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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 Forecast Surprises Markets with No Risk to Reliable U.S. Supply
2. Looking Deeper into the World’s Wheat Crop
3. ISAAA Releases 2013 GMO Plantings Report
4. Facts to Share About Health, Nutritious Wheat Foods
5. Wheat Conversations
6. Wheat Industry News

Online Edition: Wheat Letter – February 20, 2014 (http://bit.ly/1fD7jSS)

PDF Edition: (See attached file: Wheat Letter - February 20, 2014.pdf)

USW Price Report: www.uswheat.org/prices


1. USDA Forecast Surprises Markets with No Risk to Reliable U.S. Supply
By Casey Chumrau, USW Market Analyst

USDA surprised the U.S. futures markets Feb. 10 by lowering U.S. domestic supplies more than expected in its monthly World Agricultural Supply and Demand Estimates (WASDE) report. Partly as a result, U.S. futures climbed to their highest point since mid-December and, at least temporarily, stalled a slide in which since October all three nearby futures contracts lost 20 percent of their value. The markets’ strong reaction does not reflect the actual U.S. supply situation, which remains quite strong.

USDA estimates total U.S. supply, which includes carry-in stocks from last year plus this year’s production, at 82.1 million metric tons (MMT), down just 4 percent from last year and below the five-year average of 83.3 MMT. The real shift in the supply situation is a prediction of lower carry-out stocks at the end of the year due to increased exports. Early in the marketing year, USDA estimated total 2013/14 U.S. exports would be 25.2 MMT, which would have been well below the five-year average of 28.5 MMT. However, due to the strong, steady pace of U.S. exports, total sales already exceed that initial forecast and USDA now expects total exports will reach 32.0 MMT. The strong U.S. supply situation and its sophisticated marketing system allow the market to absorb increased demand and continue to provide high quality wheat when all customers need it most.

For example, U.S. wheat exports now are usually lower when Black Sea wheat is available in large quantities for export. Last year, Middle Eastern, North and East African customers relied heavily on U.S. wheat when Black Sea supplies were unavailable but have not had to do so this year. However, U.S. exports will increase an estimated 17 percent this year despite a 33 percent rebound in Black Sea exports because two other major wheat consumers increased their U.S. imports.

This year, Brazil and China have turned to U.S. wheat supplies in a big way. Sales to the two countries alone represent 29 percent of total U.S. 2013/14 sales-to-date. Brazil’s demand went unmet by its principle supplier Argentina because of political and production issues. Analysts estimate that China controls almost one third of total world wheat supply. Growth in Chinese consumption has outpaced production increases the last few years and the world’s largest wheat consumer has chosen to supplement domestic supplies with increased imports of several classes of U.S. wheat. The United States is able to meet the increased demand of Brazil and China while meeting the demand obligations of customers with a more consistent purchase history.

Looking forward, USDA predicted U.S. carry-out stocks will be 15.2 MMT, down 22 percent from last year and well below the five-year average of 21.5 MMT. In addition, the stocks-to-use ratio* of 23 percent will be well below the five-year average and the lowest since 2007/08. However, the current U.S. ratio is higher than most world exporters, with the exception of Canada where the ratio is well above average due to record production. Of note, even when the U.S. stocks-to-use ratio fell to a record low of 13 percent in 2007/08, the U.S. wheat store never closed.

Overall, the 2013/14 marketing year is a shining example of the reliability of U.S. wheat. While the futures market had a sharp reaction to the WASDE report, customers can rest assured that the U.S. wheat market is poised not only to meet regular export obligations, but also to step in when other suppliers fall short.

*The stocks-to-use ratio indicates the level of carryover stock as a percentage of the total demand or use and is a benchmark for supply and price trends.


2. Looking Deeper into the World’s Wheat Crop
By Shawn Campbell, USW Assistant Director, West Coast Office

Today, a quick glance at world wheat supply and demand might indicate that supplies are abundant, prices are trending down and the world’s importers can be somewhat relaxed about meeting their near-term needs. However, well-informed buyers can see that the real picture of today’s wheat market has more depth than the snapshot reveals – with potential impact on import strategies.

No doubt, the macro supply numbers are large and impressive. In its February WASDE report (see story above), USDA places global wheat supplies for the 2013/14 marketing year at 888.1 MMT, including record total wheat production of 711.9 MMT.

