blatantly disregard the rules of the road under their trade agreements,” said NAWG President Gordon Stoner, a wheat grower from Outlook, MT. “It comes at a critical time for farmers who have seen market prices collapse to unsustainable levels in recent years.”

A 2014 study by DTB Associates, also sponsored by USW, showed that China’s minimum procurement price of about $10 per bushel for wheat, in addition to other subsidies, violates China’s WTO commitments. That market price support is so high that the Chinese government has to purchase and store enormous stocks of domestic wheat. As a result, USDA estimates that by June 2017, China will hold 44 percent of the world’s wheat stocks, which will be at record levels and further depress market prices. This also hurts Chinese flour millers who are forced to purchase overpriced domestic wheat from these stocks and hurts their customers who pay more for the flour.

Noted Iowa State University agricultural economist Dr. Dermot Hayes conducted the 2015 and 2016 studies of domestic support effects. In reviewing the 2016 study results, which compared a base case including China’s current support to a new scenario in which the factors represented by China’s policies were removed, Dr. Hayes said farmers there would grow less wheat because domestic prices would fall and input costs would increase.

“In our comparison, that would benefit farmers in the United States and other wheat exporting countries as China would need to increase its imports to more than 9 million metric tons,” Dr. Hayes said. “The corresponding lift in wheat exports would increase U.S. farm income from wheat by 19 cents per bushel.”

“China may try to cloak its market price support as necessary to achieve self-sufficiency in wheat production, but this does not justify ignoring its trade commitments,” said Tracy. “Trade plays a vital role in food security, as no country can truly be self-sufficient in food production. The studies we have sponsored clearly show that eliminating these expensive market price support programs and letting the market work to meet their wheat needs would reduce the cost of food for Chinese consumers.”

“Trade agreements cannot meet their promise if other countries ignore the rules, no matter if the agreements are multilateral, bilateral or regional like the Trans-Pacific Partnership,” said Stoner. “That TPP has improved enforcement mechanisms is one more reason we strongly support its passage. Our grower organizations fully support this new trade enforcement action with China, and we will continue to work with our government and industry partners to address other trade distorting issues.”

USW and NAWG have posted the Iowa State studies online at http://bit.ly/1XPLrLo and http://www.wheatworld.org/issues/trade/. For results of two DTB Associates studies measuring domestic support in advanced developing countries, visit www.dtbassociates.com/docs/DomesticSupportStudy11-2014.pdf and www.dtbassociates.com/docs/domesticsupportstudy.pdf. For a third party analysis of individual policy measures by country, visit http://www.oecd.org/tad/agricultural-policies/producerandconsumersupportestimatesdatabase.htm#country.


3. Cuban Flour Millers Exchange Information with Kansas Wheat Farmers
By Marsha Boswell, Kansas Wheat Director of Communications

Kansas Wheat is hosting an informational exchange with a group of Cuban flour mill professionals this week. This first-of-its-kind event allows Cuban millers representing two of the six flour mills there to experience Kansas farming and its wheat industry first hand. Technical Specialist Marcelo Mitre from the USW Mexico City Office is traveling with the team.

The entire trip includes a visit to Kansas Wheat Commissioner Jay Armstrong’s farm, opportunities to discuss crop quality in the state with USDA and Kansas Wheat representatives, as well as tours of the Kansas Wheat Innovation Center, the IGP Institute, the Hal Ross Flour Mill and the Kansas Grain Inspection Service.

Cuba imports all its wheat needs, but is not currently importing any wheat from the United States because of challenges related to the U.S. embargo. Total wheat imports from all origins in marketing year 2015/16 are estimated at 800,000 MT (29.4 million bushels).

“With current, decade-low commodity prices and pressures on the U.S. ag economy, we need to be fostering trade relationships, not prohibiting them,” said Jay Armstrong, past chairman of the Kansas Wheat Commission and a USW director. “Despite many difficulties associated with the United States trading with Cuba, it is apparent that we have a major transportation and logistical advantage in shipping, given Cuba's proximity to our ports. A level playing field with Canada and Europe is critical for U.S. wheat farmers to fully realize their export potential to Cuba. Kansas wheat farmers support ending the embargo entirely.”

The week’s events kicked off Sept. 19, when Kansas Wheat joined Engage Cuba and other farm groups in launching the Engage Cuba Kansas State Council.

