2016 Archives - U.S. Wheat Associates

In the early 1960s, U.S. wheat farmers reached out through Western Wheat Associates (WWA) to build new partnerships with Taiwan. After many visits, WWA opened an office in Taipei in 1966. With cooperation, forward-thinking and much success over the years and with support from U.S. wheat farmers and USDA Foreign Agricultural Service export market development programs, USW has served Taiwan’s flour milling, technical education and wheat foods organizations for 50 years.

The Taiwan Flour Mills Association (TFMA) and USW forged a uniquely productive relationship. U.S. wheat farmers helped TFMA create the Taiwan Wheat Food Promotion Council, which established a baking school in Taipei. As U.S. wheat farmers continued to provide the highest quality wheat, USW continued to provide service and support that helped TFMA promote wholesome, nutritious wheat foods to Taiwan’s consumers. This trusted relationship still allows TFMA to confidently import almost all its wheat from the United States. Taiwan is on average the sixth largest market for U.S. wheat. In each of the past three marketing years, Taiwan’s flour millers purchased about 1.0 million metric tons of U.S. hard red spring (HRS), hard red winter (HRW) and soft white (SW) wheat currently valued at about $250 million.

The early spirit of cooperation with millers extended to building a vital wheat foods industry. Training at the baking school set the standards for an industry that wanted to produce the finest quality wheat food in the world. When millers and bakers raised the money to expand in 1984, the school became the China Wheat (now Grains) Products Research and Development Institute with an added focus on developing new wheat foods and demand continued to grow.

Members of the Taipei Bakery Association (TBA) and bakers across the country have always produced consumer goods of the highest quality. With a permanent office in Taipei, U.S. wheat farmers quickly reached out to TBA to join TFMA and educational leaders in developing and promoting healthy bakery products. Together they sponsored baking courses and contests, consumer outreach, school lunch programs, supported by trade service and technical support from USW.

The ultimate reward for so many years of hard work can now be measured on an international scale. Taiwan’s industry took the world by surprise by sending a team for the first time to the prestigious World Bakery Cup in 2008 that earned a bronze medal. Another bronze followed in 2012 and in 2016, Taiwan’s baking team won a silver medal. On a more practical level, consumption of wheat foods in Taiwan has now surpassed that of rice, a remarkable achievement reflecting the power of cooperation.

December 31, 2016/by Amanda Spoo

With the advantage of proximity to U.S. Gulf ports, Venezuela has been a relatively stable buyer of U.S. wheat for many years. In fact, USDA Foreign Agricultural Service (FAS) cooperator U.S. Wheat Associates (USW) helped establish ESLAMO, The Latin American Flour Milling School, in 1994 in Venezuela, which demonstrates USW’s longstanding commitment to building relationships with millers. In recent years, the deteriorating political climate and economy and the resulting challenges of providing trade service and technical support have eroded U.S. wheat’s share of Venezuela’s market. Yet the customers there still represent a good market with potential to grow should the country stabilize. The pivotal question became how to stay engaged with them.

USW put its funding from the Market Access Program (MAP) and the Foreign Market Development (FMD) program to use meeting with Venezuelan millers at regional meetings such as the annual Latin American Millers Association (ALIM) conference. Still the situation forced USW to forfeit an annual U.S. wheat crop quality seminar that is critical to help millers stay interested in U.S. wheat and understand how to get the best value from their imports.

In response, USW turned to online technology and its past relationships to hold its first crop quality “webinar” with Venezuelan customers. USW’s regional staff based in Mexico City worked with staff at ESLAMO in Puerto Cabello to set up the conference and invite customers. In October 2015, 29 customers representing seven of the largest milling companies in Venezuela participated in the webinar at ESLAMO. The out-of-pockets cost to hold the webinar, funded by MAP, was less than $1,700.

