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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. USDA Raises World Wheat Estimates Without Comment on Russian Rumors
2. U.S. Wheat Farmers Anticipate Increased Trade Opportunities with Cuba
3. A Busy Year for Trade Policy
4. Celebrating Wheat Food Education in China and Taiwan
5. Season’s Greetings from U.S. Wheat Associates
6. Wheat Industry News


PDF Edition: (See Attached) (See attached file: Wheat Letter - December 18, 2014.pdf)

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


1. USDA Raises World Wheat Estimates Without Comment on Russian Rumors
By Casey Chumrau, USW Market Analyst

There will be even more wheat produced and traded around the world in 2014/15, according to USDA. While it did not make substantial changes to U.S. or Russian estimates, USDA did add another 2.32 million metric tons (MMT) of global wheat production over last month’s estimates in its monthly World Agricultural Supply and Demand Estimates (WASDE) report released Dec. 10.

World Production Increased. Overall, USDA upped its world production estimate to 722 MMT, 7.41 MMT larger than last year’s record crop. Slight decreases in both beginning stocks and global consumption did not offset the production increase, resulting in a 2.0 MMT increase in estimated ending stocks of 195 MMT.

A 1.8 MMT increase in estimated Canadian production accounted for most of the global increase. USDA matched the Canadian government’s current projection of 29.3 MMT, which would still fall well short of last year’s record 37.5 MMT. Cool, wet weather there did not affect yields as drastically as expected but greatly diminished quality. Statistics Canada reports high quality durum is in particularly short supply.

USDA also adjusted production in Kazakhstan to match official governmental statistics, up 500,000 MT to 12.5 MMT. USDA left its projection for Australian production unchanged at 24.0 MMT despite serious drought conditions that prompted the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) to lower its official estimate to 23.2 MMT this month.

World Trade Estimates Also Up. USDA increased expected world trade by 3.12 MMT to 158 MMT, which would be 5 percent lower than last year but exceed the five-year average of 147 MMT. EU’s export forecast increased 1.0 MMT from last month to 29.0 MMT based on the pace of shipments so far this year. Canadian exports should reach an estimated 22.5 MMT, up 500,000 metric tons from last month due to the larger crop size. USDA increased projected exports from Kazakhstan and Ukraine to 5.8 MMT and 10.3 MMT, respectively.

Russian Rumors. The WASDE update did not reflect growing rumors that the Russian government will curb wheat exports to protect domestic supply. Instead, USDA decreased its Russian export projection by 500,000 MT to 22.0 MMT, citing increased competition. Russia’s 2014/15 grain exports are at a record pace, lifted by two consecutive bumper crops and a plummeting ruble. However, the government could still restrict exports. Government officials, traders and news media have discussed the possibility that the Russian government might implement tariffs, tighten export rules or halt issuing phytosanitary certificates to customers. As a result, Russian exporters recently dropped prices in an effort to push sales ahead of any such restrictions.


2. U.S. Wheat Farmers Anticipate Increased Trade Opportunities with Cuba

The National Association of Wheat Growers (NAWG) and USW applauded President Obama’s announcement Dec. 17 that the United States will begin discussions to renew diplomatic relations with Cuba, which will make it easier for Cuba to buy U.S. agricultural products, including wheat. We anticipate that these re-established trade relations will help open a market for U.S. wheat products in Cuba.

Cuba, which does not grow wheat commercially, is the largest wheat market in the Caribbean, purchasing almost all of its wheat from the European Union and Canada. Cuba could import at least 500,000 metric tons of wheat from the United States each year but has not purchased U.S. wheat since 2011. Under the current embargo, the United States can export agricultural products to Cuba through the use of third-party banking institutions, which makes facilitating trade burdensome and often more expensive.

“U.S. wheat farmers are excited about the prospect of exporting more wheat to Cuba,” says NAWG President Paul Penner. “NAWG has long supported strengthened trade relations with Cuba and see this as a historic step in that direction.”

“The U.S. wheat industry applauds these actions, which take concrete steps away from a policy approach towards Cuba that has accomplished little,” said USW President Alan Tracy. “If Cuba resumes purchases of U.S. wheat, we believe our market share there could grow from its current level of zero to around 80-90 percent, as it is in other Caribbean nations.”


