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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. U.S. Hard Red Winter Carry-In Stocks Support Higher Protein Supply
2. Taking a Reasonable Approach to Unusual GM Wheat Finding
3. A Diatribe on the Politics of Trade Agreements
4. USW Market Analyst Joins Colombian Trade Team on Its U.S. Tour
5. Korean Wheat Crop Survey Team Taking Annual U.S. Tour
6. Wheat Industry News

Online Edition: Wheat Letter – August 11, 2016 ( )
PDF Edition:
USW Harvest Report: www.uswheat.org/harvest


1. U.S. Hard Red Winter Carry-In Stocks Support Higher Protein Supply
By Stephanie Bryant-Erdmann, USW Market Analyst


For customers looking to meet their needs for higher protein bread wheat, the United States remains the supplier of choice after carrying in a strong supply of hard red winter (HRW) from the 2015/16 crop with a protein average of 12 percent or more (on a 12 percent moisture basis). Higher protein HRW does carry a premium that is significantly higher than it was when harvest started, but low futures prices take some of the bite out of that market factor for buyers.

Large U.S. carry-in stocks partially offset concern about the high-yielding, lower protein 2016/17 HRW crop and the challenging production and quality issues in the European Union (EU). On July 25, the European Union’s Crop Monitoring Service (MARS) reported abundant rain fell across the EU in June and July. While the rain helped the wheat crop in some countries, it hindered harvest and caused local damage in others. In particular, France, Germany and Poland received 50 percent more rain than normal from June 1 to July 20. As a result, Strategie Grains lowered its EU soft wheat production estimate to 138 million metric tons (MMT), down 9 percent from the 2015 record crop on Aug. 11.

Not only has the rain affected production quantity, it has also hurt quality with France being the hardest hit. According to Strategie Grains data, an average of about 80 percent of French wheat production is milling quality, or roughly 30.0 MMT, in a typical year. However, total French production this year is expected to fall below 30.0 MMT. On Aug. 4, FranceAgriMer lowered its estimate for French wheat production to a 30-year low of 29.1 MMT, down 29 percent year over year, if realized.

While EU production will be lower, the United States is currently harvesting the largest HRW crop since 2008/09. In July, USDA pegged 2016/17 U.S. HRW production at 28.1 MMT, up 25 percent from 2015/16 despite an 8 percent reduction in planted area year over year.

Preliminary test results from the USW Harvest Report on Aug. 5 show a very sound, healthy crop with high test weight (TW), above average thousand kernel weight (TKW) and below average total defects. Average TW of samples to date is 79.7 kg/hl (60.6 lb/bu) compared to the 2015 final average of 78.0 kg/hl (59.3 lb/bu). Average TKW is 31.8 grams, significantly higher than the 5-year average of 29.1 grams. Total defects are 1.3 percent, down from 1.7 percent in 2015. The average grade is #1 HRW, and average protein is 11.1 percent on a 12 percent moisture basis.

Though the average 2016/17 HRW protein is lower than normal due to very favorable growing conditions, the United States has large HRW carry-in stocks from the 2015/16 harvest, which averaged 12.4 percent protein according to the USW 2015 Crop Quality survey. This year, U.S. HRW beginning stocks totaled 12.1 MMT, compared to the 5-year average of 8.57 MMT. In 2015/16 Gulf-tributary HRW averaged slightly higher protein at 12.5 percent protein and the PNW exportable supply averaged 12.0 percent protein. U.S. 2016/17 high-protein, carry-in stocks allow U.S. exporters to meet any specification requirement. This can be seen in the year-to-date Federal Grain Inspection Service (FGIS) export inspection data. FGIS reported 45 percent of 2016/17 U.S. HRW exports were 12 percent protein or higher.

To make sure you get the most value possible from your U.S. wheat purchase, contact your local USW representative, who always stands ready to answer any questions and help meet your needs.

To subscribe to the USW Harvest Report, Price Report and “Wheat Letter,” click here.


2. Taking a Reasonable Approach to Unusual GM Wheat Finding
By Steve Mercer, Vice President of Communications

The recent discovery of a very small number of wheat plants with genetically engineered (GE) resistance to the herbicide glyphosate, as well as the actions of the USDA Animal and Plant Health Inspection Service (APHIS) and the reactions of wheat importing countries represent a reasonable, science-based approach to a very unusual situation.

