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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 18 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. Potential Problems in Southern Hemisphere Unlikely to Affect Wheat Market
2. May the Fundamentals Be With You
3. Customer Service Demonstrates U.S. Wheat Value
4. USW Shares Crop Quality Data at Annual Seminars
5. History Lessons for TPP Ratification
6. Wheat Industry News

PDF Edition: (See Attached) (See attached file: Wheat Letter -December 3, 2015.pdf)

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


1. Potential Problems in Southern Hemisphere Unlikely to Affect Wheat Market
By Stephanie Bryant-Erdmann, USW Market Analyst

With a small portion of 2015/16 world wheat production still in Southern Hemisphere fields, KCBT hard red winter (HRW) wheat futures have fallen 34 cents since early November based on bearish fundamentals. Record global stocks and the strongest U.S. dollar in 12 years have combined with record low ocean freight rates to expand the reach of cheap Black Sea wheat, limiting HRW export demand.

Adding additional pressure to the markets is the relatively good condition of the U.S. winter wheat crop. In its Nov. 30 Crop Progress report, USDA’s National Agricultural Statistics Service (NASS) said winter wheat condition (including HRW) improved 2 percentage points from the prior week. The report rated 55 percent of the crop good to excellent compared to 58 percent in 2014 on the same date. Winter wheat emergence is also on pace with the 5-year average at 93 percent.

Topsoil and subsoil moisture levels across the United States are also more favorable than last year, with notable exceptions in parts of the western states following the fifth year of drought conditions. NASS rated overall topsoil moisture for the United States at 82 percent adequate or surplus levels, compared to 70 percent on the same date last year. NASS reported a similar trend with subsoil moisture, rating 75 percent as adequate or surplus compared to 67 percent in 2014.

These factors combine to make this a buyers’ market. To date, the only bullish price news for the 2015/16 crop comes from weather conditions attributed by some to El Niño effects in the Southern Hemisphere. That region accounts for an average of only about 7 percent of global wheat production but a very significant 19 percent of global wheat exports.

As of Nov. 26, the harvest in Argentina, which exports an average of 75 percent of annual wheat production, is 20 percent complete. That is significantly behind last year’s pace of 31 percent. Heavy rains that delayed harvest for much of November have also resulted in some quality downgrading according to Bolsa de Cereales, the Argentina Grain Exchange. The International Grains Council (IGC) expects Argentina to harvest 10.4 million metric tons (MMT), which is 25 percent less than 2014/15, and attributes that change to less planted area.

The same heavy rains that delayed harvest in Argentina also affected Brazil’s southern wheat growing regions caused loss of yield potential and quality downgrades, according to the Dec. 1 International Grains Council (IGC) report. On average, Brazil imports 6.76 MMT of wheat with domestic production accounting for the other half of its annual consumption. Time will reveal its final quality, but a private agronomist recently told a Brazilian farm publication that, “This wheat crop is to be forgotten!” USDA currently expects Brazil wheat production to be similar to 2014/15 levels at 6.0 MMT, which is 10 percent greater than the five-year average. However, the apparent quality damage in both Argentina and Brazil could lead to higher domestic wheat feeding in both countries and thus a need for more imports of milling wheat into Brazil from outside of the region.

In its December 2015 crop report, the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) lowered its estimate for Australian wheat production to 24.0 MMT, down 5 percent from its September estimate, but still 1 percent higher than 2014/15 levels. Hot, dry conditions from the strongest El Niño in 20 years persisted across the country, though Reuters reports that adequate subsoil moisture prevented any significant yield potential decreases. Untimely rains in late October and November slowed harvest, but ABARES said the rain did not hurt overall crop quality.

Buyers and sellers will continue to watch the Southern Hemisphere harvest for late changes to wheat market fundamentals as the 2015/16 harvest wraps up. However, with the much larger Northern Hemisphere winter wheat crop headed into dormancy, there appear to be few changes on the horizon to change the underlying fundamentals that are driving this global buyers’ market in wheat.


2. May the Fundamentals Be With You

If you are a wheat importer, market fundamentals have given you a great gift this season: a reduction in the dollar cost of wheat to a level not seen for many years. Global supply is up, demand is relatively stable — though still near record levels — and bulk freight rates are down.

To be more specific, and even a bit bold, U.S. wheat represents a great buying opportunity. Although it costs more to buy the dollars needed to import U.S. wheat, when you weigh all the factors that affect its value, U.S. wheat has much to recommend it.

What we say about our wheat is not an empty promise. U.S. wheat is the world’s most reliable choice. In a season of surplus and wide variability in prices, USW continues to make this case because U.S. wheat growers have consistently produced abundant supplies of excellent quality wheat and earned an enduring reputation for reliability and value over many years.

USW believes that a large number of customers from around the world continue to turn to the United States for wheat because buying it carries less risk. U.S. wheat quality is predictable and, as an objective third party, the Federal Grain Inspection Service (FGIS) certifies that all exported wheat meets import specifications. Their inspectors create a shipping inspection log that is available to the buyer as an additional risk management tool. FGIS supervisors double-check the work of every inspector and periodically send working samples and equipment to their national technical center to be checked again. That makes a positive difference for wheat buyers around the world.