3. A Busy Year for Trade Policy
By Shannon Schlecht, USW Vice President of Policy

It was an active trade policy year with many worldwide policy negotiations and discussions to track. Following is a recap of major events:

Two major trade negotiations continue that will ultimately benefit consumers, customers and producers. The 12 TransPacific Partnership (TPP) member countries conducted several negotiating rounds in 2014, but agriculture and auto trade issues with Japan slowed the pace. It will take a high level of ambition in these difficult areas to meet the original TPP objective of a comprehensive, ambitious and forward-looking 21st century trade deal. The TransAtlantic Trade and Investment Partnership (TTIP) talks with the European Commission are much further behind and there are several long-standing agriculture issues that cloud optimism for a quick deal. In both these negotiations, USW is specifically watching for eventual tariff elimination and enforceable WTO plus sanitary-phytosanitary (SPS) measures.

The World Trade Organization (WTO) started the year with optimism and momentum to achieve more outcomes on the multilateral front. Unfortunately, India quashed this momentum when it refused to stick to its December 2013 commitment to implement the Trade Facilitation Agreement (TFA) package in July 2014. As a result, the TFA did not move forward as planned, delaying up to $1 trillion in economic benefits to both developing and developed countries. It also put back into question WTO members’ ability to reach any new trade deal.

In November 2014, WTO members clarified India’s use of a peace clause for its trade distorting support program to fund expensive public stockholding programs and moved up the timeframe to work on a permanent public stockholding solution. The clarification for India allowed the TFA to move forward toward implementation. However, the move essentially weakened the 20-year-old Agreement on Agriculture commitments and cut against the WTO's long-term objective of fair and market oriented trading for agricultural products. Ironically, while India was pushing for greater allowances in its public stockholding programs for domestic food security in 2014, especially for wheat and rice, it also became the world’s largest rice exporter in 2012 and 2013.

In December 2014, USW introduced a wheat food security sectoral concept that WTO members could consider that encompasses a more holistic food security approach. Domestic production and holding stocks are elements of food security to the world's consumers. However, an initiative that eliminates import tariffs and export restrictions, increases the transparency of agricultural programs and limits trade distorting support would guarantee importing nations access to exportable wheat supplies and allow markets to work and provide more consistent and affordable wheat food supplies to the world's consumers. Read more online.

Advanced developing country domestic support also continued its trend upward in 2014, which is a major change in agricultural policy over the past decade. The trend has been largely unnoticed until recent years and is an important factor for the prospects of any new multilateral trade effort. While the artificial signals from minimum price support programs, arguably the most trade distorting form of agricultural support, increase, so has agricultural production in these countries. This negatively affects trade opportunities as well as world commodity prices. Additionally, over production often results in the need to export excess supplies since adequate storage facilities do not exist. The result is a double hit on the world’s farmers in the vast majority of countries that faithfully abide by their WTO commitments.

Work on these negotiations and issues that will affect wheat trade for many years to come will continue in 2015 and hopefully lead to policies that develop a more market oriented trading system that benefits trade, and ultimately your customers, consumers and the world's wheat farmers.


4. Celebrating Wheat Food Education in China and Taiwan
By Steve Mercer, USW Vice President of Communications

I have just returned from a very rewarding trip to celebrate old and new educational partnerships between U.S. wheat farmers and the people of China and Taiwan. Washington wheat farmer and USW director Mike Miller joined several USW colleagues and me as guests at a 30th anniversary event for the Sino-American Baking School Dec. 12 in Guangzhou, China. From there, Miller and I also travelled to Yilan, Taiwan, to represent wheat farmers at a Chinese baked product seminar Dec. 15 at St. Mary’s Junior College of Medicine, Nursing and Management.

Retired USW colleagues Fred Schneiter, Rick Callies and Pansy Lam, many current colleagues and several state wheat commissions worked with Chinese officials to help establish the Sino-American Baking School (SABS) in 1984.The school grew significantly through the early years and, more recently, expanded to two campuses serving nearly 2,000 students annually from Guangdong. Because USW has sponsored many short courses over the years and maintained close ties to the school through the years, SABS honored us with special recognition among more than 300 guests celebrating at the central Guangzhou campus.

After greetings by SABS Director Philip Zhou, U.S. Consul General for Guangdong Jennifer Galt addressed the guests, noting the important connection between U.S. wheat farmers and the school.

“Your collaboration serves as a model for the U.S. agricultural sector and China’s food industry and educational institutions,” Galt said. “Your partnership also reflects how U.S. wheat farmers and the Chinese food industry are committed to deepening U.S.-Chinese trade and cultural relations more generally.”

Regional Vice President Matt Weimar, USW/Hong Kong, also offered formal remarks.

“Through the training of bakery personnel from all over China and the use of wheat produced by Chinese and American farmers, either alone or blended together, the wheat foods processing and flour milling industry in China has a bright future,” he said. “We wish SABS many more successful years for the next generation and for generations to come.”

