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Rail Merger Proposals Should Improve Competition, Hold Down Wheat Shipping Rates

On March 21, 2021, Canadian Pacific (CP) Railways announced a $25 billion plan to merge with Kansas City Southern (KCS), calling it a “transformative” remake of the freight-rail industry. The proposed new railroad would be the first U.S.-Mexico-Canada-linked rail line.

To illustrate rail merger proposals

The proposed rail merger of Canadian Pacific and Kansas City Southern would create a new rail system linking Canada, the United States and Mexico. Map: Canadian Pacific.

Not to be outdone, Canadian National Railway (CN) began talks with KCS in late April, saying it could yield a “superior” rail merger proposal and offering $30 billion for KCS compared to CP’s $25 billion.

Wheat is Watching

The U.S. wheat industry is closely watching both proposals but has not taken a position in support of or opposition to either proposed merger. U.S. Wheat Associates (USW), along with a coalition of shippers, has asked the Surface Transportation Board (STB), which regulates U.S. rail service, to apply its most strict standard of “enhances competition” to both proposals.

Also in April, however, the STB granted a waiver to CP that exempted its proposal from that high standard established in 2001. That ruling effectively lowered CP’s burden for winning the deal. The STB defended its decision noting that because the combination of CP and KCS would be the smallest of the large North American railroads, it would “result in the fewest overlapping routes.”

A Dissent

However, one STB member, Robert Primus, dissented in part, saying, “Special treatment for this proposed merger between Class I [railroads] runs counter to the Board’s responsibility to review such major mergers and protect the public interest.”

While the STB waived CP’s proposal from that standard, it has not yet ruled on the CN proposal. However, CN’s effort to brand the merger as enhancing competition has received over 600 letters of support.

USW’s desire to see increased rail competition in these merger proposals is directly related to their potential effect on U.S. wheat export prices.

To show proposed rail routes

Alternative routes created by Canadian National’s proposed rail merger with Kansas City Southern. Map: U.S. Department of Transportation via Bloomberg.

Rail Rates Affect Sellers and Buyers

U.S. railroads are a crucial part of the most efficient grain supply system in the world. The rail system fulfills an essential logistical function that neither grain handlers nor farmers can perform on their own. Wheat must compete for limited rail capacity with other grains as well.

USW, however, has learned that since June 2014, the cost of wheat shipments has increased substantially, due at times to higher basic rates for shipping wheat and other rail pricing strategies. For Mexican wheat buyers who bring in more than 60% of their total U.S. imports directly by rail, rates have a significant, direct impact on their bottom-line costs.

As rail costs increase, grain handlers may try to recover these costs by offering higher grain prices to terminal or export elevators and, as some in the industry believe, by offering lower prices to farmers. As basis increases, overseas buyers must pay more for all classes of wheat, and that affects demand.

While it is unlikely these proposed rail mergers would make Canada more competitive in Mexico due to long shipping distances, Canada’s history of nationalism in rail policies is concerning as it favors only some shippers. It is also possible a merger would increase Canada’s competitiveness in the U.S. domestic market, while the Canadian industry continues benefitting from an archaic, government-mandated variety registration system that helps minimize any large-scale U.S. wheat imports north.

Next Steps

The KCS’s board of directors must next decide if they want to accept one of the rail merger proposals. In the meantime, the STB will review the proposed mergers.

In response to the impacts of increasing rail rates on our export competitiveness, USW formed a Wheat Transportation Working group in 2018. The group is currently working with researchers on scenarios that will help identify potentially positive or negative outcomes that could result from a merger. The STB is likely to seek public comments on the final rail merger proposals later in 2021 and the Wheat Transportation Working Group will weigh in on behalf of U.S. wheat farmers.

For more information: https://www.freightwaves.com/news/cn-and-canadian-pacific-vie-for-shippers-and-kcs-shareholders-favor.

