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In This Issue:
1. Current U.S. Wheat Export Sales Outpace 5-Year Average
2. Panic is Not a Good Strategy When Considering Future Trade Policies
3. Long-Term Relationship with Thai Flour Mill Benefits Customers and U.S. Farmers
4. USW Prioritizes Face-to-Face Engagement with Customers and U.S. Wheat Growers
5. Government Confirms No GE Wheat in Commercial Supplies
6. Winter Wheat Seedings and Conditions Point to Smaller 2017 Crop
7. Wheat Industry News

PDF Edition: Wheat Letter – December 1, 2016 (See attached file: Wheat Letter - December 1, 2016.pdf)

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


1. Current U.S. Wheat Export Sales Outpace 5-Year Average
By Stephanie Bryant-Erdmann, USW Market Analyst

Five months into the 2016/17 marketing year (June to May), total U.S. export sales of 18.9 million metric tons (MMT) are 30 percent ahead of last year’s pace and 7 percent ahead of the 5-year average pace. Soft red winter (SRW) and durum sales continue to be slower than last year, but as of Nov. 24, volumes in seven of the top 10 U.S. export markets from 2015/16 are higher than last year, while Taiwan is matching last year’s pace. Hard red winter (HRW) has already exceeded both 2014/15 and 2015/16 total sales, and is 25 percent ahead of the 5-year average on the same date. Both HRW and hard red spring (HRS) year-to-date exports are the largest since 2010/11. White wheat sales are also ahead of both last year’s pace and the 5-year average pace. USDA projects 2016/17 exports will rise to 26.5 MMT, which, if realized, would be 26 percent higher than 2015/16.

USDA reported HRW year-to-date exports at 7.58 MMT, up 93 percent from the prior year. Brazil and Mexico are now the number one and number two largest HRW purchasers. As of Nov. 24, HRW sales to Brazil totaled 1.01 MMT, which is on par with total Brazilian 2014/15 HRW imports. Sales to Mexico are also up 80 percent year over year at 1.04 MMT, nearly equal to last year’s total HRW purchases as well. HRW purchases by Japan total 571,000 metric tons (MT), up 22 percent from 2015/16. To date, HRW sales to Colombia, Ecuador, Indonesia and Thailand are already greater than total 2015/16 HRW sales. Year-to-date sales to Chile and Peru are nearly three times greater than each country’s total HRW imports last year.

As of Nov. 24, exports of soft white (SW) wheat are up 19 percent year over year at 3.28 MMT. That is also 5 percent ahead of the 5-year average on this date of 3.12 MMT. Sales to the Philippines and Japan, the two largest SW purchasers, are up 16 percent and 22 percent, respectively. Year-to-date, Philippine millers purchased 772,000 MT, up more than 100,000 MT from 2015/16. U.S. SW sales to Thailand and Indonesia are also up. Year-to-date, Indonesia has purchased 264,000 MT, compared to total 2015/16 purchases of 166,000 MT. Thailand’s imports are up 25 percent year over year at 167,000 MT.

HRS sales of 5.98 MMT are up 29 percent year over year, and 28 percent ahead of the 5-year average pace. As of Nov. 24, buyers in the Philippines purchased 1.13 MMT, up 44 percent from 2015/16. The Philippines is the top HRS buyer, and sales to seven of the top ten HRS customers are also ahead of last year’s pace. Japanese HRS purchases are 21 percent ahead of last year’s pace at 633,000 MT. Sales to China of 480,000 MT are up 39 percent from last year’s sales on the same date. Thailand, Venezuela and the Dominican Republic HRS sales are already greater than their respective total 2015/16 sales.

Sales of SRW for 2016/17 are down 34 percent year over year at 1.61 MMT despite the improved quality of the 2016/17 harvest and the lowest prices in ten years. While SRW has excellent end-use characteristics for cookies, crackers and cakes, a large portion of SRW is historically used as a blending flour and for inexpensive flatbread production. Due to the large global supply, SRW faces perhaps the most competition in world markets for these two uses. SRW sales are the strongest to countries where cookie, cracker and cake production facilities are located, which is also the highest-value usage. Sales to Honduras are 26 percent ahead of 2015/16 at 85,000 MT. Sales to Peru and the Dominican Republic are both up 5 percent from 2015/16, at 105,000 MT and 90,000 MT, respectively. Sales to other Central American countries, including Guatemala, Jamaica and El Salvador, are also ahead of the 2015/16 pace.

