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By Michael Anderson, USW Assistant Director, USW West Coast Office

At the core of the U.S. Wheat Associates (USW) mission is a strong commitment to enhance the value of U.S. wheat for farmers and their customers. A large part U.S. wheat’s value-added differential advantage is the U.S. wheat supply chain system. It is system that ultimately works for wheat food consumers around the world. But it is also complex and therefore most effective when farmers, end users and everyone in between have a better understanding of how it works for them.

Once the wheat has arrived at the port by truck, rail or barge, grain exporters work around the clock to meet customer contract requirements. Through the futures market and a network of facilities up country, exporters are able to bring the right wheat to the export facility for blending, inspection and loading while managing their own price risks. This diverse network allows exporters to meet diverse and varied cargo requirements. USW helps exporters meet diverse and varied cargo requirements by connecting them and facilitating communications with customers worldwide.

 

As the wheat is loaded from the export facility to vessels, the law requires inspection by the Federal Grain Inspection Service (FGIS) to certify that the wheat loaded for export meets the quality standards specified in the customer’s contract. Created in 1976 by the U.S. Congress, FGIS is responsible for establishing and upholding standards for quality assessments and managing the grain inspection and grading procedures. FGIS also maintains equipment standards and manages the network of federal, state and private laboratories that provide impartial inspection and weighing services. The United States is the only wheat exporter with an independent, neutral grain inspection system, which is valued by its overseas customers and has helped wheat and other U.S. commodities grow export markets.

The Federal Grain Inspection Service (FGIS), as an objective third party, certifies that all exported wheat meets import specifications.

For end users of imported wheat, understanding what you need is key to producing what you want, which is why USW’s network of 15 offices across the world, including two in the continental United States, is the final step in the U.S. supply chain. Each office works closely with customers, including buyers, millers, bakers, food processors and government officials, to promote the advantages of U.S. wheat quality, help troubleshoot issues and simplify the process of importing and utilizing U.S. wheat.

Peter Lloyd, Regional Technical Director, based in the USW Casablanca Office, notes that the cheapest improver for wheat flour is buying the right wheat in the first place. He knows that making a high quality, desired end product is what the customer wants and getting there starts with the right wheat and understanding how best to use it. USW technical experts work closely with customers to share technical information on U.S. wheat characteristics, address issues related to wheat functionality and help customers make better end products with U.S. wheat.

USW Regional Technical Director Peter Lloyd visits Mennel Milling, Fostoria, Ohio, Feb. 2016. Read more about Peter’s work here.

 

USW Milling & Baking Technologist Tarik Gahi touring the Bakhresa Mill in Zanzibar, Tanzania in 2019 and answering one of the chief miller’s questions about flour extraction and bran. Read more about Tarik’s work here.

 

USW Food/Bakery Technologist David Oh in the laboratory at the Korean Baking School testing formulations of testing blends of HRW and SW flour for Korean-style baguettes and HRS and HRW flour for sweet buns in 2017. Read more about David’s work here.

USW representatives also raise the profile of wheat and note that only the United States offers six distinctly different wheat classes. Joe Sowers, Regional Vice President for the Philippines and Korea, notes that USW’s “philosophy for relating to industry participants is to put ourselves in their position and try to understand what they need to succeed. Then we maximize the number of positive contacts such as providing information, training or other resources to a customer. If everybody on the team is striving to make the most positive contacts possible, good sales follow. Good sales leads to better prices for our farmer stakeholders.”

USW has taken a global approach to increasing the profile of U.S. wheat. Alongside each stakeholder in the U.S. wheat supply chain, we too, take seriously our commitment to providing education, access, reliability and guidance in accessing the world’s most reliable wheat supply. It is through the commitment of dependable people, that we breed, grow, transport, inspect, export and promote the wheat the world needs.


Read other blog posts in this series:
Research and Breeding
Farmers and State Wheat Commissions
Grain Handlers

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By Claire Hutchins, USW Market Analyst

A swift uptick in export demand for U.S. soybeans, corn and sorghum is limiting export elevation capacity out of the Center Gulf, which supports nearby Gulf export basis for all classes of wheat. Between June 12 and June 19, Gulf 14.0 percent protein hard red spring (HRS) export basis increased 6 percent to $1.75/bu. Over the same period, Gulf 12.0 percent protein hard red winter (HRW) export basis increased 6 percent to $1.65/bu and Gulf soft red winter (SRW) export basis increased 7 percent to $0.75/bu.