Nothing is more important to the U.S. wheat industry than the trust we have earned with customers at home and around the world by providing a reliable supply of high quality wheat. USW recognizes the challenges every stakeholder faced as this situation unfolded. We want to thank them all for their patient efforts.

USW, the National Association of Wheat Growers (NAWG) and state wheat organizations believe that APHIS has successfully managed this situation and provided sufficient evidence that this has not affected commercial wheat supplies. Based on that and other facts, we are very confident that nothing has changed the U.S. wheat supply chain’s ability to deliver wheat that matches every customer’s specifications.

APHIS took prompt and thorough action to identify the regulated wheat event in the plants that were discovered and has confirmed to stakeholders that:
· the situation was isolated to only 22 plants in a fallow field in eastern Washington State;
· there is no health risk associated with this wheat event based on Food and Drug Administration evaluation;
· there is no evidence suggesting that this wheat event, or any other GE wheat event, has entered U.S. commercial supplies;
· a validated test to detect this event in wheat was quickly produced and made available to trading partners if so desired to help ensure that any market disruption would be limited and temporary.

A statement with more facts about this situation is posted at: https://www.aphis.usda.gov/aphis/ourfocus/biotechnology/brs-news-and-information/ct_news.

APHIS kept wheat grower organizations, as well as government officials in several key overseas markets, informed as it worked to find the facts. In turn, USW shared information about the situation with overseas grain trade and buyers in several countries that import U.S. wheat.

Two countries took public action after APHIS announced it was looking into the isolated discovery.

Korea's Ministry of Food and Drug Safety (MFDS) temporarily withheld imported U.S. wheat from being milled until it could deploy the new detection test. That agency started testing U.S. wheat very quickly, and found no evidence of GE wheat. Reassured that imported U.S. wheat imports meet all health and safety requirements, MFDS ended its temporary suspension within just seven days of the public statement from APHIS.

Japan's Ministry of Agriculture, Forestry and Fisheries (MAFF) has temporarily suspended only new purchases of western white wheat (soft white and 20 percent club wheat) from the PNW until it can validate and start using a customized version of the new detection assay test. USW expects that to happen well before the end of August. If, as expected, the testing confirms that there is no GE wheat in U.S. white wheat supplies, MAFF will likely end its suspension quickly. MAFF did not suspend any open or new purchases of U.S. HRW and HRS, so vessel loading in the PNW and discharge operations in Japan continue normally.

It is also important to note that grain import officials in Korea and Japan have tested for the glyphosate resistance event identified in May 2013 and cleared every load of U.S. wheat delivered to those countries for the last three years. In addition, researchers at Washington State University have conducted routine phenotype screening for GE glyphosate tolerance in wheat since 2013. In each of the last three growing seasons, this field screening process has involved more than 80 varieties, 2,000 advanced breeding lines and more than 35,000 individual plots. Varieties included in these trials represent more than 95 percent of the wheat acreage planted in the state of Washington and much of the acreage planted in Oregon and Idaho. Screening to date has revealed no glyphosate tolerant wheat plants in these trials.

The federal systems in place ensure that unauthorized biotech products are tightly regulated and do not enter commercial channels. In fact, APHIS recently changed its rules to require developers to apply for a permit for field trials involving GE wheat. APHIS said this more stringent process adds protection that GE wheat will remain confined during the trials.

On behalf of the U.S. wheat farmers we represent, USW again thanks our customers for their reasonable approach to this situation. We are confident that public and private breeders and federal regulators are taking all appropriate actions to ensure that U.S. wheat, wheat flour and wheat foods remain safe, wholesome and nutritious for people, and in animal feed, around the world.


3. A Diatribe on the Politics of Trade Agreements
By Ben Conner, USW Deputy Director of Policy

Few who followed U.S. politics as recently as last summer would have expected to see presidential candidates from both major parties taking a hard line against new and existing free trade agreements, but that is the world we now wake up to every day.

It has always been relatively easy to make the political case against free trade. Showing a closed factory or bemoaning jobs allegedly outsourced to “cheap foreign labor” gets too much attention compared to the positive, but more complex, story of positive trade benefits. The arguments against trade usually ignore the growth of technology (including the introduction of the personal computer and the Internet that occurred simultaneously with implementation of trade agreements and increased productivity), overlook the fact that manufacturing output in the United States is at record levels, and dismiss the dependence of farmers —especially wheat farmers — on international trade for their survival.