“Kansas wheat farmers are excited to be founding members of the Engage Cuba Kansas State Council. As members of this group, we can play an important role to influence significant decisions that have to be made before we can enjoy Cuba as a trading partner,” said Armstrong.

Kansas Wheat has been working for decades to open up the Cuban wheat market, including meetings with Cuban leaders and trade missions to the island nation, often in coordination with USW.

In January 2002, the first shipment of hard red winter (HRW) wheat in more than forty years left the Port of Galveston, TX, and began a beneficial trade partnership. That first shipment contained wheat from Kansas, Texas and Oklahoma, and was the beginning of a total first shipment of 2.6 million bushels, in the wake of Hurricane Michelle.

As that first shipment was leaving, an expert flour miller funded by the Kansas Wheat Commission was on his way to demonstrate HRW wheat milling techniques. Elie Posner, a USW milling consultant, provided the technical assistance.

That trade partnership continued until 2010. During those years of trade, Cuba was a dedicated buyer, purchasing up to 70 percent of its wheat imports from the United States.

One of the key reasons that wheat purchases from the United States have not continued is because, under U.S. law, Cuba must pay for all U.S. goods with cash. Because other competitor countries are able to offer credit to Cuba, U.S. wheat is effectively shut out of the market.

That is not ideal for Raisner Ramos Vanega, Director of Balance and Delivery from Grupo Empresarial de la Industria Alimentaria (GEIA) and representatives from Empresa Mixta Industrial Molinera S.A. (IMSA) flour mill, a joint venture operation with a Mexican company and a Cuban holding company. They spoke this week about their desire to purchase U.S. HRW wheat.

“We have always wanted to buy wheat from the United States, and unfortunately politics have not allowed us to be able to purchase that wheat,” said Amyris Herrera García, Quality Specialist from IMSA mill.

“Hard red winter wheat is a good wheat. Transportation costs are a lot lower and we have had good yields in processing that wheat,” said José Suarez Linares, Quality Department Supervisor from IMSA, which produces flour, semolina and bran. Whole wheat products are not popular in Cuba, so most of the flour is used to make white pan bread and rolls. The bran is removed from the kernel and used as animal feed.

“We hope to continue strengthening these relationships and awareness of our purchasing system, so that when the embargo is fully lifted, these friends will have the information they need to successfully incorporate U.S. and Kansas wheat into their milling operations,” said Armstrong.


4. U.S. Wheat Associates Bids Farewell to Taiwan Colleagues Ron Lu and Serena Wu

USW announces the retirement of two long-time associates from its Taipei Office. After 33 years of service, Ronald L. J. Lu is stepping down as Country Director, and Serena Wu is retiring her post as Office Manager and Accountant after 38 years of service.

“Today, per capita wheat consumption in Taiwan has exceeded that of rice. It is a market that prefers the quality and reliability of U.S. wheat and Ron and Serena have played key roles in that success,” said USW Regional Vice President Matt Weimar, who oversees operations in South Asia, China, Hong Kong and Taiwan. “USW has a strong presence in Taiwan, across all sectors and entities in the food industry because of their dedication and commitment representing U.S. wheat farmers.”

Lu joined USW in 1983 as a technical specialist and was appointed country director in 2004. During his tenure, Lu worked directly with end users and importers to help them strengthen commercial links with U.S. export companies through trade servicing, technical assistance and promotional activities. From 2007 to 2009, Lu served as the chairman of the China Grain Products Research and Development Institute (CGPRDI). During his USW career, he has facilitated countless customer and trade team visits to the United States, including the biennial Agricultural Trade Goodwill Mission during which the Taiwan Flour Mills Association (TFMA) traditionally signs letters of intent to purchase U.S. wheat during the following two marketing years.

Lu will remain with USW through the end of 2016 providing ongoing assistance as a Senior Advisor.

“Over these many years, Ron has added value to every level of USW's work in Taiwan — from improving and creating the finest wheat food products for consumers to strengthening the long-standing trade relationship between Taiwan and the United States,” said USW Vice President of Overseas Operations Vince Peterson. “Through his steady efforts and successes, he has made immeasurable contributions to both the wheat food industry in Taiwan and the U.S. wheat production and export industries.”

"By hosting so many public introductions of those new wheat food products with his customers and educational partners, Ron truly has been the face of U.S. wheat in Taiwan,” said Weimar.

