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It is certainly true that the trade relations between the United States and China have been and remain in a difficult place. However, USDA Foreign Agricultural Service cooperator U.S. Wheat Associates (USW) is confident that this trade confrontation will one day be resolved. After many years investing funding from the Market Access Program (MAP) and Foreign Market Development (FMD) program, USW remains engaged in keeping our once and future wheat importing customers in China informed about the quality, variety and value of U.S. wheat in anticipation of future opportunities.

USW maintains a presence in Beijing but did not replace a retired colleague to help hold the line on FMD investment. Trade service visits in the first six months of 2019 confirm that private flour millers want to continue importing U.S. hard red spring (HRS) and soft white (SW) when the tariff conflict is resolved. The only flour miller who purchased any U.S. wheat in marketing year 2018/19 was willing to pay the 25% punitive tariff and took delivery of 43,000 metric tons of HRS in April. He expressed an abiding interest in the functionality, flavor and good milling characteristic of U.S. wheat, and holds high hopes for not just a “normal” trading relationship, but one that allow mills like his to run much more of it.

USW representatives also conducted trade service visits with customers attending Bakery China Shanghai 2019. They participated in a U.S. agricultural product showcase sponsored by the USDA/FAS Agricultural Trade Officer posted in Shanghai to highlight the differential advantages of U.S. HRS and other classes of wheat. USW Regional Vice President Jeff Coey reported that every customer was eager to regain access to the high-quality U.S. wheat they learned about through export development programs and experience over the years.

Officials with China’s state-sponsored grain buying agencies also welcome USW trade servicing, technical training and relationship management activities. Even with the tariffs in place, in May 2019 Coey and USW/Beijing Country Director Shirley Lu were invited to speak at a conference in Xiamen to several millers who gained new information about the functional value of U.S. wheat classes. Bakery training classes conducted by USW’s technical specialist in 2019 also expanded awareness of U.S. wheat’s superior functional benefits.

In addition, officials were happy to hear that USW’s commitment to the China market remains unchanged.  In fact, USW told the officials it intends to increase its activities in partnership with FAS in part with funding from the Agricultural Trade Promotion (ATP) program to keep U.S. wheat top of mind among users and policy makers in China. Under ATP, for example, USW plans to hold a series of “Contracting for Wheat Value” courses in the United States for commercial and state wheat buyers over the next three years. Participants will be managers with direct wheat trade contacts that influence wheat purchasing in their organizations. After the courses, participants will get the chance to observe wheat breeding, farms, transportation, quality control and Federal Grain Inspection Service processes.

Given that China imported 1.6 million metric tons of U.S. HRS, SW and soft red winter (SRW) wheat in marketing year 2016/17 and more than 800,000 metric tons of U.S. wheat in 2017/18 before the retaliatory tariffs were implemented, potential demand will benefit farmers in the Pacific Northwest and Northern Plains. And, with funding from MAP, FMD and ATP, USW’s commitment to service in China will continue long after this trade conflict has ended.

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Ecuador’s per capita consumption of wheat foods has rapidly increased in recent years, supported in part by governmental regulations limiting imports of finished products. Over the years, USDA Foreign Agricultural Service cooperator U.S. Wheat Associates (USW) has focused on demonstrating how using flour from U.S. hard red winter (HRW) can improve bread quality while reducing variable costs to build U.S. wheat share of Ecuador’s growing bread flour market.

The main constraint in this segment is a long-held reliance on higher protein Canadian wheat. To demonstrate the value of HRW wheat flour, USW used MAP funds in 2017 to conduct a baking seminar with a large commercial operation in Quito that supplies frozen dough and par-baked dough to fast food chains and the largest supermarket in Ecuador. The USW consultant demonstrated how the bakery could modify its processes using flour with a higher proportion of HRW wheat rather than with straight high-protein Canadian wheat flour and additives. This year, the company reported it has developed new products and will produce sliced bread and hamburger buns using HRW blended flour.