Another endlessly repeated concern is about a “growing trade deficit.” Trade deficits may matter, but not as much as opponents would leave us to believe. The perception that all deficits are bad stems partially from the almost exclusive focus by trade advocates on the benefits of trade agreements to exporting countries and industries. Let us use the elimination of import tariffs on U.S. wheat exports as an example. That situation does not mean that countries that import U.S. wheat are worse off because they decide they can afford to buy more U.S. wheat with lower tariffs. The purchase of U.S. wheat adds to the import side of the balance of trade, but that is only a bad thing if you assume that wheat itself has no value.

Likewise, when a U.S. farmer buys fertilizer that was extracted from foreign deposits, the U.S. trade deficit goes up, but the farmer is more likely to be pleased with improving quality and yields than alarmed by an abstract accounting measure published by the Bureau of Economic Analysis.

Another persistent objection raised by skeptics of free trade agreements is that foreign countries try to tip the scales against U.S. companies. And we know there is some truth in that. Much of USW’s trade policy work is devoted to off-agreement practices. More details about that work can be seen on the trade policy section on the USW website. The recourse to address such issues is in the enforcement provisions of trade agreements.

Trade agreements have the potential to create a level playing field where individuals, families and companies can make their own decisions about what to buy and sell. The moral response is to allow people to trade with whom they wish, and not tip the scales. The role of trade agreements is to provide that opportunity, and that benefits both U.S. wheat buyers and wheat producers.


4. USW Market Analyst Joins Colombian Trade Team on Its U.S. Tour

For Stephanie Bryant-Erdmann, USW’s market analyst, the diversity of the wheat export market and its changes keep her job interesting. She works closely with industry partners and USW overseas staff to track the pulse of the industry, so when the opportunity to gain direct insight into customer needs and concerns by traveling with one of USW’s trade teams from Colombia — she took it.

“Trade teams provide a unique opportunity to see the interaction between U.S. exporters and their customers that normally takes place remotely,” said Bryant-Erdmann. “This face-to-face interaction helps me better understand the challenges and opportunities U.S. wheat exports face.”

With funding from USDA’s Foreign Agricultural Service, USW collaborated with the North Dakota Wheat Commission (NDWC) and the Montana Wheat & Barley Committee (MWBC) to host a trade team of five Colombian executives July 24 to 30, 2016. Colombia was the top destination for U.S. wheat in South America in marketing year 2015/16 (June to May) after importing over 670,000 metric tons (MT) from four of the six U.S. wheat classes. During their visits to North Dakota, Montana and Louisiana the team focused on renewing their familiarity with the advantages of the U.S. wheat marketing system and gaining a better understanding of the U.S. wheat industry.

“The managers on this team represent the major flour, cookie and pasta groups in Colombia. Some are experienced buyers and account for 40 percent of the country’s wheat imports in 2015,” said USW Assistant Regional Director Osvaldo Seco, who led the team. “They are directly responsible for evaluating and importing wheat for their organizations and this trip put them directly in contact with traders to better inform their purchasing decisions.”

The team started its trip in Fargo, ND, at the Northern Crops Institute where they heard from a variety of North Dakota State University durum and spring wheat researchers on breeding and quality programs, pasta production techniques and pricing strategy.

“The programs the state commissions put together were excellent. One highlight for me was the USDA-ARS Hard Spring and Durum Wheat Quality Laboratory on the NDSU campus,” said Bryant-Erdmann. “Not only did the team see the depth and breadth of the lab’s capabilities, but we also saw samples fresh from the elevators and fields awaiting analysis for the USW annual Crop Quality Report.”

The trip’s northern leg, which included Montana, put an emphasis on highlighting the supply chain with tours of farms, grain elevators, the Montana State Grain Laboratory, Pasta Montana, General Mills and Columbia Grain. They also had several opportunities to meet directly with growers.

To top off their experience, the team traveled to Destrehan, LA, to visit a FGIS field office and a Bunge export elevator; and to Reserve, LA, to visit Cargill’s Terre Haute Marine Facility.