Source: U.S. Wheat Associates (USW) weekly Price Report.

Soybeans. “A lot of customers are surprised by the fact that export capacity is filling up so quickly with soybeans,” said one industry contact. A significant increase in U.S. soybean exports to China this year compared to previous years is supporting overall soybean sales. According to USDA, the United States sold 1.79 million metric tons (MMT) of soybeans to China between May 14 and June 11 for delivery in 2019/20. That is nearly 4 times greater than the 360,000 metric tons (MT) sold to China over the same period in 2019. Soybean sales to all destinations, between April 2 and June 11, reached 7.34 MMT, nearly double the amount sold over the same period in 2019.

 Source: USDA FAS Weekly Export Sales as of June 11, 2020

Corn. Between April 2 and June 11, total U.S. corn export sales, to all destinations, reached 9.58 MMT, more than 80 percent greater than the volume sold over the same period in 2019. Export sales to Mexico, the largest market for U.S. corn, increased 79 percent year-over-year to 2.04 MMT during the previously noted 2020 period.

Source: USDA FAS Weekly Export Sales as of June 11, 2020

Sorghum. Total U.S. sorghum export sales, as of June 11, 2020, are nearly 4 times greater than this time last year at 4.01 MMT. Like soybeans, weekly sorghum exports to China were significantly greater between mid-May and Mid-June 2020, at 455,000 MT, compared to the same period in 2019.

 Source: USDA FAS Weekly Export Sales as of June 11, 2020

According to U.S. grain traders, customers might have difficulty finding export capacity for “grocery boats” (vessels containing multiple commodities or multiple classes of wheat) out of the Center Gulf for nearby deliveries. While the effect of limited elevation capacity is focused in the Center Gulf, it could also support wheat export basis levels out of all export regions.

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By Michael Anderson, USW Assistant Director, USW West Coast Office

Each day during harvest season in the Pacific Northwest, the road to mid-Columbia Grain Company in The Dalles, Ore., is backed up by large grain trucks loaded with recently harvested wheat. A sample is taken from each load, then graded and tested for protein before being offloaded and elevated into segregated storage or directly onto a barge that will make its way down the Columbia River to export grain terminals. Wheat from other up-country elevators is also loaded into rail cars for the trip to port.

Downriver, storage is limited but variable orders must be filled quickly. So, what is being offloaded from up-country is segregated by class and protein, inspected to certify it will meet buyers’ specifications and re-loaded into bulk vessels.

Such logistics are complex, but it is happening all the time across the United States. It is a system that continues to be highly efficient at receiving, storing, sorting, blending and shipping large amounts of grain of uniform quality to a diverse international customer base. To read more about the systems that support U.S. grain handling, visit the National Grain and Feed Association website here.

The North American Export Grain Association (NAEGA) describes exporting grain as both a competitive and capital-intensive industry. On its website, NAEGA states that “since the margin of profit to be earned from moving a ton of grain can be quite small, exporters depend upon moving large volumes very quickly. They seek to achieve an economy of scale that lowers their average fixed costs per unit of volume handled, provides operating flexibility, increases bargaining power in chartering for shipping, and improves the services they can provide worldwide.”

Using trucks, rail and river barges, the U.S. grain handling system in marketing year 2018/19 moved about 56 percent of annual wheat exports through ports in Oregon and Washington State, about 31 percent through ports in Louisiana and the Texas Gulf, about 9 percent from the “interior,” mainly via direct rail from the Plains to Mexican buyers, and 4 percent through ports on the Great Lakes.

From the bookkeepers at country elevators to the longshoremen who load bulk ocean-going vessels, every person in our grain handling system is working hard to add value to every metric ton of wheat our overseas customers purchase. Even today, as the threat from COVID-19 continues, these men and women remain at work, helping to feed the world.