Looking deeper, though, beginning stocks in the six traditional wheat-exporting regions are on a four-year trend down, from 84.0 MMT in 2009/10 to 53.0 MMT in 2013/14. That is the lowest carry-in for major exporters since 2008/09, the year following the supply crisis of 2007/08. World wheat use, on the other hand, is trending up. USDA estimated that the world will consume a record 696.6 MMT of wheat and world wheat trade will reach a record 159.4 MMT. Not surprisingly, global stocks-to-use ratios are also falling, from 31 percent in 2008/09 to 26 percent projected for this marketing year.

Following is an overview of supply and demand situations in other major exporters that add detail to the supply and demand picture.

Russian wheat production bounced back from a drought in 2012/13, reaching 52.1 MMT, up 38 percent compared to last year and the fourth largest crop since the dissolution of the Soviet Union. However, heavy rainfall during harvest resulted in a crop with lower protein and weaker gluten than normal. Russian farmers responded by holding back their better quality supplies in anticipation of higher prices. In turn, higher prices later in the year affected Russian wheat’s competitive position on the world market. USDA’s first estimate of Russian wheat exports in July was 17.0 MMT. The estimate is currently at 16.5 MMT.

Ukraine’s wheat situation is similar. While estimated production of 22.3 MMT is up from last year, quality suffered with harvest rains. In addition to quality issues, farmers are choosing to plant corn (maize) over wheat. High winterkill in winter wheat and the greater profit potential of corn is spurring the increase in corn planted area and production the past three years. In fact, Ukraine has produced more corn than wheat for the past three years and exported more corn than wheat for the past four years.

USDA estimates wheat production in the European Union (EU) at 142.9 MMT, the third largest crop ever, and expects exports to reach a record 27.5 MMT. What the numbers do not show is that a large part of the production increase is taking place in Eastern Europe, a region noted for growing lower quality wheat. EU feed wheat usage has been declining, replaced by higher corn production and increasing corn imports from Ukraine. This forces countries like Romania to find other markets for their increasing wheat supplies, creating new competition for Russia and France in North Africa and the Middle East.

France itself is not immune to quality challenges. News outlets reported French farm groups are voicing concerns over wheat varieties bred more for yield than quality. In addition, a cold wet spring in 2013 resulted in a crop with below-average protein and above-average moisture; prices had to come down before that wheat would move to market. Moreover, just a few weeks ago, Egypt, the world’s largest wheat importer, lowered its moisture specification from 13.5 to 13.0 percent.
That new requirement will likely exclude higher-moisture French wheat from the Egyptian market.


Logistical issues have pushed availability of Canadian wheat well into the future (see the Jan. 23 Wheat Letter) in part because the spring wheat crop is so large. There are similar, though less disruptive, logistical issues in the United States. U.S. exporters are bidding and delivering wheat reliably, but farmers in the northern United States have reacted to a very large basis by storing much of their wheat up country. This affects another issue: exportable supplies of high protein spring wheat.

The average protein levels for Canadian Western Red Spring (CWRS) and U.S. hard red spring (HRS) classes are an entire percentage point lower than last year. This has resulted in the highest premium for 14.0 percent over 13.0 percent protein since 2010/11. Large carry-over stocks of high protein HRS and record CWRS production have kept the premium in check. If next year’s HRS and CWRS protein levels are lower than average again, the looming shortage of high protein wheat could be a big challenge for the world’s millers and bakers.

Moving to the Southern Hemisphere, Argentina’s wheat farmers have little economic incentive to grow more wheat because of disruptive government policies. And, for the second year in a row, Argentina had a poor crop and Brazil will need to source much of its bread wheat from other sources (including a reliable supplier to their north).

Australia has also harvested its third largest crop ever at 26.5 MMT, but supplies of the higher protein wheat classes, Australian Hard and Australian Prime Hard, likely will be limited. Farmers in Western Australia, South Australia and Victoria are reaping bumper crops, but a drought has restricted supplies in Queensland and New South Wales. The drought did help raise wheat protein levels but also cut short supplies of grass and feed grains for the majority of Australia’s cattle herd. The result has been high protein wheat moving away from the export market into domestic feed channels.


3. ISAAA Releases 2013 GMO Plantings Report

The International Service for the Acquisition of Agri-Biotech Applications (ISAAA) last week released its annual report on the global status of commercialized crops with traits derived from biotechnology. The report notes that commercial planting of biotech crops increased for the 18th consecutive year in 2013, with 175.2 million hectares grown around the world, up 3 percent from 2012 and over 100 times more than the 1.7 million hectares grown in 1996. The report also highlights the many benefits of biotechnology that accrue not just to farmers in developing and developed countries but to the environment as well.