The U.S. wheat store also sells a wide variety of classes that are proven specific, high-quality ingredients for any end product need. U.S. soft red winter (SRW), for example, is an excellent, proven wheat for confectionary use and baguettes, while HRW is a consistently superior bread wheat compared to Black Sea region crops. Each class offers inherent quality and functional value.

Moreover, no other wheat seller does more than the United States to add value to its wheat through customer support. At its very base, this support comes from the farmers who produce the wheat.

In good years and bad, U.S. wheat farmers have supported USW’s effort to work directly with buyers to answer questions and resolve issues in purchasing, shipping or using their six classes of wheat. With U.S. wheat, buyers also get professional technical assistance, education, information and personalized consulting that help strengthen overseas milling, storage and handling, and end product industries. As always, USW stands ready to help meet our customers’ needs (see Customer Service Demonstrates U.S. Wheat Value, below).

At a time when other wheat-exporting countries are aggressively offering their product, it is easy to overlook other opportunities. However, it really is a great time to reconsider the value of U.S. wheat given its full reliability, quality, service and advantages.

For more information, please contact your local USW representative.


3. Customer Service Demonstrates U.S. Wheat Value

USW makes an on-going effort to help customers improve their processes and product quality. Its work in the rapidly expanding South Asian region offers one example of how service increases true value of U.S. wheat.

Incomes in South Asian markets are growing as large manufacturers add factories to produce electronics, automobiles and other goods for the export and domestic markets. Our example focuses on how USW is helping the cookie, cracker and other confectionery product sectors meet their growing opportunities. New processing and retail entrants in these sectors are encouraging local businesses to improve their product quality and presentation. Moreover, for these businesses, flour products milled from U.S. SW have the performance characteristics to help them meet the emerging demand.

Taking a step back, millers and some soft wheat end users traditionally look first at protein percentage when considering functional characteristics. In this case, our customers knew that two hot, dry growing seasons in a row have limited the supply of SW with lower protein levels. They were concerned about how the higher protein SW would perform. USW responded with trade service and technical support that reassured customers.

The key was demonstrating that solvent retention capacity (SRC) analysis is the best way to evaluate flour performance and that even higher protein SW meets expected standards without increasing costs. USW is reinforcing this approach during technical service visits and education for flour mills and processing facilities throughout the South Asian region. For example, USW recently conducted a soft wheat flour products training session for sales and quality managers at a mill operated by one of the region’s largest milling groups, which built on prior training sessions earlier in 2015 at the mill and at a regional training center in a prior year.

Price risk continues to be a concern for these customers, but USW quickly addresses individual issues. USW this year helped another mill’s procurement managers understand how contract specifications, FGIS shipping log data and other purchasing aspects add value to U.S. wheat purchases.

Now, several major customers have more knowledge and tools to consider the ingredient options they need to serve their downstream customers. This same level of service and technical assistance is available for all customers and those organizations that are interested in learning more about how to put U.S. wheat to work. For more information, contact your local USW representative.


4. USW Shares Crop Quality Data at Annual Seminars

After weeks of preparation to analyze thousands of samples and publish the results in USW’s 2015 Crop Quality Report, professional staff from USW, state commissions and educational partner organizations shared quality information about the 2015/16 U.S. crop at USW’s annual series of Crop Quality Seminars.

By the end of November, USW had shared current data on grade factors, flour extraction rates, dough stability, baking loaf volume, noodle color and texture, and more for all six U.S. wheat classes, to hundreds of buyers, millers and processors in more than more than 30 countries. We want to thank our guests who attended 26 separate seminars, including our first crop quality seminar conducted over the Internet, and customers who welcomed us to their places of business.

Legacy organizations to USW first identified the need to quickly gather and share new crop data in 1960. Since then, wheat producers and the U.S. government have provided the funding used to test, analyze and publish a complete picture of each year’s crop. Given this commitment to transparency, you can be confident in the data, which, together in consultation with your local USW representative, you can use to get the most value possible from this year’s abundant, high-quality supply.

For more information about current U.S. wheat crop quality, visit our website to see the 2015 Crop Quality Report as well as more detailed reports on each class, published in English, Spanish, French and Arabic, with Mandarin versions available soon.


Tarik Gahi, USW Milling and Baking Technologist serving the Middle East, East and North Africa, was one of several speakers reviewing 2015/16 U.S. wheat crop quality at a recent seminar in Cairo, Egypt. Hundreds of customers and friends participated in more than 26 crop quality meetings this year.


5. History Lessons for TPP Ratification
By Dalton Henry, USW Director of Policy

As details of the Trans-Pacific Partnership (TPP) continue to garner headlines, there is a lot of speculation about when Congress will consider the agreement. A delay would be very costly and the proof of that is found in the recent history of U.S. free trade agreements. It is worth looking back in recent history to just how costly delays in trade agreements can be.