By Michael Anderson, USW Market Analyst

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Global Growth Forecast Likely to Support Higher Ocean Freight Rates

As the world’s economies begin picking up pace, the increasing demand for raw materials is pushing up ocean freight rates worldwide. A less volatile freight market is possible but there are factors that suggest rates will remain higher for some time.

Aristides Pittas, CEO of EuroDry, noted recently that dry bulk rates in January were the highest in a decade.

“The period from 2000-2010 was an extraordinarily good decade for dry bulk. In 2010-2020, it was an extraordinary bad decade,” he added. However, as another industry insider noted, “a lethargic decade for the [ocean freight] industry is behind us.” Rates for Panamax and Supramax vessels are double what they were at the same time last year, ahead of the global shutdowns brought on by the spread of COVID-19.

Why Freight Rates are Increasing

Dry bulk demand is overwhelmingly driven by China’s buying spree, which accounted for 48.5% of all dry bulk-ton miles in 2020, reported BIMCO. Unlike many countries last year, China’s economy grew by 2.3%. China’s growth translated directly to demand for grains, coal, iron ore, and other commodities delivered in dry bulk vessels.

Another cause is a diplomatic dispute between China and Australia that has left 70 bulkers carrying coal anchored off northern China. China is looking elsewhere for coal while Australia is finding other export markets, leading to longer shipping times and tying up the vessel supply on longer shipping routes.

News of President Biden’s plans to push a significant U.S. infrastructure plan could also affect demand. Martyn Wade, CEO of Grindrod Shipping, said shipping demand could be “through the roof” if deliveries of building materials like steel and cement tie up smaller ship sizes. In fact, Chinese steel exports in March were 40% above January and February, respectively. That is a four-year high according to Marine Strategies International (MSI).

Can the Market Stabilize?

Rates for Panamax and Supramax vessels have steadily increased in the first quarter of 2021 and remain very strong. Rates have been steady in April. Today’s Panamax rate is $22,949, or about $600 more than on April 1. Forward freight agreement (FFA) derivatives indicate continued strength. The Baltic Index is up 39% in April.

Proving ocean freight rates are rising.

Ocean Freight Rates Comparison, April 2020 to April 2021.  This chart gives a snapshot of freight price trends for routes from the U.S. Pacific Northwest to Northeast Asia, the U.S. Gulf to Northeast Asia, and the Black Sea to Northeast Asia. The chart shows the trend of shipping rates over the course of one year (April 2020 to 2021). The Y-axis represents the percent change over the course of a year with 0% representing the benchmark. Source: “AgriCensus.”

New ship orders can increase the worldwide supply of dry bulk carriers, but new orders are not keeping pace with demand. New build orders for container ships in comparison are triple the dry bulk ratio, reported “American Shipper.”

In addition, COVID-19 protocols in many countries have slowed vessel discharge time. Australia, for example, requires ships to hold at sea for 14 days before calling at ports. This protocol has had a major impact on the Capesize route between China and Australia, said Nick Ristic, lead dry cargo analyst at Braemar ACM Shipbroking.

Strength in Freight Market to Persist

It looks like the market is at a turning point for the shipping industry. As the year progresses, rates remain strong. Global economic growth and momentum in the equities markets point to an optimistic outlook for the year. Limits on vessel supply cannot be met quickly.

For those contracting for shipping, these factors are likely to sustain the higher dry bulk carrier rates.

For additional information on freight and other trade service needs, please contact your local USW Office.

By Michael Anderson, USW Market Analyst

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U.S. Hard Red Winter Wheat Farmers Looking for Rain

The 2021/22 U.S. hard red winter (HRW) wheat crop is developing under a range of conditions. However, rain makes grain, so anxious farmers are looking for clouds on the horizon.

Based on the USDA’s Crop Progress reports, issued each week on Mondays, the HRW crop seems to be starting on average footing compared to condition reports at the same time last year. Yet USDA this week reported a 2% drop in the amount of winter wheat rated good and a 3% drop in the amount rated fair, while wheat rated as very poor grew by 16%. Overall, the USDA puts 53% of the U.S. HRW wheat crop between good and excellent conditions, a 2% drop from the week before.