The United States is once again the top country for biotech crop plantings, followed by Brazil, Argentina, India, Canada and China. Bangladesh, Panama and Indonesia also approved biotech crops in 2013 but no planting had occurred. In total, 36 countries (the EU-27 counting as one) have approved biotech crops for planting, though only 27 currently plant commercial biotech crops.

Farmers in developing nations represent a huge share of those benefitting from biotechnology in 2013. Only eight of the countries planting biotech crops are considered industrialized. Similarly, 90 percent (16.5 billion) of the estimated 18 million farmers growing biotech crops were small, resource-poor farmers.

According to the report, from 1996 through 2012, biotech crops provided benefits to farmers and the environment by:
  • increasing global crop production by $116.9 billion;
  • saving 497 million kilograms of active ingredients used in pesticides;
  • reducing CO2 emissions in 2012 alone by 26.7 billion kg, equivalent to taking 11.8 million cars off the road for one year;
  • saving 123 million hectares of land; and
  • helping alleviate poverty for more than 16.5 million small and resource-poor farmers and their families, totaling more than 65 million people.

While wheat is not one of the 27 crops benefiting from biotechnology, U.S. wheat farmers were pleased to see the continued adoption of the technology around the world in other crops. USW remains committed to producing more and better wheat with less impact on the environment. Our top priorities, as always, are on quality, safety and delivering what our customers demand.


4. Facts to Share About Health, Nutritious Wheat Foods

Humans have been eating wheat for thousands of years. Around the world, every day, wheat is the source of 20 percent of all the calories we consume. Recently, however, self-promoting doctors stretching way beyond their expertise have been selling books by claiming gluten in wheat flour is the primary cause of obesity and related diseases such as diabetes. Others claim to show that all grains are the underlying cause of general inflammation and cognitive dysfunction, even Alzheimer’s disease.

Sadly, more and more people who want simple answers to their fears about weight, self-image and future risk of disease are turning away from wheat foods (especially those fortunate enough to have the disposable income to worry about such matters). As a noted U.S. psychologist recently wrote: “Entire companies, stores and restaurants have discovered a marketing strategy that works to get us to buy their gluten-free products in supermarkets or eat in their shops and restaurants ... a new way to prey on the psyches of consumers.”

The truth is that a person who truly needs to eat gluten free has a very serious medical condition known as celiac disease. Moreover, eating gluten free food for the rest of us denies our bodies of complex and rich carbohydrates necessary for hunger satiety, digestion, stamina and fuel during exercise.

U.S. Wheat Associates (USW) and the wheat farmers we represent share the specific concerns about what Oklahoma State University wheat breeder Dr. Brett Carver calls “gluten-oia.” In addition, we share the more general concern of our customers about the often conflicting and sometimes suspect nutritional information about foods made from wheat.

Fortunately, there are many sensible, science-based studies supporting the fact that wheat and grain foods play an important role in the human diet. Here is some information that you can share with your customers and acquaintances:
  • Consuming grain foods helps with weight maintenance. In fact, a July 2009 study published in the Journal of the American Dietetic Association shows that those who consume a medium-to-high percentage of carbohydrates in their diet have a reduced risk of obesity.
  • Grain foods are a major source of iron, a key nutrient in energy production and release.
  • Enriched grains are the primary source of folic acid and help to reduce specific types of neural tube birth defects.
  • Enriched grains provide our bodies with essential B vitamins (niacin, thiamine and riboflavin), which collectively help maintain a healthy nervous system and increase energy production, and which may help lower cholesterol.
  • Whole grains are naturally low in fat.
  • Whole grains contain important nutrients such as selenium, potassium and magnesium, which collectively may help boost immunity, lower blood pressure and prevent heart disease and some forms of cancer.
  • Whole grains are a good source of fiber.
  • Whole grains lower the risk of irritable bowel syndrome and diverticular disease.

For more information and other resources about wheat and grain food nutrition, visit the Wheat Foods Council at www.wheatfoods.org, the Grain Foods Foundation at www.goforthegrain.org or www.grainsforyourbrain.org.


5. Wheat Conversations

Wheat Letter wants to share some insight from several recent articles about issues that are important to wheat farmers around the world and to their customers.