Read other blog posts in this series:
Research and Breeding
Farmers and State Wheat Commissions
Exporters, Inspectors and USW Overseas Offices

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By Michael Anderson, USW Assistant Director, USW West Coast Office

“Everywhere the grain stood ripe and the hot afternoon was full of the smell of the ripe wheat, like the smell of bread baking in an oven. The breath of the wheat and the sweet clover passed him like a pleasant thing in a dream.” – Willa Cather, O Pioneers!

Heading east out of Portland, Ore., the landscape changes quickly. From the large city you pass through a tapestry of green forest with snow-capped peaks in the distance. Following the Columbia River, the mountains gradually become smaller until opening onto vast open hills carpeted by wheat fields. It is an impressive drive and vastly different from where you started.

For U.S. wheat overseas customers visiting the U.S. Pacific Northwest states with a trade delegation, this is often the journey they take as they travel out to see for themselves where the wheat they purchase is grown and to meet the people who grow it. Every year, U.S. Wheat Associates (USW) and its state wheat commission member organizations host several trade delegations to facilitate these important connections. A crucial link that tightens the customer relationship, made possible by the long distances traveled, is to connect the customer with the source of their product in the company of the people who work hard to grow it.

Trade teams that visit the United States are often able to observe grain grading and inspection by the Federal Grain Inspection Service (FGIS). Visits can include interaction with research institutions to see how farmers and their state wheat commissions work closely with breeders to improve wheat varieties. Teams are often able to see the infrastructure that efficiently moves U.S. wheat from the farms to export facilities.

USW led five representatives of the Taipei Bakers Association and three officials from Taiwan’s Department of Public Health on a trade team to Oregon in late April 2019.

Customer Relations

Many U.S. wheat farmers and wheat commissions have made lasting connections with the customers they meet at part of trade delegations to and from the United States. Some have even had the opportunity to host customers they have met overseas here in the United States on their farms. In an interview with KGNC Radio in Amarillo, Tex., Ken Davis, a USW director and a wheat farmer from Grandview, Tex., talked about his experience traveling with USW. On a 2018 visit to Nigeria, Davis, who represents the Texas Wheat Producers Board, met with a team of flour millers and extended an invitation for them to visit his farm. A year later, he picked them up at the airport in Dallas and shuttled them to his farm. For the first time they got to see a wheat field and see the work that goes into growing the product that is crucial to their own livelihood. In the interview, Davis noted that “it is customer relations” that make the difference. That is a refrain I have personally heard often in my time with USW.

This trade team of Chilean flour millers that visited Oklahoma in June 2017 helped increase understanding of U.S. hard red winter wheat quality and how farmers do everything they can to produce the best quality crop.

Michael Peters, a wheat farmer from Okarche, Okla., and the 2020/21 USW Secretary Treasurer-elect representing the Oklahoma Wheat Commission, has his own experience to share. Last summer, at the USW Mexico Wheat Trade Conference, Peters saw a familiar face, César Enríquez, Director of Business Development for Grupo La Moderna in Toluca, Mexico. Enríquez extended an invitation for Peters to attend the opening of their new shuttle train facility. Later that fall, and to his surprise, Peters was there.

U.S. wheat farmers will continue to pursue a higher quality, wholesome and sustainable wheat crop by redefining the state of excellence every growing season. The U.S. wheat export supply system will continue placing an abundant supply of wheat for export, as it has continued to do during the COVID-19 pandemic. USW and its state commission members will also continue working to connect these farmers and the export system to customers around the world, both on their visits to the United States and abroad.


Read other blog posts in this series:
Research and Plant Breeding
Grain Handlers
Exporters, Inspectors and USW Overseas Offices

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By Michael Anderson, USW Assistant Director, West Coast Office

Professional millers and bakers know that the appearance and taste of every product depends on the specific characteristics imparted by its flour ingredient. And those characteristics are deeply rooted in the ancient craft of plant breeding.

[Plant breeding is an ancient craft.] As far back as 10,000 years, farmers looked for traits that helped them grow more and better food. Egypt became the breadbasket of ancient Rome as its farmers adopted a type of wheat from the “fertile crescent” in modern Iraq to plant along the Nile River. Over time, the Egyptians found ways to grow a grain that was sturdy enough to transport long distances and stand up against pests. The Egyptian wheat traded with the Romans may not be what we are used to today, but the process for how it was grown to meet the needs of the consumer is by no means ancient history.