In September 2018, USW held seminars with two other bakeries with similar results. The seminars proved that U.S. HRW wheat flour reduced costs and improved the taste and quality of bread products. Both bakeries are changing their processes to product new products from the HRW blended flour. In 2019, USW also established its first contact with the largest commercial bakery in Ecuador that resulted in an agreement with USW to hold in-plant demonstrations of U.S. wheat flour blends.

To ensure HRW flour is available to those bakeries, USW has also conducted trade servicing and technical support for the largest flour miller in Ecuador. In June 2018, USW invited the main buyer from the premium mill to join a trade team to the United States. As a new employee of the mill, the buyer’s mind was more open to new opportunities and immediately after the trip he purchased a shipment of more than 11,000 metric tons of HRW and, in 2018, U.S. HRW and soft red winter (SRW) wheat made up 80% of the mill’s purchase volume. In 2019/20, under the Agricultural Trade Promotion (ATP) program, USW will start to chip away at the Canadian wheat dominance at a large mill in Ecuador by bringing samples of HRW and in-plant technical support to demonstrate the value of the U.S. alternative.

USW has also expanded its activities with medium-sized mills that produce about 30% of Ecuador’s annual flour production. Since 2016, USW has conducted a variety of activities to help them purchase and process U.S. wheat as efficiently as possible. As a result, U.S. wheat is gaining a foothold, growing from 6.3% of the mid-sized mill purchases in 2017/18 to 15.8% in 2018/19.

Ecuador’s average annual purchase of HRW the past three marketing years is 101,000 metric tons, a significant increase over the three-year average of 46,200 metric tons in 2015/16 and SRW purchases of about 224,800 metric tons in 2018/19.

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Because no two crops are alike, the world’s flour millers, bakers and wheat food processors must have some assurance that the wheat they buy will meet their needs. That is why USDA Foreign Agricultural Service cooperator U.S. Wheat Associates (USW) and its partner organizations collect and analyze samples of all six classes of U.S. wheat, compile results and share that data around the world every year.

Legacy organizations to USW first identified the need to quickly gather and share new crop data in 1960. Since then, wheat farmer checkoff dollars and Market Access Program (MAP) funding have been invested to publish a complete picture of each year’s harvest. This commitment to transparency offers confidence in the data that, together with the trade service and technical support also funded by MAP and the Foreign Market Development (FMD) program, help differentiate U.S. wheat exportable supplies from competing supplies from Russia, Ukraine, Europe, Canada, Australia and Argentina.

USW works with several wheat quality organizations, including the Federal Grain Inspection Service and the USDA/ARS Hard Winter Wheat Quality Laboratory, to collect, grade and analyze thousands of wheat samples from local elevators and sub-lot samples from export elevators. Sampling begins with early winter wheat harvest and continues until the U.S. hard red spring (HRS) and durum harvests are complete, usually by early October. The data is compiled by class and by production region. By late October, class reports and a complete USW Crop Quality Report are published on USW’s website and the Crop Quality Report is printed as a booklet in English, Spanish, French, Arabic and Mandarin.

USW then sends teams of farmers, wheat quality experts and representatives out to present that year’s data to its buyers. By mid-December, USW has presented current characteristics on 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 to hundreds of buyers, millers and processors in more than 25 countries. Buying decisions are made because of this effort; some are acted upon quickly. For example, with information they learned at USW’s 2015 Crop Quality Seminar, millers in Portugal imported 36,500 metric tons of HRS for the first time in 3 years.

U.S. wheat crop quality data forms the basis for our farmers’ ability to compete in the global wheat market. Without funding from MAP and the support of federally-funded inspection and quality analysis labs, this essential service to overseas customers would not be possible. It provides crucial support to annual U.S. wheat export sales averaging more than 26 million metric tons per year.