“Gulf exports account for roughly 45 percent of all U.S. wheat export volume, and have their own, unique challenges and opportunities,” said Bryant-Erdmann. “While the Pacific Northwest handles a similar quantity of exports, the Gulf climate, origination logistics, classes of wheat and customers ensure it is an entirely different animal. This was a great experience to share with the team.”


5. Korean Wheat Crop Survey Team Taking Annual U.S. Tour

Three executives representing Korean flour milling companies will travel through the Pacific Northwest (PNW) Aug. 7 to 14, for a more in-depth look at crop production and quality of soft white (SW), hard red spring (HRS) and HRW wheat. Their visit, which includes stops in Montana, Washington and Oregon, will give them the opportunity to meet with growers, breeders and exporters.

“These milling companies hold purchasing tenders for milling wheat that supply all eight mills in Korea,” said USW Country Director Chang Yoon Kang, who is leading the team. “Each of these managers have a key role in making decisions about wheat origin, class, purchase contract specifications and wheat procurement policies. It is vital that they receive timely and reliable information on the crop situation.”

With funding from USDA’s Foreign Agricultural Service, USW collaborated with the Montana Wheat & Barley Committee (MWBC), Washington Grain Commission (WGC) and Oregon Wheat Commission (OWC) to organize and host this trade team.

In calendar year 2015, South Korea imported 2.37 MMT of wheat, including 1.10 MMT U.S. SW, HRS and HRW wheat sourced from PNW and northern plains fields. While Korean millers import most of their wheat from the United States, Canadian spring wheat is also imported to blend with U.S. classes for bread flour. Australian white wheat is preferred for Korean style noodles, but USW is working to flank that market by helping its customers introduce whole wheat products made with flour from U.S. wheat as a healthy noodle choice.

The team will start its visit in Great Falls, MT, to visit a Columbia Grain elevator and the State Grain Lab. They will also tour O’Hara Farms in Fort Benton, MT, and have dinner with MWBC commissioners. In Pullman and Spokane, WA, the team will meet with Washington State University breeders and tour the USDA Agricultural Research Service (ARS) Western Wheat Quality lab, as well as go on a tour of the HighLine Grain shuttle facility. The final leg of the trip will be to Portland, OR, where the team will learn more about the PNW supply chain from staff at the USW West Coast Office, Wheat Marketing Center, Oregon Wheat Commission, Pacific Grain Exporters Association and FGIS. The team will round out their trip with a farm tour in the Willamette Valley.

“The Korean consumer is sophisticated and demands a wide range of high-quality wheat products that compete effectively with more traditional rice products. Korea has grown into a very important market for U.S. wheat producers because they buy our premium wheat classes and are willing to pay more to extract that quality from our market,” said USW Vice President and West Coast Office Director Steve Wirsching. “This trade team provides a way for the millers to learn more about the upcoming harvest so they can do a better job of originating the best quality we have to offer.”


6. Wheat Industry News
  • Condolences. USW colleagues were saddened to learn that USW Vice President of Finance Kevin McGarry’s father passed away last week. Our thoughts are with Kevin and his family.
  • Annual Crop Quality Survey. Together with its partner organizations across the United States, USW will test 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 are published in the Crop Quality report at the end of October. Please contact your local USW representative for more information about the USW Crop Quality survey, report or seminars.
  • Grain Foods Foundation Study Finds Good Diet, Health for Grains Eaters. A recent study funded by the Grain Foods Foundation and published in July in Food and Nutrition Sciences found that compared to people who avoid eating grain-based foods, people who eat grain foods are generally healthier. Based on the findings, the researchers suggested nutritionists in often lumping grain-based foods in two broad categories — whole grains and refined grains — may be painting with too broad a brush. Read the full article here.
  • IGP Institute Names Shawn Thiele as Flour Milling and Grain Processing Curriculum Manager. In this role, Thiele will develop and teach the core milling and processing courses at the IGP Institute. He will also oversee the creation and presentation of workshops, on-site courses, distance education courses and other technical outreach programs to enhance the market promotion, consumption and utilization of U.S. cereal grains, oilseeds and their value-added products for the global grain and feed industry. Before stepping into this position, Thiele was the operations manager at the KSU Hal Ross Flour Mill for more than three years. For the full announcement visit www.grains.ksu.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.
  • 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, additional photos at www.flickr.com/photos/uswheat, plus video stories at www.youtube.com/uswheatassociates.

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