Today, the Wheat Genetics Resource Center at the Kansas Wheat Innovation Center houses more than 30,000 wheat varieties from around the world that are descendants of ancient varieties. Kansas Wheat Vice President of Research and Operations Aaron Harries likened the collection to a “treasure hunt,” offering the opportunity to find the next innovation derived in part from each specimen. Researchers and breeders here, and at other programs across the United States, play an important role in the relationship U.S. Wheat Associates (USW) builds with its customers. By listening to both farmer and customer feedback, they work on developing high-yielding, disease resistant wheat seed with excellent milling, baking and processing qualities.

Wheat Genetics Resource Center at the Kansas Wheat Innovation Center in Manhattan, Kan. Photo courtesy of the Kansas Wheat Commission.

Dr. Senay Simsek is a cereal chemist and professor at North Dakota State University and says that the personal connections that she has made on fifteen trips with USW to four different continents is crucial to her work. As an expert on hard red spring (HRS) wheat, Simsek says that when she prepares to meet overseas customers, she familiarizes herself with the types of wheat flour products they make, what the other ingredients are and what countries they buy wheat from. Being familiar with a market is important to understanding the unique needs of the customer. “Sophisticated” was the word she uses to describe customer needs and knowledge, emphasizing how important the technical process of using the right wheat for a specific product can be.

Dr. Senay Simsek joins USW staff to meet with U.S. wheat customers in Indonesia in 2019.

Dr. Senay Simsek joins USW staff to meet with U.S. wheat customers in Malaysia in 2019.

Each year, USW hosts several trade delegations that are traveling to the United States to learn firsthand about the U.S. wheat supply chain system. The delegations visit research institutes like the USDA Western Wheat Quality Lab at Washington State University in Pullman, Wash. Its mission in part is to “conduct cooperative investigations with breeders to evaluate the milling and baking quality characteristics of wheat selections,” and to “conduct basic research into the biochemical and genetic basis of wheat quality in order to better understand the fundamental nature of end-use functionality.” The director of the lab, Dr. Craig Morris, welcomes many of the USW delegations to his lab each year and emphasizes the unique partnership that the lab, as part of the USDA Agricultural Research Service, has within the industry, among other researchers and with state wheat commissions.

A USW Japanese trade delegation visits the USDA Western Wheat Quality Lab.

In September 2019, I had the opportunity to visit Washington State University with a trade delegation from Southeast Asia. We met with Dr. Michael Pumphrey, a spring wheat breeder, who walked us through the steps of the wheat breeding process. We watched as he cross-pollinated single wheat plants, a process that requires careful, precise techniques.

In his 27 years with USW, Steve Wirsching, Vice President and West Coast Office Director, based in Portland, Ore., has hosted many trade delegations and has also led many Wheat Quality Improvement Teams of wheat breeders to visit customers overseas. When asked why USW continues to put an emphasis on facilitating the relationships between customers and wheat researchers and breeders, he said, “It is important to listen to our customers and seek feedback on the quality characteristics they need. It is part of the U.S. Wheat Associates mission, to enhance wheat’s value for our customers.”

2017 Wheat Quality Improvement team in Thailand. Read more about this activity.

2018 Wheat Quality Improvement Team in Latin America. Read more about this activity.

According to www.innovature.com, the innovation and evolving breeding methods in agriculture and food, and a deep understanding of DNA, today helps scientists like Dr. Simsek and Dr. Pumphrey make even more precise genetic changes to wheat and other plants. Their work is needed more than ever to meet some of society’s most urgent and pressing challenges including climate change, sustainability, hunger and improved health and wellness.


Read other blog posts in this series:
Farmers and State Wheat Commissions
Grain Handlers
Exporters, Inspectors and USW Overseas Offices

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By Dalton Henry, USW Vice President of Policy

For the better part of a century the United States has been known as the breadbasket of the world. Today, that reputation continues ringing as true as ever at a time when it may be needed most.

Reliability and certainty go hand in hand. That is why the U.S. export grain industry and the government agencies that protect and promote U.S. agriculture snapped into action when the first COVID-19 “shelter-in-place” orders forced many workers to stay home. Individual businesses developed mitigation plans including more cleaning shifts and personal protective equipment for employees. Workarounds were found to limit staff member contact and to ensure trade could continue to flow, even when items as routine as loading paperwork were being curtailed.