USW also leveraged partnerships with its members and experts from the United States to develop the webinar. Presenting via the internet from the USW Mexico City office, Dr. Rebecca Regan, Director of the Wheat Quality Laboratory at Kansas State University, covered quality information for Hard Red Winter (HRW) and Soft Red Winter (SRW) classes. Claudia Carter, Executive Director of the California Wheat Commission, presented quality information for Hard Red Spring (HRS) and Durum classes. Dr. Andrew Ross from Oregon State University presented quality information for Soft White (SW) for the Venezuelan webinar.

Feedback from the participating millers was quite positive and USW plans to hold a second webinar for Venezuela in November 2016. With the potential to import as much as one million metric tons of U.S. wheat, continuing to invest judiciously in this nearby market is a smart choice. Though relatively high U.S. wheat export prices and an unfavorable exchange rate continued to pressure U.S. exports to Venezuela in 2015/16, one of the largest buyers did import U.S. soft white and hard white wheat for the first time. Venezuela’s average annual U.S. wheat imports of nearly 543,000 metric tons over the past five years have returned substantial revenue to farmers and employers in the U.S. wheat supply system.

December 31, 2016/by Amanda Spoo

With funding from several state wheat checkoff programs and USDA Foreign Agricultural Service export market development programs, U.S. Wheat Associates (USW) is helping new flour millers learn how to get the wheat they need from U.S. farmers, a strategy that has built a dominant market share in this growing Southeast Asian market.

USW has for more than 50 years helped Philippine flour millers use sophisticated purchase specifications that increase value and enable the millers to import five classes of U.S. wheat. However, the industry is undergoing a generational transfer of leadership to younger family members or staff. Some knowledge gets passed down but this transition still requires significant training to assure new market participants can navigate the evolving international trading environment.

USW is addressing this transition through trade team visits to observe the U.S. wheat production and marketing systems, workshops on how to write the best U.S. wheat tenders and information on the quality and functionalities for every crop. These activities, funded by the Market Access Program (MAP) and the Foreign Market Development (FMD) program, help assure the next generation of decision-makers are familiar with the U.S. marketing system and the advantages of U.S. wheat classes in milling and end-product performance. The activities also prepare the industry for key quality concerns and opportunities in the current crop, helping them revise their specifications appropriately to maximize the value of the wheat they receive.

For example, in August 2015, USW sponsored a U.S. visit for new managers at Monde Nissin and Atlantic Milling. They learned that hard red spring (HRS) basis was at historic lows and low protein soft white (SW) stocks were very tight. As a result, these mills accelerated their purchasing pace and bought 110,000 metric tons (MT) of U.S. wheat sending substantial revenue back to the U.S. supply chain and farmers in the Pacific Northwest, Montana, North Dakota and South Dakota. This early purchase of U.S. wheat pre-empted the risk that both mills would consider purchasing lower priced spring wheat from Canada.

In October 2015, during a USW contracting workshop, market leading flour miller San Miguel used the information to revise confusing specifications in their contract language that helped reduce their import cost. This led them to make their first hard red winter (HRW) purchase in recent history. It is the fourth year in a row that San Miguel bought U.S. milling wheat exclusively, maintaining U.S. wheat as the quality standard in the Philippine market. In turn, this further reduces the chance that other mills may consider importing from other origins.

In marketing year 2015/16 (June to May), Philippine millers imported more U.S. HRS and SW wheat than any other country in the world. Its total imports of 2.164 million metric tons of U.S. wheat in 2015/16 ranks the Philippines at third among all countries. This represents more than 90 percent of total Philippine milling wheat imports and a substantial estimated return to the U.S. wheat supply chain.

December 31, 2016/by Amanda Spoo

China’s complex wheat importing rules can be a significant barrier to private purchases, but wheat imports help cover gaps in the need for high-quality wheat for a growing commercial wheat food market. USDA Foreign Agricultural Service cooperator U.S. Wheat Associates (USW) is using Market Access Program (MAP) and Foreign Market Development (FMD) program funds to educate traders and millers in ways that help overcome issues and increase private purchases of U.S. hard red spring (HRS) wheat grown in the northern plains.