"Almost everything I hear about (industrial agriculture) is a myth. It's such an emotional issue — a highly ideological and politicized issue — that what I find is that most of what people write and say and believe about it just fits into some narrative, some worldview. And it's not very factual or evidence-based."
- Dr. Steven Novella, Yale University, from an article in Mother Jones magazine

"We have competition around the world. Buyers have opportunities to source their wheat from different regions. Having lived overseas, I can tell you it is critical to maintain and build those relationships. Customers need to have a name and a face for the U.S. wheat producer so they know who they can reach out to if they have a question, if they need education or need help to purchase U.S. wheat as the best value for the products they need to produce."
- Shannon Schlecht, USW vice president of policy, from an article by Kansas Wheat

“This variety (Oakley CL) has a good flour yield and also a very good mixing tolerance and a good loaf volume. If this variety can be planted in larger acreage, then the millers and bakers will have good wheat to process.”
- Guorong Zhang, HRW wheat breeder, Kansas State University Agricultural Research Center

“What do you know about wheat? The crop is the focus of the Borlaug Summit on Wheat for Food Security, an event CIMMYT is hosting in March to celebrate what would have been the 100th birthday of Dr. Norman Borlaug. Topics of the summit range from the history of wheat, to the work of Dr. Borlaug, to climate change and world grain policy.”
- Brenda Goth, CIMMYT Blog

“Imports are raised 10 million bushels as railroad backlogs and other logistical problems slow Canadian wheat shipments to Pacific Coast terminals and encourage additional shipments of hard red spring wheat into the U.S. market.”
- USDA, from the February 2014 World Agricultural Supply and Demand Estimates Report


6. Wheat Industry News
  • USDA Releases Agricultural Projections to 2023. USDA expects U.S. crop prices to decline in the near term but remain above 2007 levels over the next decade, according to its annual baseline projections. USDA projects wheat acreage will continue the long-term general downtrend it has been in since the early 1980s. For 2014/15, USDA estimates farmers will grow 2.2 billion bushels (59.9 MMT) of wheat on 57 million planted acres. For more information, read http://bit.ly/1clLPfK. Read the full report at http://1.usa.gov/1gA9ryF.
  • IFPRI Study Shows Combo of New Technologies Can Increase World Crop Yields. The International Food Policy Research Institute (IFPRI) released a study titled "Food Security in a World of Natural Resource Scarcity” showing widespread adoption of technologies, including biotech seeds, irrigation and no-till farming, could slice world food prices by nearly half and cut food insecurity by as much as 36 percent. The study weighed the impacts of 11 different technologies on corn, rice and wheat yields, crop prices, trade and world hunger. Heat-tolerant varieties of wheat could raise grain yields by 17 percent and, when combined with irrigation, yields may jump 23 percent. Precision agriculture technology boosted wheat yields by 25 percent. For more information, visit http://bit.ly/M9n500.
  • Senators Call for End of Cuban Embargo. Sens. Patrick Leahy (D-VT) and Jeff Flake (R-AZ), two Senators from opposite ends of the political spectrum, on Tuesday jointly called on President Obama to end the trade embargo on Cuba. In an op-ed for the Miami Herald, Leahy and Flake point to surveys that indicate a majority of people in the United States support a change in U.S. policy toward Cuba. For more information, read http://bit.ly/1dHV3E9.
  • USDA Names New Appointees. U.S. Secretary of Agriculture Tom Vilsack named Tina May as chief of staff to Deputy Secretary Krysta Harden, promoted Courtney Rowe to deputy communications director and named Cullen Schwarz as press secretary.
  • ASB Baking Tech 2014 Coming in March. The American Baking Society’s (ASB) “Best Week in Baking,” formally known as BakingTech, will be March 2 to 4 in Chicago. The meetings will focus primarily on technical sessions covering topics from general operations to ingredients to packaging. For more information, visit http://bit.ly/1h5TIpx.
  • WMC Asian Noodle Technology and Ingredient Application Short Course. The Wheat Marketing Center (WMC) in Portland, OR, will hold its Asian Noodle Technology and Ingredient Application Short Course March 10 to 14, 2014. For more information or to register, visit http://www.wmcinc.org.
  • IGP Flour Milling Short Courses. The International Grains Program (IGP) in Manhattan, KS, will hold its Buhler-KSU Expert Milling Course in English March 17 to 21, 2014. The Spanish version of the course will be March 24 to 28, 2014. For more information or to register, visit http://www.grains.ksu.edu/igp/.
  • IGP/NCI Durum Wheat Milling, Pasta Production Courses. IGP and The Northern Crops Institute (NCI) in Fargo, ND will hold a Durum Wheat Milling short course at NCI April 7 to 9, 2014. An NCI Pasta Production and Technology Short Course will follow from April 9 to 11. For more information or to register, visit http://www.northern-crops.com/.

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