It wasn’t just private businesses that took steps to keep wheat exports flowing smoothly. While other countries used bureaucratic delays on regular functions such as permits and inspections to slow down exports, the U.S. Federal Grain Inspection Service (FGIS) issued a public letter stating they would “take all necessary steps” to ensure export inspection services would continue unabated. The Animal and Plant Health Inspection Service (APHIS) issued a similar letter, promising to continue critical inspections and issuance of phytosanitary certificates. Both agencies clearly understand that maintaining U.S. agricultural exports is vital, not just to the U.S. economy, but also to meeting our commitments to our partners around the world.

Federal Grain Inspection Service

USDA wasn’t the only federal agency to recognize that U.S. farmers need to stay on the job. The Department of Homeland Security is responsible for providing federal guidance in national emergencies, especially concerning critical industries. In less than a month, they have expanded the guidance defining “essential” workers and should, therefore, stay on the job in the event of “stay-at-home” or “shelter-in-place” orders to include the entire grain supply chain. That guidance includes workers in transportation, inspections, production, input suppliers and even business providing repair services. Keeping those businesses running, keeps U.S. farms running, and helps give our overseas customers peace of mind.

U.S. wheat is still flowing through U.S. ports such as here in Portland, Oregon.

As we saw at a container facility in the Port of Houston when a worker tested positive for COVID-19, there will no doubt still be small disruptions as we work through this uncertain time. But with government and industry commitment to maintaining supply chains, wheat will continue flow to customers at home and abroad from the U.S. breadbasket.

If you have questions, please contact your local U.S. Wheat Associates (USW) representative here.

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By Claire Hutchins, USW Market Analyst

Soft red winter (SRW) export prices had been climbing steadily since the end of the 2019 harvest on reduced production, tight ending stocks and stable domestic and overseas demand. Then after Jan. 24, 2020, export basis and FOB prices dipped, offering an opportunity for SRW importers to lock in a lower price through the end of marketing year 2019/20.

From mid-July 2019 to mid-January 2020, SRW export basis rose 65 percent from $0.85 per bushel (/bu) to $1.40/bu, 33 percent higher than last year at this time and 47 percent higher than the 5-year average.

However, between Jan. 24 and Jan. 31, 2020, a dip in export demand pressured SRW export basis for the first time since early September. SRW export basis fell 7 percent to $1.30/bu, the lowest since early December 2019. Lower basis and softer futures prices also pressured SRW FOB values 4 percent between Jan. 24 and Jan. 31 from $262/MT to $251/MT.

Market watchers, including those at U.S. Wheat Associates (USW), believe this price decline is a good buying signal. They believe SRW export basis will remain high through the end of 2019/20 based on still tightening exportable supplies and stable demand from overseas customers. Members from the grain trade also believe SRW export basis will be higher than average through the 2020/21 harvest based on significantly reduced beginning stocks year-over-year and substantial reductions in SRW planted area in states tributary to the Mississippi River, where a significant amount of SRW is transported from the countryside to export facilities in the Gulf.

Specifically, farmers reduced SRW planted area for harvest in 2019 due to overly wet field fields in the fall of 2018 and unprofitable prices. SRW production fell 17 percent from last year to 6.50 million metric tons (MMT), the lowest since 2010/11. USDA expects SRW ending stocks at the end of 2019/20 to fall 49 percent to 2.88 MMT, the lowest in 10 years. USDA predicts SRW exports will total 2.72 MMT, in line with the 5-year average.

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By Claire Hutchins, USW Market Analyst

With six months gone in marketing year 2019/20, USDA currently believes total U.S. wheat exports will reach 26.5 million metric tons (MMT), which, if realized, would be 4 percent more than 2018/19 and 7 percent more than the 5-year average. U.S. Wheat Associates (USW) believes the high quality and competitive pricing for select U.S. wheat classes and other factors definitely support USDA’s estimate.

As of Dec. 26, 2019, total commercial sales of 18.5 MMT already make up 71% of USDA’s latest export forecast. Commercial sales to 11 of the top 20 markets for U.S. wheat are ahead of last year’s pace and total export sales to all destinations are 6 percent ahead of sales on the same date in 2018/19.