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A Latin American and Caribbean Buyers Conference June 2016 in Portland, OR, sponsored by USDA Foreign Agricultural Service cooperator U.S. Wheat Associates (USW) with Market Access Program (MAP) funding and support from 9 state wheat commissions, set the stage for incremental wheat exports by 75 flour millers and buyers from 16 countries.

The increasingly competitive global wheat market puts a premium on in-person trade service and technical support to differentiate wheat supplies. The 2016 Buyers Conference created a collegial opportunity for wheat buyers to meet with farmers, U.S. based grain traders and technical experts on local supply chain visits, in seminar sessions and social activities. USW arranged for speakers on a range of relevant topics including U.S. wheat quality trends, logistics management, plant breeding methods and other key wheat price drivers that address specific constraints on U.S. wheat sales to these growing markets.

By increasing the basic knowledge of how to purchase U.S. wheat, for example, a flour miller in Haiti bought their first two shipments ever of U.S. hard red winter (HRW) after the conference, with plans to import more HRW. The miller noted that meeting with traders and millers at the conference opened talks about possible joint purchases. Two participants from a new flour mill in Honduras said they now have better information to consider additional U.S. wheat purchases from Pacific Northwest ports. An experienced Colombian buyer said seeing the whole process from varietal development to the farm and supply system was “amazing” and definitely increased his confidence in U.S. wheat quality and reliability.

To help overcome regional preferences for Canadian wheat, master baker Didier Rosada presented (in Spanish) evidence that blending two or more U.S. wheat classes can be less expensive and improve end-product quality. With this information and discussions at the conference, a large Costa Rican miller and food processor indicated it would likely increase U.S. soft white (SW) wheat imports for blending.

While it is not possible to quantify all additional U.S. wheat exports directly related to the 2016 conference, 2016/17 sales to Mexico, Central America and the Caribbean of 6.3 million metric tons (MMT) are up 23 percent over 2015/16. Sales of 3.5 MMT of U.S. wheat to South American markets represent a 70 percent increase in 2016/17 over the prior year.

Overall, the effort to identify how world market dynamics made U.S. wheat an attractive choice was a timely message for Latin American buyers. To help meet the growing demand for new and better wheat food products in the region they increasingly buy based on the kind of quality characteristics U.S. wheat classes offer. A survey of buyers at the 2016 conference showed that 64 percent believed the experience will help them compare U.S. wheat quality, while 70 percent said it would help them compare U.S wheat value, to competing origins. These are key objectives for USW in its trade service and technical support activities funded by the MAP and Foreign Market Development (FMD) program.

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Euromonitor International has predicted that sales of baked goods in the People’s Republic of China will increase 22.5% by 2021. Domestic wheat is less than optimal in flour production and quality for these baked goods, so imports are needed. USDA Foreign Agricultural Service cooperator U.S. Wheat Associates (USW) is using Market Access Program (MAP) and Foreign Market Development (FMD) program funds to meet that demand by helping the Chinese baking industry tackle technical challenges to produce world class baked goods using imported U.S. wheat.

USW applied FMD funds to hire Dr. Ting Liu in September 2016 as Technical Specialist to bolster USW’s technical ability to demonstrate U.S. wheat performance qualities for new baked goods. One of Dr. Liu’s first projects, supported by MAP funds, was to help the Sino American Baking School (SABS) in Guangdong Province offer consultation to baking companies that have some experience using flour made from U.S. wheat. The long-term goal is to help them expand new specialty items such as sourdough, frozen dough and whole grain products. In marketing year 2016/17, three Chinese companies requested the technical assistance from senior specialists currently teaching at, or recently retired from, SABS. USW and SABS are strongly associated with excellent instruction and product development, so USW’s support is also helping build stronger reputations for both the school and for U.S. wheat.