Wu joined USW in 1978 serving as a personal assistant to the country director and overseeing daily office operations. Her responsibilities ranged from budget development and program management to finances and translations. She had an important role in planning conferences, seminars and meetings for the Taipei office, including arranging travel for office staff, consultants and trade cooperators.

“With an ever-engaging smile and upbeat attitude, Serena has been a constant element in producing and molding USW's activities into a highly successful program for Taiwan,” said Peterson. “She has been indispensable and the wheat-related industries on both sides of the Pacific owe her a huge thank you for her dedication, service and for bringing us all together.”

Taiwan is on average the sixth largest market for U.S. wheat, purchasing more than 15 million metric tons (more than 550 million bushels) since 1998. In each of the past two marketing years, Taiwan’s flour millers purchased about 1.0 million metric tons (MMT), or nearly 37 million bushels, of U.S. wheat.


5. Rutger Koekoek Promoted to European Regional Marketing Director

USW is pleased to announce that Rutger Koekoek is promoted from marketing specialist to regional marketing director for Europe. Koekoek joined USW in 2009 and is based in the organization’s regional office in Rotterdam, The Netherlands.

“We are recognizing Rutger’s work and his successful performance over the past several months filling this regional role as our long-time director Goris van Lit transitioned to retirement,” said USW Regional Vice President Ian Flagg. Flagg manages USW staff and all market development activities in Europe, the Middle East and North Africa from Rotterdam.

Europe continues to be an important regional market for U.S. wheat. It is the largest export market for northern durum and Desert Durum® and flour millers frequently import U.S. hard red spring (HRS) wheat to blend with locally-produced “soft” wheat.

Before joining USW, Koekoek worked in seed sales and marketing management first with Delta and Pine Land in its Netherlands office. Koekoek managed sales and marketing of cotton seed in Europe and directly managed Delta and Pine Land's Turkish subsidiary. Koekoek also worked as a marketing product manager for Dutch vegetable seed producer De Ruiter Seeds, where he steered the development and product lifecycle for pepper and eggplant varieties.

Koekoek received a bachelor’s degree in International Management at the Rotterdam Business School and a master’s degree in Agricultural Economics and Marketing from Wageningen Agricultural University.


6. Wheat Industry News
  • Congratulations to USW President Alan Tracy and his wife Kris who recently welcomed their seventh grandchild. Carrington Joy Tracy was born to Paul and Lily Tracy on Sept. 6 in Austin, TX.
  • Wheat Industry Remembers Joe Berkely. The founder of High Plains Journal (HPJ) passed away Sept. 9 at 97. A long-time friend of the wheat industry, Berkely was involved in the formation of Great Plains Wheat, which eventually merged with Western Wheat Associates to form USW, as well as the National Association of Wheat Growers, Kansas Association of Wheat Growers and Kansas Wheat Commission. “Joe was always so very proud of his work for and with wheat growers, to help them come together, work together for their future success,” said HPJ Associate Editor Jenni Latzke. “I am proud to work for the company he created.” Read the full announcement here.
  • Best Wishes to Lynne Hoot, who is retiring on Sept. 30 after many years as Executive Director of Maryland Grain Producers Utilization Board (MGPUB), a USW member organization, and Maryland Grain Producers Association. Everyone at USW thanks to Lynne for her exceptional leadership, management and strong support for developing overseas markets. Three cheers, Lynne, for a cracking career helping farmers! Lynne's colleague Lindsay Thompson will replace her starting Oct. 1. MGPUB will also have a new email (lindsay.mdag@gmail.com) and mailing address (2019 Jarman Branch Road, Centreville MD 20617).
  • Communicators Learning Mission to Cuba. A group of 20 agricultural journalists from the American Agricultural Editor’s Association is in Cuba, Sept. 19 to 23, to learn firsthand about the people, culture and government. Follow HPJ Associate Editor Jenni Latzke’s experiences as she shares them at http://www.hpj.com/latzke/blog/cuba/.
  • AIB Supports Food Exports to the United States. Some of our end product customers may be interested in AIB International's assistance to help companies bring their food safety program into compliance with the many changes mandated by the U.S. Food and Drug Administration (FDA). New U.S. regulations are fast approaching and AIB is offering a free webinar on compliance with the new Food Safety Modernization Act.

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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