On average, 53 percent of U.S. total durum sales occur from June through November. Year-to-date durum exports total 334,000 MT, down 40 percent from the same time last year and 16 percent behind the 5-year average pace. The slow export sales are due to “just-in-time” purchasing pattern many companies adopted as they waited for final Northern Hemisphere durum quality to be known. However, with significant quality concerns in Canada, U.S. traders report renewed interest in U.S. durum. To date, Nigeria, the European Union (EU) and Algeria are the top durum buyers. A significant portion of year-to-date 2016/17 sales is designated as “sales to unknown destinations.”


2. Panic is Not a Good Strategy When Considering Future Trade Policies
By Ben Conner, USW Deputy Director of Policy

On Nov. 8, 2016, American voters shocked the world and themselves by electing Donald J. Trump to be the 45th President of the United States. To those who trade goods and services across the U.S. border, including wheat buyers, this may be cause for some alarm because of statements made by the President-elect over the past year.

This is, however, no time to panic. The U.S. wheat store will remain open. The President-elect has yet to enact a single policy, and campaign rhetoric always seems to have a way of adjusting to reality, particularly after a year where rhetorical flourishes played such an outsized role on the campaign trail.

And here is the reality. Much of the U.S. economy depends on a rules-based trading system, including free trade agreements (FTAs) and the World Trade Organization (WTO) agreements. All those agreements have provisions to prevent a country from giving special privileges to their producers.

The reason for that is simple enough: special privileges backfire because other countries impose their own special privileges in response. Sets of rules that create a level playing field, such as a trade agreements, allow people in each country to buy and sell without interference based on their own skills and preferences.

The network of trade agreements to which the United States is party — including NAFTA, CAFTA, the six Trans-Pacific Partnership (TPP) member countries that have existing FTAs with the United States, and the WTO — is integral to the function of the U.S. economy, because so many jobs are in whole or part dependent on international trade.

Wheat is the most export dependent grain grown in the United States and our overseas customers rely on its quality, consistency and reliability of supply. New and existing trade agreements are major contributors to the profitability of U.S. wheat farmers and their customers.

It is difficult to appreciate the scale of that dependence and the ramifications of threats to pull out of agreements or impose WTO-inconsistent punitive tariffs should any of those actually occur. However, it is interesting to see the path one formerly protectionist president took toward more open trade. President William McKinley, once one of this country’s most ardent protectionists, told a crowd shortly before his death: “Commercial wars are unprofitable. A policy of goodwill and friendly trade relations will prevent reprisals. Reciprocity treaties are in harmony with the spirit of the times; measures of retaliation are not.”

It will never be too late for President-elect Trump to come to this same conclusion. Despite his disappointing promise to pull out of the TPP, he is already advocating new bilateral trade agreements (it is worth noting that TPP is essentially a collection of bilateral agreements with some shared language).

Fundamentally altering the interests of the U.S. economic and political systems is much easier said than done. So if you are worried about the continued commitment of the United States to the global trading system, cheer up: the campaign is behind us. The work of governing comes next.


3. Long-Term Relationship with Thai Flour Mill Benefits Customers and U.S. Farmers

U.S. wheat farmers generously invest in export market development by USW through state wheat commissions. This allows USW to compete for federal support through the Market Access Program (MAP) and Foreign Market Development (FMD) program administered by USDA’s Foreign Agricultural Service. This unique partnership started many years ago and has had wide-reaching, positive effects for farmers and their overseas customers.

USW is devoted to helping customers get the most value from U.S. wheat and use it to help grow their businesses. There are few better examples than the relationship between USW and United Flour Mills (UFM) in Bangkok, Thailand. For nearly 40 years, UFM has worked with USW to hold influential training courses at the UFM Baking and Cooking School. USW Bakery Consultant Roy Chung has been the principle course planner and instructor for the majority of that time. Perhaps more notable is the fact that Asian flour mills and baking companies now willingly pay all tuition and travel expenses for employees to take the courses.

In 2016, USW and UFM jointly offered three courses: a six-week Baking Science and Technology Course; a two-week Frozen Dough Technology Course; and a three-week Cookie & Cracker Technology Course. The training emphasizes baking methods that feature the unique characteristics of high-protein, hard wheat flour for breads and low-protein, soft wheat flour for cakes and cookies. This year, end use customers from 10 countries invested hundreds of thousands of dollars to send 80 participants to the three courses. Chung reports that 40 percent of participants represented flour mills, 42 percent bakeries and 18 percent allied industries.