Commercial Sales - U.S. wheat sales to Top 10 Customers - JAN20

Hard Red Winter (HRW)

USDA expects the United States to export 10.6 MMT of HRW in 2019/20, 18 percent more than 2018/19, if realized. Year-to-date HRW sales total 6.91 MMT, 24 percent ahead of last year’s pace and 65 percent of USDA’s total estimate. Exports to three of the top five HRW export markets are significantly ahead of last year’s pace. Sales to Mexico, the largest market for HRW, are 30 percent ahead of last year at 1.80 MMT. Exports to Nigeria are 19 percent ahead of last year at 580,000 metric tons (MT) and sales to Taiwan are 41 percent ahead of last year’s pace at 333,000 MT. USW believes HRW sales could continue to grow through the second half of 2019/20 assuming U.S. HRW prices remain competitive at the global level. According to AgriCensus data, on Dec. 30, 2019, U.S. HRW 11.0 percent (on a 12 percent moisture basis) prices off the Gulf was $222 per MT FOB and comparable Russian 12.5 percent protein wheat (on a dry moisture basis) was $3 per MT less at $219 per MT FOB.

Hard Red Spring (HRS)

USDA forecasts 2019/20 HRS exports will reach 7.10 MMT, in line with last year despite the significant effects of an overly wet harvest. USDA even increased its total HRS export estimate 2 percent between October and November 2019 from 6.94 MMT to 7.10 MMT. Year-to-date total HRS sales of 5.3 MMT are down 4 percent from 2018/19 and fall 7 percent less than the 5-year average. USW believes slower export sales could be attributed to HRS FOB prices between September and December 2019 that were higher than last year at the same time.1 Between late September and late December 2018, the average nearby FOB price for HRS off the Pacific Northwest (PNW) was $259 per MT. Between late September and late December 2019, the average nearby FOB price for HRS out of the PNW was $271 per MT, 5 percent more than the same period last year. Yet year-to-date exports to the top two importers of HRS are only slightly behind last year’s pace. Exports to Japan and Korea, top 5 importers of HRS, are both ahead of last year’s pace at 514,000 MT and 362,000 MT, respectively.

1Source: USW Price Report.

Commercial Sales - U.S. Wheat Sales by Class - JAN20

Soft Red Winter (SRW)

Export sales of 2.10 MMT for SRW through Dec. 26, 2019, are 6 percent less than 2018/19. This difference relates mainly to increased SRW export prices due to a significant decline in exportable supplies. USDA predicts 2019/20 SRW ending stocks will fall to 3.02 MMT, 30 percent less than 2018/19, if realized. USDA forecasts total SRW exports will fall 22 percent year-over-year to 2.72 MMT. Year-to-date commercial sales of SRW to all destinations make up 77 percent of USDA’s total SRW export estimate. Despite lower production and higher prices, SRW sales to five of the top ten export markets are ahead of last year’s pace. Exports to Mexico, the top destination for SRW, total 641,000 MT, up 2 percent from last year. Sales to Colombia and Nigeria, both top 5 export markets for SRW, are up 38 percent and 20 percent from last year, respectively. Imports by Brazil are also running at a faster pace so far this marketing year.

White Wheat (Soft and Hard2)

USDA predicts “white wheat” exports (which includes 99.7 percent soft white) will fall 3 percent in 2019/20 to 5.20 MMT. As of Dec. 26, 2019, export sales of white wheat at 3.77 MMT are 8 percent behind last year’s pace and make up 73 percent of USDA’s final export estimate. The sales pace on the same date for four of the five top white wheat export markets is less than last year. According to industry experts, routine demand from these top markets is lagging in part because some importers believed FOB prices were too high throughout the first half of 2019/20. Some price sensitive buyers in Southeast Asia were focused on relatively low-cost Black Sea supplies. However, export sales to the Philippines, the top market for white wheat, are 9 percent ahead of last year’s pace at 1.0 MMT. USW believes routine demand from top buyers may pick up again in the second half of 2019/20 as Black Sea exportable supplies dwindle before harvest and U.S. white wheat prices grow more competitive with the shortage of Australian white classes.

2USDA sales reports combine SW and hard white (HW) export sales.