Growing demand for baked goods and interest in healthy, whole grain products represents good opportunity to increase Chinese demand specifically for high-protein U.S. hard red spring (HRS) wheat. In May 2017, Dr. Liu represented USW at the 2017 Sino-Foreign Whole Grain Industry Development Experts Forum in Shanghai. Joining 22 experts in food processing, nutrition and health, financial investment, policy and marketing, Dr. Liu actively participated in the forum as one of 10 industry guest speakers. Drawing from USW’s activities in several other countries, Dr. Liu’s presentation focused “International Whole Grain Development,” which provided guidelines and references to the development of whole grains products in China.

China’s U.S. wheat imports can swing up or down with government policy decisions. However, total U.S. import volume doubled in 2016/17 to more than 1.6 million metric tons (MMT) compared to almost 880,000 MT in 2015/16. A closer look shows China’s annual import of HRS wheat grown in Minnesota, North Dakota, Montana and South Dakota has steadily increased the past five years from 475,000 MT in 2012/13 to more than 1.1 MMT in 2016/17. That is the second highest volume of HRS imports in the world that year.

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To help Colombian wheat buyers find ways to import more U.S. wheat, USDA Foreign Agricultural Service cooperator U.S. Wheat Associates worked closely with USDA and state wheat commissions to organize a visit to observe the quality and logistical advantages of the U.S. wheat supply chain.

Colombia is the largest wheat buyer in the growing South American market. There are several smaller flour mills there that find it difficult and price restrictive to try to purchase U.S. wheat from on their own. USW’s South America regional office saw an opportunity to overcome this constraint by bringing newer members of the purchasing and milling industries together to consider joint purchasing. They organized a trade team of high level executives from five major flour, cookie and pasta companies in Colombia, all traveling for the first time to see the U.S. wheat supply system. In June 2016, the team traveled to North Dakota, Montana and Louisiana to visit country and port elevators, to meet with wheat producers, U.S. pasta and cookie manufacturers and government agencies including the Federal Grain Inspection Service.

This trade service effort, funded by the Market Access Program (MAP), generated several positive results. One of the participants representing Colombia’s largest wheat buyer after observing how the Montana State Grain Laboratory tested feed and grain for the presence of vomitoxin (deoxynivalenol or DON), recommended that the company install the testing equipment at its mill. Now the testing is helping the mill make crucial judgements about the variability in wheat quality. In addition, the participant reports that the visit helped the company get more value from its purchases because its managers now better understand their options in U.S. wheat supply logistics.

Following the trade team visit, four of the companies established a wheat purchasing pool for the first time. Within six months, the pool purchased 220,000 MT of hard red winter (HRW) and soft red winter (SRW). U.S. wheat purchases by these companies increased 19 percent compared to the same period in 2015. One of the companies that attended the trade mission informed USW that it plans to purchase 13 percent more U.S. wheat in 2016/17 and 2017/18, valued at $3.0 million because of the advantages from pool buying. That miller also said it will change its formula for bread flour by blending more imported U.S. HRW in place of Canadian spring wheat because the ratio of quality to price is greater because it can pool buy U.S. wheat.

In 2016/17, total U.S. wheat exports to Colombia for marketing year 2016/17 exceeded 858,000 metric tons, which is more than 27 percent more than in 2015/16. That represents sales benefitting farmers in the southern and central Plains and the U.S. wheat supply chain in the Gulf of Mexico and Pacific Northwest.

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Just as the 2016 wheat harvest was starting, a farmer in Washington state discovered and reported rogue wheat plants genetically modified to be “Roundup Ready” in a fallow field on his farm. Yet U.S. Wheat Associates (USW) helped avert a potentially devastating market disruption by taking quick steps to work with the USDA Foreign Agricultural Service and other USDA agencies, overseas wheat buyers and state wheat commissions.

U.S. wheat imports by Japan, Korea and Taiwan represent an annual average of about 20 percent of total U.S. wheat exports, valued at more than $1 billion even with very low prices. Most consumers in those countries oppose food produced from genetically modified crops, so the stakes could hardly be higher.