Nine years ago, on the day before the Thanksgiving holiday the U.S. and Colombia finished negotiations on a free trade agreement that promised lower wheat costs for Colombian millers and greater market access for U.S. wheat producers. The United States dragged its feet on implementing the agreement for nearly six years amid tepid congressional support and the election of a new administration that insisted on renegotiating certain new provisions.

During that delay, Colombia moved to secure agreements with other countries, most notably Canada. With faster approval by the Canadian government, the Canada-Colombia Free Trade Agreement went into effect nine months ahead of the U.S. agreement. It allowed duty free access to Canadian wheat supplies, which in turn put U.S. wheat at a disadvantage. As U.S. wheat growers waited for the U.S. government to act on our FTA, U.S. wheat market share in Colombia plummeted to 27 percent in 2011/12, from the previous three-year average of 55 percent.

A delay in the consideration and approval of the TPP could have similar far-reaching effects for the U.S. wheat industry. Vietnam is a rapidly growing wheat market for quality U.S. supplies, with imports from the U.S. steadily rising over the last decade. The dark side of this comparison lies in the enactment of the recently completed ASEAN-Australia free trade agreement, which gives Vietnamese millers duty-free access to Australian wheat after Jan. 1, 2016. Without equal tariff treatment that would come with TPP’s implementation, U.S. supplies will suffer a $12 to $15 per metric ton (MT) disadvantage. That would likely negate for a time much of the technical and trade service work USW has invested in Vietnam and potentially blocking more than 600,000 MT of U.S. wheat over the next two years from customers who want to import it.

The current timeline scenarios for TPP consideration are troubling. The agreement is a third of the way through a congressionally mandated 90-day public review period. The U.S. International Trade Commission is formally evaluating the agreement in a review expected to last until mid-May 2016. That means congressional consideration would likely not start before mid-2016. Many commentators believe that timeline would put consideration too close to the fall 2016 U.S. elections, giving political cover for those who insist the agreement will have to wait until late 2016. Even more concerning would be a delay demanded by opponents to hold off consideration until a new administration takes office and the next Congress is seated.

We believe the old saying that those who fail to study history are doomed to repeat it applies to our concern about the future of the TPP agreement. Any of these delays will cost U.S. growers and their customers dearly, and that is something worth remembering.


6. Wheat Industry News
  • Scientists Agree Pasta is a Healthy Food. During World Pasta Congress in October, an international committee of scientists and food authorities released a Scientific Consensus Statement concluding that, contrary to fad diet thinking, pasta represents a healthy, complex carbohydrate-containing food suitable to most diets. For the first time since the original Consensus Statement in 2004, scientists addressed topics including gluten-free trends, sports nutrition and sustainability. Read the full announcement and consensus statement here.
  • Germany Steps Up Its Wheat Sequencing Effort. The German Federal Ministry of Food and Agriculture announced Dec. 2 that it would award 1.5 million Euros to a project aimed at providing a reference sequence for two wheat chromosomes, part of the international effort to decipher the bread wheat genome, led by the International Wheat Genome Sequencing Consortium (IWGSC). Read the full announcement here.
  • University of Minnesota Professors, Students Developing 'Next Generation of Crops'. Researchers at the University of Minnesota are working on a wheat that you do not have to replant, and you could find it in stores soon. Perennial crops are convenient because farmers do not have to re-plant them year after year, and now perennial wheat grass could be the future. Read the full story and watch the video report here.
  • CIMMYT Scientist Ravi Singh Receives Honor for Wheat Genetics, Breeding. The American Association for the Advancement of Science (AAAS) named Singh a Fellow of the organization for his “distinguished contributions to the field of agricultural research and development, particularly in wheat genetics, pathology and breeding.” Singh’s research has shown that globally effective, durable resistance to leaf, yellow and stem rust fungi in wheat involves interactions of slow rusting genes that have additive effects and that the accumulation of four or five of these genes results in a level of resistance comparable to immunity. Read the full announcement here.
  • Evogene Officially Opens Research and Development Facility in St. Louis, MO. Evogene Ltd., a leading company for the improvement of crop productivity and economics for the food and feed industries, recently opened a new Research and Development facility in St. Louis. The company collaborates with world-leading agricultural companies to develop improved seed traits in relation to yield and abiotic stress (such as tolerance to drought), and biotic stress (such as resistance to disease and nematodes), in wheat and other key crops. Evogene also focuses on the research and development of new products for crop protection, such as weed control. Read the full announcement here.
  • Asian Noodle Technology and Ingredient Application Course. This hands-on course at the Wheat Marketing Center focuses on improving noodle quality by optimizing flour and functional ingredients. The dates for the next course in 2016 are still to be determined, but those interested can learn more at www.wmcinc.org.
  • IGP-KSU Introduction to Flour Milling. Scheduled for Jan. 11 to 15, 2016, this course will focus on the principles of the milling process, the relationship between wheat quality and the effect of the milling process, understanding what wheat types and products each can produce, and flour functionality. Registration will close on Dec. 18, 2015. Click here to register and for more information.
  • 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.


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