Durum

Year-to-date U.S. durum exports total 790,000 MT, which is significantly ahead of the same time last year. Despite significantly lower production, between October and November 2019 USDA increased its 2019/20 U.S. durum export forecast by 40 percent from 680,000 MT to 950,000 MT. Italy and other European Union (EU) countries are significant U.S. durum importers. Demand appears to be up in 2019/20 because EU durum production was 12 percent less than last year. As of Dec. 26, 2019, U.S. durum exports to Italy are more than double last year’s pace at 462,000 MT.

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By USW President Vince Peterson

Recently, I have heard several of the farmers that U.S. Wheat Associates (USW) represents say they are hoping for a much better year in 2020. No wonder, given the low farmgate prices, trade uncertainty and difficult harvest conditions last year. A better year would be good for our farmers and for our overseas customers, too, who want farmers to have the incentive to continue producing a reliable supply of high-quality U.S. wheat.

From the perspective of global supply, demand and trade factors, we do see mostly positive influences hovering just out in front of us as we start the new year. After a long-term bear market that pulled Chicago wheat futures down from $9.50 in 2012 to a bottom of nearly $3.50, recent firmness in prices represents possible change and momentum on the horizon.

To highlight the primary market factors, we can start with a look at the Southern Hemisphere. Australia remains in the grips of drought that has reduced this year’s harvest outlook by 35 percent below their 10-year average. Australian wheat export prices are currently among the world’s highest at around $265 per metric ton (MT) FOB. In Argentina, the newly elected government has increased export taxes again for wheat from 7 percent to 12 percent (soybean export taxes were raised by 30 percent!). The bump in wheat export taxes raises FOB prices by more than $10 per MT, allegedly to protect domestic producer prices. That is not good for their importing customers, particularly for Brazil. However, after more than a dozen years of negotiations, Brazil on January 1 opened its 750,000 MT duty free tariff rate quota (TRQ), potentially advancing wheat import demand from outside Mercosur. When Mercosur wheat supplies have been tight, U.S. farmers have supplied an average of 80 percent of Brazil’s non-Mercosur needs.

In the Northern Hemisphere, Russian wheat export expectations have been reduced based on lower domestic supplies and prices for their standard 12.5 percent protein wheat (calculated on a dry matter basis and is most closely comparable to U.S. HRW 11 protein calculated on a 12 percent moisture basis). Russian FOB export prices are now around $219 per MT, with U.S. hard red winter (HRW) 11 percent at approximately $222 FOB from the Gulf. Long gone are the $40 to $50 per MT FOB discount spreads that have disrupted what would be normal logistical trade patterns in some recent years.

In its December “Wheat Outlook” report, USDA noted that cuts in wheat production in Argentina, Australia and Canada create potential opportunities for U.S. wheat exports in marketing year 2019/20.

In trade, despite the uncertain slog of negotiations, the United States has completed trade deals with Mexico through the finalization of the U.S.-Mexico-Canada Agreement (the new NAFTA) and through an initial bilateral agreement on agriculture with Japan. U.S. wheat export shipments to Mexico in marketing year 2019/20 already stand at 2.74 million metric tons (MMT) versus sales at the same date last year of 2.18 MMT. Together, Mexico and Japan account for more than 4.0 MMT and 25 percent of all U.S. wheat export sales to date.

Finally, trade negotiations with China, which have been perhaps the biggest weight on U.S. wheat market fundamentals and psychology, appear to be at a more hopeful position. This week, President Trump announced that the U.S. and China will sign a so-called Phase One deal on January 15. Based on information provided by the Office of the U.S. Trade Representative, China has agreed under the Phase One agreement to cancel retaliatory tariffs and import significantly more U.S. agricultural products, including wheat. Running parallel to this potential demand, China has also agreed to start filling its annual 9.6 MMT reduced tariff TRQ for imported wheat. In the five years before the start of the U.S.-China trade “war” in 2018, U.S. wheat exports to China averaged 1.5 MMT per year. That provides a logical basis for a more robust world and U.S. wheat trade with China.

Over the last five years or so, U.S. wheat producers have shouldered many challenges and continued to produce the highest quality, most wholesome milling wheat in the world, as they have done for decades. We do not yet know if these positive shifts in market and trade factors will provide the economic boost they need. But in that hope, our team at USW will be watching how they affect the markets – and how that will affect our overseas customers.