In addition to these three courses, USW in 2016 sponsored a custom two-week soft wheat products course at UFM for technical service workers from flour mills in Vietnam and Myanmar (Burma) along with one of each mill’s end-use customers.

“We invest quite a lot of time preparing for these courses in part because the technology is constantly changing,” Chung has said about the UFM training. In 2015, for example, he noted that there have been new developments in improvers needed for partial-baked, pre-proofed and freezer-to-oven products. Before the 2015 course, Chung had to conduct bake tests to evaluate the flour and make sure yeast and improvers met commercial quality for frozen dough. He also worked with consultants from Lesaffre to revise the curriculum and demonstrate the improvements in the new materials.

Feedback from 2016 participants show strong satisfaction with the courses, and they are applying the knowledge they gained into their work. More than 70 percent said they used the training to improve their product quality, and many of the participants said they had developed new products, reduced costs and improved sales. Not surprisingly, these satisfied customers have also included wheat import specifications supporting U.S. wheat classes.

Technical support along with trade service and other work make the activities of USW distinct from other countries that export wheat. USW believes this has helped a country like Thailand develop into a showcase for production of premium quality flour products that represent a mix of wheat foods from across Asia, the Americas and Europe. South Asia overall is a critical growth market for wheat foods and for U.S. HRS, SW and HRW. The investment there will continue as long as the benefits to wheat users and sellers remain strong.


4. USW Prioritizes Face-to-Face Engagement with Customers and U.S. Wheat Growers
By Amanda J. Spoo, USW Communications Specialist

In the digital age, breaking news is instantly available at one’s fingertips. Resources are easily accessible, market report updates stream in by the second and there are many media platforms to share insight and opinions. However, USW recognizes that a key element to meeting its commitments to both customers and growers lies not just at the end of a hyperlink, but mainly in face-to-face engagement.

“There is nothing more genuine than making a personal connection and investing time with the people who have a stake in your organization,” said USW Chairman Jason Scott, who farms on Maryland’s Eastern Shore.

As a farmer-led organization, USW reaches out to its growers and state partners to connect and share news about the work it does on their behalf in overseas markets and through trade policy. In 2016, USW staff and officers are traveling to and speaking at 13 separate state grower meetings.

Scott has already presented to the Maryland Small Grains Utilization Board and the South Dakota Wheat Commission, and will visit the Virginia Grains and Soybeans Annual Conference early in 2017.

“Growers are currently concerned about external factors affecting low U.S. wheat prices and planted acres. As the landscape of world wheat trade changes, they also want to know what their role is in influencing trade policy,” said Scott. “From my perspective as USW Chairman, I have addressed those questions and discussed current issues such as TRQ enforcement in Brazil and the recent dispute filed by the U.S. government against China’s excessive domestic support prices for wheat, rice and corn.”

This year, the North Dakota Wheat Commission County Leaders heard a direct update on USW overseas activities from USW Assistant Regional Vice President Jeff Coey, who manages wheat market development programs in China from the USW Hong Kong Office.

“Seeing is believing when it comes to wheat quality, so it is USW’s responsibility to manage the conversation and opportunities to build bridges between growers and end-product users,” said Coey. “I shared with the growers that when they take advantage of those bridges there is nothing more valuable than when the information and answers to questions are coming directly from the source. Those connections strengthen the impact of our programs, which strengthens trade.”

One of those important programs is the annual USW Crop Quality Seminars. Each year, after thousands of wheat crop samples are analyzed and the results are published in the USW Crop Quality Report, USW invites its overseas customers, including buyers, millers and processors, to seminars led by USW staff, growers, state wheat commission staff and educational partner organizations. The seminars dive into grade factors, protein levels, flour extraction rates, dough stability, baking loaf volume, noodle color and texture and more for all six U.S. wheat classes, and are tailored to focus on the needs and trends in each regional market. The reports and seminars have been a traditional part of USW’s strategy since 1959, growing to become its single largest marketing activity. In 2016, USW hosted 40 seminars in 23 countries.