Weimar noted later that those generations would create new demand for imported wheat. Even though China grows more wheat than any other country, wheat use for milling in Guangdong province grew from about 500,000 MT 30 years ago to about four MMT today, which represents about 80 percent of China's imports.

In his address to the guests, Miller said U.S. farmers understand “we must cultivate a reliable, safe and consistent product that not only my children can enjoy, but also your children can enjoy. I am confident that our wheat can help produce more and more high quality baked and processed wheat foods here in Guangdong Province and across China.” As the fourth generation of his family to farm near Ritzville in eastern Washington, Mike grows soft white (SW), hard red winter (HRW), hard red spring (HRS) and hard white (HW) wheat.

Moving on to Taiwan, we learned from bakery visits that the industry sees increasing demand for premium quality baked goods, but there are challenges finding employees. Fortunately, St. Mary’s, a large Catholic vocational “junior college” teaches hospitality management and has excellent cooking and bakery training facilities for students to complete these required sections of the curriculum.

To take advantage of increased demand for new bakery products, Top Food Industry Corporation, a large Taiwan flour miller, and USW sponsored a seminar that we attended at the school. Miller, Weimar and I made brief remarks to about 35 bakers and many St. Mary’s students who participated in the seminar. Baking consultant Hung-Wen Chen and St. Mary’s lecturer Hsin Tien Cheng demonstrated production of three products using medium protein flour that originated in China. First was “hu jiao bing,” or pepper biscuit, with a crunchy baked bun around a seasoned pork and onion filling. Next was “song yu bing,” a flaky pastry made from thin dough rolled with green onions and pan fried. Last was “ma lai gou,” an individual, steamed sponge cake made with flour from soft white wheat, healthy nuts and berries. This treat used to be made with rice flour.

“Our market is very competitive,” a Top Food sales manager told me. “We want to sponsor more seminars like this as a way to help expand the entire wheat foods market and position us as a leader. We are happy to partner with USW and with a facility like St. Mary’s.”

USW Country Manager Ron Lu, who has represented U.S. wheat farmers in Taiwan for many years, said the 23 million Taiwanese now eat more wheat than rice. Nico Wu, St. Mary’s head bakery instructor, confirmed Lu’s point that families and young people are eating more often out of the home, are looking for new products and remain concerned about food safety.

“Now we are helping the flour milling and baking industries introduce healthy, more nutritious wheat foods so we can continue to see increased demand for imported wheat,” Lu said. USW works closely with the Taiwan Flour Mills Association (TFMA), which cooperatively imports wheat for its members. We met with three TFMA members and staff wheat buyers in its new office in Taipei on Dec. 16 to discuss how they might adjust their purchase specifications based on this year’s U.S. HRW, HRS and SW crop quality.

“I learn so much from meeting with our customers face-to-face on visits like this,” Miller said. “This is very important to me in managing my farm because, as I told the guests at the SABS anniversary event, wheat farmers cannot survive without them. This helps me adjust what I’m doing at home to better meet their needs in the future.”

To see some photos from our trip, visit the USW Facebook page at www.facebook.com/uswheat.


5. Season’s Greetings from U.S. Wheat Associates




6. Wheat Industry News
  • USW Headquarters and West Coast Offices Will Be Closed the afternoon of Wednesday, Dec. 24, 2014, through Friday, Dec. 26, 2014, and the afternoon of Wednesday, Dec. 31, 2014, through Friday, Jan. 2, 2015, for the Christmas and New Year’s holidays. Please contact your local USW office for holiday schedules.
  • IGP Distance Milling Course. The International Grains Program in Manhattan, KS, will start its next distance Overview of Milling Principles course on Feb. 9, 2015. The course runs through March 13, 2015. For more information or to register, visit http://www.grains.ksu.edu/igp.
  • NCI Pasta Course. The Northern Crops Institute in Fargo, ND will hold its Pasta Production and Technology Short Course April 14 to 16, 2015. For more information or to register, visit http://www.northern-crops.com/.
  • WMC Flat Bread and Tortilla Course. The Wheat Marketing Center in Portland, OR, will hold its Flat Bread and Wheat Flour Tortilla Technology Short Course May 11 to 14, 2015. For more information or to register, visit http://www.wmcinc.org.
  • Farewell and Best Wishes to USW Regional Vice President Mike Spier who is leaving USW in January to join Columbia Grain in Singapore as a Sales Representative for South Asia. “It has been a tremendous privilege to represent USW and U.S. wheat producers,” Mike said. “I want to express my appreciation to my USW colleagues and our customers for so generously sharing your time and friendship with me.” From all of us at USW, thank you for your service, Mike, and we with you and your family all the best in your new position.

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