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Three and a half months into marketing year 2019/20, total U.S. export sales* as of Oct. 15 of 13.8 million metric tons (MMT), 14 percent ahead of last year’s pace. Sales to four of the top 10 U.S. wheat customers are ahead of last year’s pace. Export sales to Mexico, the top U.S. customer over a five-year period, are up 50 percent year-over-year at 2.09 MMT. Sales to Nigeria total 936,000 metric tons (MT), up sharply from the 569,000 MT sold this time last year. All U.S. wheat classes except hard red spring (HRS) and white wheat are ahead of last year’s pace. USDA projects 2019/20 U.S. wheat exports will rise to 25.9 MMT. If realized, this would be 1 percent higher than 2018/19.

HRW. USDA reported hard red winter (HRW) year-to-date exports at 5.13 MMT, 52 percent ahead of the 2018/19 HRW sales pace on the same date. Mexico is currently the number one HRW purchaser and HRW sales to Mexico are 54 percent ahead of last year’s pace. As of Oct. 10, HRW sales to Mexico totaled 1.27 MMT. Sales to Nigeria are more than double last year’s pace at 567,000 MT. Japanese HRW purchases total 488,000 MT, up 7 percent from 2018/19.

SRW. 2019/20 soft red winter (SRW) sales are up 14 percent year-over-year at 1.72 MMT. Sales to 4 out of 5 of the top buyers of U.S. SRW are ahead of last year’s pace. Year-to-date, Mexico has purchased 550,000 MT, 15 percent more than last year. Nigerian SRW purchases total 142,000 MT, 50 percent ahead of last year’s pace. Sales to other Latin American countries, including Trinidad and Tobago and Panama are also ahead of 2018/19 exports.

HRS sales of 3.77 MMT are only 1 percent behind the last year’s pace. As of Oct. 10, buyers in Taiwan purchased 353,000 MT, up 5 percent from 2018/19. Taiwan is the third-largest buyer of HRS. Sales to South Korea, the fourth-largest buyer of HRS, are up 10 percent from last year at 294,000 MT. Year-to-date sales to Southeast Asian countries, including the Philippines, Bangladesh, Thailand and Malaysia, are behind last year’s pace. This time last year, there were no HRS sales to China. So far in 2019/20, the U.S. has sold 63,000 MT of HRS to China.

White. As of Oct. 11, exports of all white wheat (including soft white and hard white) are down 14 percent year-over-year at 2.62 MMT. Sales to 4 out of the top 5 customers of U.S. white wheat are down from last year. Sales to the Philippines, the largest customer of soft white (SW) wheat, are down 6 percent from 2018/19 at 660,000 MT.  SW food aid donations to Yemen are up 79 percent from this time last year at 231,000 MT. Minimal access to the Chinese market is also impacting SW sales. In 2017/18, China had purchased 271,000 MT of SW by this date.

It should be noted that the white sales to Nigeria of 123,000 MT are hard white (HW). USDA does not differentiate between the 2 classes on the Export Sales Report. HW sales to Nigeria in 2019/20 are 9 percent ahead of last year’s pace.

Durum. Year-to-date durum exports total 497,000 MT, up 59 percent from the same time last year. To date, the European Union (EU), Algeria and Nigeria are the top durum buyers. Year-to-date sales to the EU total 269,000 MT (9.88 million bushels), more than double last year’s pace. Italy is the top durum buyer in the EU. U.S. durum sales to Italy are up 165 percent from last year at 248,000 MT. Increased sales to the EU more than offset decreased sales to Algeria and Nigeria. Algerian durum sales are down 30 percent from last year at 45,000 MT and Nigerian durum sales are down 58 percent from 2018/19 at 28,000 MT. There is also a significant portion of these 2019/20 durum sales currently designated as “sales to unknown destinations.”

*U.S. Wheat Associates (USW) publishes a new Commercial Sales report every Thursday documenting wheat export sales-to-date by country and class for the current marketing year compared to the previous marketing year on the same date. The report also includes a 10-year commercial sales history by class and country. Data is sourced from the USDA Foreign Agricultural Service Weekly Export Sales Report.