“During a seminar in Taiwan I took staff and growers from the Montana Wheat and Barley Commission to a bakery whose products were 80 to 85 percent U.S. wheat, but that is not the only reason I chose that bakery,” said Coey. “On the walls of this bakery were many diplomas and certificates from training done at USW sponsored technical courses. I wanted them to see that the educational support is bearing real products and impact in overseas market.”

USW also reached customers in North Asia and Latin America this year at the North Asia Marketing Conference in Guam, and the Latin American and Caribbean Buyers Conference in Portland, OR. These conferences, which both saw record attendance, focused on the reliability of the U.S. wheat marketing system, emerging market factors and listening to customer needs.

“The time USW spends with its customers is a testament to its commitment to having the world’s most reliable supply of high quality wheat,” said Scott.


5. Government Confirms No GE Wheat in Commercial Supplies

In a statement published today, Dec. 1, 2016, the USDA Animal and Plant Health Inspection Service (APHIS) announced that after a thorough examination regarding the genetically engineered (GE) wheat detection in Washington State, it has closed its fact finding effort. The Agency also said it found no evidence of GE wheat in commerce.

USW and the National Association of Wheat Growers express our appreciation to APHIS for its work on this isolated incident. Effective communications between government officials, including APHIS and USDA’s Foreign Agricultural Service, farmer organizations, the grain trade and customers kept the process moving in a positive way. We also thank our overseas customers for their rational response to this situation and their continued confidence in the quality and value of U.S. wheat.

On July 29, 2016, USDA confirmed the discovery by a farmer of GE wheat plants growing in an unplanted agricultural field in Washington State. After thoroughly examining the farmer’s property, APHIS detected a total of 22 wheat plants that had grown in an unplanted field. The GE wheat in question is resistant to the herbicide glyphosate, commonly referred to as Roundup®.

Working with the farmer, APHIS took measures to ensure that no GE wheat moved into commerce. Although the suspect plants were not in a planted field, out of an abundance of caution, APHIS tested the farmer’s full wheat harvest for the presence of any GE wheat material. All samples were found to be negative for any GE wheat material.

The statement added that there are no GE wheat varieties for sale or in commercial production in the United States at this time, as APHIS has not deregulated any GE wheat varieties.

For additional information, visit:
August 5, 2016 Statement on Detection of GE Wheat Volunteer Plants in Washington State;
July 29, 2016 Statement on Detection of GE Wheat Volunteer Plants in Washington State.


6. Winter Wheat Seedings and Conditions Point to Smaller 2017 Crop
Excerpted from “Spring 2017 Will Help Heal U.S. Hard Red Wheat Woes,” by Drew Lerner, World-Grain.com, Nov. 11, 2016, Reprinted with Permission

An unusually dry autumn continues in the west-central high plains region of the United States, impacting unirrigated wheat production areas with limited soil moisture. Crops that were planted early and established favorably have not seen much moisture in several weeks.

The situation is a growing concern for farmers and some of the commodity trade because of deteriorating conditions for some of the crop. The bigger concern is not for the early planted crop, but for the crop planted more recently, or that which is still waiting to be planted. Some of the late crop may not get significant precipitation before plant dormancy evolves, and that may leave a part of this year’s wheat poorly established and vulnerable to winterkill.

Most of the [USDA] crop progress numbers are very good for wheat throughout the central and southwestern plains. Planting and emergence have gone well, but evidence of the limited soil moisture is most obvious in the crop condition ratings. Crops rated in poor or very poor condition reached 14 percent in Colorado, 10 percent in Kansas, 12 percent in Nebraska, 9 percent in Oklahoma and 15 percent for Texas on November 13. Those figures could still deteriorate further and that is what has the industry a little nervous. Hard red winter (HRW) wheat production from the United States is important to many food companies, and ongoing trouble in the central plains may impact the bottom line for production and profit in 2017.

Several counties in western Kansas and eastern Colorado were completely dry during the 30-day period ended Nov. 14, while other areas nearby reported less than 25 percent of normal precipitation. Very few areas in any part of the HRW production area reported much more than half of normal rainfall. However, conditions in the previous 30 days were different for some areas with central and eastern wheat areas of Kansas and Oklahoma reporting sufficient rainfall to support emergence and good stands. Rainfall for the 60-day period ended Nov. 14 was still well below half of normal in the first five tiers of counties to the east of Colorado’s border extending deeply into western Kansas.