Individual Chinese flour mills may privately import wheat under the government’s tariff rate quota (TRQ). Yet buying in bulk is not economically viable for individual mills because their capacity is too small. To overcome this non-trade barrier, several mills can pool TRQ purchases through private trading companies. One of those traders is Nantong Yufeng Grains & Oils Co., Ltd., which had been a steady but relatively small customer for U.S. wheat since 2013. Initially the company was only able to purchase U.S. wheat in small volume containers.

Because this trading company was ready to expand its ability to purchase wheat in bulk for its Chinese flour mill customers, USW recognized that its people needed training in how to get the most value from its tenders for bulk loads of U.S. wheat. To do that, USW brought two of Nantong Yufeng’s traders and its mill customers to “Contracting for Wheat Value” workshops in the United States in August 2014 and June 2015. This activity, developed using MAP funds several years ago, helps wheat buyers better understand and use the inspection data created by Federal Grain Inspection Service as ships are loaded with U.S. wheat. In addition to the technical training, these workshops fostered deeper contacts with Pacific Northwest (PNW) exporters. In turn, this encouraged on-going communications between this buyer and U.S. sellers, a key basis of trust, understanding and a cooperative relationship.

When Nantong Yufeng expanded its ability to handle more efficient, lower cost bulk shipments of U.S. wheat in marketing year 2015/16, the training and new relationships came to fruition. With first-hand knowledge of quality, price and contracted value, the company chose U.S. HRS over Canadian supplies. It imported HRS in two Panamax vessel loads of 57,750 metric tons (MT) each for its Chinese milling customers.

When the first shipment arrived at port, though, Chinese customs officials unfamiliar with wheat inspection and contracting questioned the importer on “dockage” level and the term “deductible from contract value.” With the knowledge Nantong Yufeng gained from the USW seminars and additional assistance from USW Marketing Specialist Shirley Lu, the trader resolved the issue smoothly. In a subsequent purchase, USW suggested that Nantong Yufeng should specify a lower maximum dockage and there were no customs issues associated with this purchase.

The workshops and local trade servicing under MAP and FMD in 2014/15 and 2015/16 helped Nantong Yufeng import 172,000 MT of HRS. Total U.S. HRS exports to China in 2015/16 were 744,000 MT — two times total sales in 2014/15 — returning substantial revenue to the U.S. wheat trade and farmers in Idaho, Montana, North Dakota, South Dakota and Minnesota.

December 31, 2016/by Amanda Spoo

The emergence of Russia as a very competitive wheat exporting country has dramatically changed the Egyptian market opportunity for U.S. wheat farmers. Egypt still imports more wheat than any other country, but for several years Egypt’s government purchasing agency has been able to import Russian wheat and wheat from other nearby exporters at FOB costs that have been as much as $50 per metric ton cheaper than U.S. wheat on top of a freight advantage. Most Russian wheat is imported for use in Egypt’s subsidized baladi bread program.

USDA Foreign Agricultural Service cooperator U.S. Wheat Associates (USW) recognizes these challenges and has shifted Foreign Market Development (FMD) and Market Access Program (MAP) funding from staff and activities in Egypt to other regions and countries that offer better opportunity for U.S. wheat export sales. However, USW has identified an emerging high-value market in cookies, crackers and cakes, as well as other products like pasta, in Egypt that is served by private importers, mills and processors. While such products are affordable for many Egyptian consumers, they return higher margins to the supply chain and they require high quality flour and offer a new opportunity for U.S. wheat.

In marketing year 20115/16 (June to May), for example, Badawi Group contacted the USW office in Cairo to discuss their plans to introduce a new line of branded pasta products. Badawi is the largest tea company in Egypt and wanted to extend a respected, premium reputation into the growing pasta market.

USW Regional Technical Specialist Peter Lloyd traveled from Casablanca, Morocco, to meet with Badawi managers. While durum wheat is the premier source of semolina for pasta, flour from other wheat classes can be used effectively depending on cost and consumer preferences. After reviewing Badawi’s product concepts, Lloyd recommended the company should consider using high protein U.S. hard red spring (HRS) wheat as its primary pasta ingredient.