Once informed of the situation, USW began working on the issue closely with all the stakeholders involved, including its in-country offices and FAS posts, the Animal and Plant Health Inspection Service (APHIS), the U.S. grain trade and Monsanto. APHIS took prompt and thorough action to identify the regulated wheat event in the suspect plants and kept our 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 the domestic grain trade and downstream customer organizations, as well as overseas grain trade and buyers in Japan, Korea and Taiwan.

Out of an abundance of caution, Japan’s Ministry of Agriculture, Forestry and Fisheries (MAFF) suspended new purchases of U.S. western white wheat (soft white and 20 percent club wheat) from the Pacific Northwest (PNW) and Korea’s Ministry of Food and Drug Safety (MFDS) suspended all new U.S. wheat imports until their officials could validate and start using a customized version of a new detection assay provided quickly by Monsanto and APHIS.

Testing ultimately confirmed that U.S. wheat remained safe and reliable, adding confidence that nothing had changed the U.S. wheat supply chain’s ability to deliver wheat that matches every customer’s specifications. Because USW and state wheat commissions also had a bank of trust with customers in Japan, Korea and Taiwan, and because Monsanto and APHIS acted so quickly and calmly, both countries reopened their markets to all U.S. wheat imports within eight weeks.

Without the goodwill earned over decades from USW trade and technical service and business relationships funded by the Market Access Program (MAP) and the Foreign Market Development (FMD) program, wheat farmers in Washington, Oregon, Idaho and other states would be isolated in their ability to work through such a market disruption. Instead of export losses, total sales to the North Asian countries in marketing year 2016/17 increased 12 percent compared to 2015/16 with a total value of $1.2 billion.

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U.S. Wheat Associates (USW) represents the interests of U.S. wheat farmers in international markets. As it does with all U.S. wheat importing customers, USW focuses on helping Mexico’s buyers, millers and food processors solve problems or increase their business opportunities with U.S. wheat classes. This effort, supported by wheat farmers and the partnership with the Market Access Program (MAP) and Foreign Market Development (FMD) program, has fostered a productive relationship that has endured for decades through many challenges. More than 22 years of duty free access to the Mexican market under the North American Free Trade Agreement (NAFTA) certainly helped build the relationship.

Mexico is one of the largest U.S. wheat buyers in the world, importing just under 3.0 million metric tons (MMT) on average going back many years.  Not in marketing year 2016/17, however. As of May 18, 2017, Mexico’s flour millers had imported more than 3.3 MMT of U.S. wheat, which is more than any other country. That volume is up 39 percent over last year at the same time.

Breaking down their purchases by class, flour millers in Mexico generate strong demand for U.S. hard red winter (HRW) wheat. In 2015/16, they were the leading HRW importers and are taking advantage of the favorable prices and high quality of the 2016/17 HRW crop. At a current volume of about 2.0 MMT, they have imported 79 percent more HRW this year and again lead buyers of that class. The association representing Mexican flour millers says a rising number of industrial bakeries, along with traditional artisanal bakeries, account for about 70 percent of the country’s wheat consumption. That puts HRW producers in a good position to meet that demand. Being closer to HRW production and having a highly functioning ability to import a large share of HRW directly via rail and duty free from the Plains states is an advantage for Mexico’s buyers.

In addition, Mexico is home to Bimbo, the world’s largest baked goods company, and an increasing number of cookie and cracker companies. The functional properties of U.S. soft red winter wheat (SRW) is well suited to the production of cookies, crackers and pastries, and serves as an excellent blending wheat. Millers supplying this growing market imported an average of 1.2 MMT of SRW between 2011/12 and 2015/16. With imports from the Gulf of more than 1.0 MMT of SRW in 2016/17, Mexico was the top buyer of SRW again. USW and state wheat commissions from the PNW are also helping demonstrate how millers and bakers can reduce input costs by using U.S. soft white (SW) as a blending wheat for specialty flour products.

The successful story of how U.S. wheat farmers and their customers in Mexico have worked together in a mutually beneficial way and, for now, U.S. wheat continues to flow to our customers in Mexico.

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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.

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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.