Similar dryness extended south through the Oklahoma border to the northern Texas Panhandle and east through much of eastern Colorado’s production area. Several counties and parts of counties were still reporting nearly dry conditions over the past two months.

World Weather, Inc. believes colder weather will occur without much dryness relief. Some precipitation will fall during the winter, but the … forecast suggests spring will be wetter biased and cooler biased in HRW wheat country. That may be a blessing for the region, especially if winter weather extremes can be kept to a minimum. Crop loss is possible during the winter, but … if conditions are just right the spring moisture may be a huge boon to the crop. This is certainly not a time to write off the crop.

In the meantime, trouble in U.S. HRW wheat county is apparently not serious enough on its own to stimulate a big run up in futures prices. For a while this season, it looked as though there would be some bullish help from a troubled wheat crop in Australia, China and France, North Africa, Argentina and Brazil. Trouble in each of these regions in recent weeks and months seems to have been reduced very slowly and the situation has trended a little better.

Adding all of the issues for wheat around the world together does not spell a crisis. As long as U.S. plains wheat improves and there are no big losses in the remainder of the world, the bottom line for production will not be a perfect year by any means, but a disastrous production year is equally unlikely. However, it is not over until bread is on the table.


7. Wheat Industry News
  • Quote of the Week: “I think wheat could be a market that’s got a large short position by the management funds, and of course that could be the spark to turn this market around down the road. I don’t think there’s a question if wheat is going to rally, it is when,” said Jim Bower, Bower Trading, in agweb.com.
  • PNW River Closure Starts Dec. 12. Ag industry representatives say they are as ready as possible for the 14-week closure of the Columbia and Snake river system that carries their goods overseas. USW and the Pacific Northwest wheat supply chain have been in close contact with overseas buyers to help them keep exports flowing. “The industry has taken all the steps it can to prepare for the long closure,” said Dan Hart, general manager of Almota Elevator Co. in Colfax, WA, in an article in Capital Press this week. “This is an investment in U.S. infrastructure and ultimately an investment in the reliability of U.S. products,” said Kristin Meira, executive director of the Pacific Northwest Waterways Association.
  • National Yield Contest Winners. The National Wheat Foundation announced the winners of its 2016 National Wheat Yield Contest, who produced an average of 135 bu/ac (175.58 kg/hl). With commercial sponsorship support, the first national yield contest in 20 years attracted entries from nearly 170 farmers. The contest is an effort to encourage farmers to innovate, exchange knowledge, and fully use available technology to produce more and better wheat. The “Bin-Buster” award went to Warden, WA, grower Phillip Gross, who produced a final irrigated winter wheat yield of 192.85 bu/ac (250.58 kg/hl). To read more visit http://bit.ly/2fVFv6J.
  • Promote “The Staff of Life.” Wheat growers, millers and bakers need to counter the negative image of wheat gluten, bread and carbohydrates in general to win more consumers over to the great qualities of wheat. That was the message from Tim O’Connor, president of the Wheat Food Council (WFC), to farmers at the Ag Horizons meeting Nov. 29 in Pierre, SD. The WFC is funded by state wheat commissions and other producer groups as well as millers and bakers, to promote wheat as part of a healthy diet. To read more visit http://bit.ly/2fMxvl7.
  • The D. Blaine Jacobson Wheat Breeding Professorship. The Idaho Wheat Commission (IWC) has now fully funded two $1 million research endowments, which were established in 2012 to bolster the University of Idaho’s wheat research capabilities, support a wheat breeding and a wheat agronomist professorship at UI’s Aberdeen Research and Extension Center. The wheat breeding fellowship honors Blaine Jacobson, executive director of the IWC, which is a full and long-time member of USW.
  • Perspective on News from Cuba. USW enjoyed reading agricultural journalist Jennifer Latzke’s article in High Plains Journal this week about what may come next in Cuba following the death of former President Fidel Castro. USW remains strong in advocating at home for an end to the embargo that for too long has created a negative relationship between U.S. agricultural product sellers and Cuban buyers that is not conducive to doing business.
  • With Sincere Sympathy. USW colleagues are very sad to hear the news that Cheryl Ann ("Shortie") Glazier, 71, wife of past Director Tom Glazier, passed away Nov. 29, 2016, in Loyal, OK. "Shortie" was a smiling presence at many USW board meetings and a friend, with Tom, to so many in our organization. We extend our sincere sympathy to Tom and his family, and to our Oklahoma wheat friends.

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