Next, USW Regional Director Ian Flagg and Marketing Consultant Nihal Habib reviewed how Badawi could best execute a HRS wheat purchase. Following a final discussion, Badawi imported 30,000 metric tons of HRW in 2015/16, the first significant sale of U.S. spring wheat to Egypt in many years. The purchase returned significant revenue to U.S. spring wheat farmers in North Dakota, Montana, South Dakota and Minnesota from a very small investment of MAP and FMD funds. This opportunity would never have materialized if that investment and USW’s ability to serve this prospect were not in place. Moreover, Badawi set a standard for premium tea in Egypt and USW believes it can set another standard for premium pasta, which holds promise for additional HRS sales.

USW is fostering similar opportunities in Egypt through technical support aimed at helping build a preference for U.S. soft red winter and soft white wheat in the emerging cookie, cracker and cake products. The effort shows that USW is making the most efficient use possible of MAP, FMD and U.S. wheat producer funding in response to changing market dynamics.

December 31, 2016/by Amanda Spoo

Perceptions of wheat flour quality can be difficult to change. Korean flour millers, for example, traditionally judge U.S. soft white (SW) wheat quality based on #1 Grade and a very low protein specification. Unfortunately, two years of hot, dry growing conditions in Washington and Oregon severely reduced the low-protein SW supply and spurred a price barrier to sales. Through trade service and technical support funded by the Market Access Program (MAP) and the Foreign Market Development (FMD) program, FAS cooperator U.S. Wheat Associates (USW) was able to show the millers that they could import higher protein SW at a much lower cost and still meet customer demand. In turn, this effort ended a significant decline in imports.

SW wheat is ideal for the cake, cracker and confection products that make up a large part of Korea’s flour consumption. Between marketing years 2013/14 and 2015/16, USW took a multi-tiered approach to maintaining this important market:

Representatives based in Seoul convinced millers to use Solvent Retention Capacity (SRC) analysis, rather than only using protein specifications, to measure SW flour performance.
Working with state wheat commissions, USW support staff in the United States shipped samples of the more abundant higher protein SW to Korea. Technical staff performed the SRC analysis on flour milled from the samples and successfully demonstrated equivalent performance.
The next step was to prove the SRC analysis and higher protein SW flour performance to downstream bakery and confectionery customers in a seminar supervised by USW South Asia Bakery Consultant Roy Chung. The largest commercial bakery in Korea saw the opportunities and purchased an SRC analyzer.
Finally, USW helped large flour millers understand how they could adjust grade and protein tender specifications. Two large millers did change their specifications and tendered for SW with slightly higher protein levels, which helped reduce import costs. The Korean Flour Millers Association also relaxed some of its grade requirements and received a discount of $5 per metric ton from the trade.

In marketing year 2013/14, before the challenge of higher protein levels appeared, Korean millers imported an estimated 731,000 metric tons (MT) of SW worth about $212 million. As the cost of very low protein SW increased, millers cut back on imports while learning about alternatives from USW. Total SW exports fell to about 538,000 MT in 2014/15.

Armed with new information and support from their customers, these millers were able to slightly increase SW imports in 2015/16 to about 565,000 MT, returning value to the U.S. wheat supply chain and farmers in Washington, Oregon and Idaho.

December 31, 2016/by Amanda Spoo

A Legacy of Cooperation – U.S. Wheat Farmers, FAS and Taiwan’s Milling and Baking Industry

Online Conference Maintains Valuable Wheat Export Connections in Venezuela

Legacy of Training Sustains Market Leading U.S. Wheat Exports to the Philippines

Contracting for Value Workshops Educates Private Chinese Buyers, Spur Spring Wheat Sales

Positioned for Opportunity in Changing Egyptian Wheat Market

Trade Service, Technical Support Protect Soft White Wheat Exports to Korea

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