Michael Peters, an Oklahoma HRW producer and U.S. Wheat Associates (USW) Secretary-Treasurer, noted that he had not received more than a half-inch of rain in the last 45 days.

Warm to Cold

Above-average temperatures in March only added to anxiety, especially as the crop enters its reproductive stage. And in typical spring fashion, unseasonably warm weather last week turned cold this week, with much of the Plains and Midwest experiencing below-average temperatures.

To show rainfall across the U.S. April 4 to 10, 2021

Some precipitation in the eastern Plains was some help for the 2021/22 HRW wheat crop from April 4 to 10 but dry conditions remain a concern. SRW conditions in the East look much better. Source: National Oceanic and Atmospheric Administration.

Following are brief summaries of growing conditions in six major U.S. HRW-producing states based on USDA’s April 12 report.

Colorado

The entire state of Colorado is experiencing some form of drought and windy weather has made conditions worse. Cold soil temperatures are keeping winter wheat progress back slightly. Recent snow helped with some moisture deficits with more snow in the forecast over the next week. USDA rates winter wheat conditions at 26% good or excellent.

Kansas

The winter wheat conditions in Kansas are above average. Wheat planted in September had significant soil moisture leading to a good looking and considerably different crop then wheat planted in October challenged by dry weather since seeding, creating two unequal crops. Much needed rain fell in March and more rain is predicted. Kansas wheat is rated 55% good or excellent.

Nebraska

Across Nebraska, uneven moisture means uneven crop development. Overall, the wheat crop there is rated 43% good or excellent, but dryness is a key concern. Wheat planted early is well established, but later plantings are behind.

Oklahoma

Cool, wet weather has 70%of the Oklahoma wheat crop in good or excellent condition over recent weeks. A lack of snow cover and severe cold damaged some growing areas in February. Still, overall, it did not have much adverse impact, said Amanda de Oliveria Silva, a small grains specialist with Oklahoma State University Extension Service. Insect pressure is minimal, and, because of the dry conditions, disease is nearly nonexistent.

South Dakota

Moisture deficits in topsoil and subsoil are weighing on winter wheat conditions. Despite the lack of rain, winter wheat condition ratings improved this week to 38% good to excellent. Rain in the forecast for this week would help improve conditions even more.

Texas

In February, Texas saw temperatures as high as 80 degrees followed by a prolonged period of record cold temperatures. This likely made freeze damage worse in some areas. Texas is also extremely dry in much of its wheat production regions and USDA reported only 28% of the state’s winter wheat crop as good or excellent.

Overall, Oklahoma’s Michael Peters had this to say about the U.S. hard red winter wheat crop: “We are in a critical stage, but we have time to recover if rain comes in the next 10 days. Either way, we will have a crop.”

To show % of HRW production by six U.S. states.

Among the six states included in this report, the chart shows each state’s percent of their combined total HRW production. Source: USDA NASS.

A Note on Soft Red Winter Wheat Conditions

Contrary to dry growing conditions in much of the Plains region, soft red winter (SRW) production areas have experienced favorable growing conditions, with one farmer calling them “ideal.” Mild winter conditions, modest snow cover, and little ice has farmers feeling positive overall. Many growers have been in the field to apply fertilizer and they note minimal concern about weeds or disease to date.

By Michael Anderson, USW Market Analyst

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Russian Wheat Export Controls: They Are at It Again

By Michael Anderson, USW Assistant Director, West Coast Office

On Nov. 13, 1991, the Chicago Tribune ran this headline: “Soviet Bread Prices Skyrocket By 600%.” Bread was already in short supply and if you bought it that morning, you would have paid 60 kopeks, by that afternoon it was 3.60 rubles.

Apparently, the memory of such an event nearly three decades ago is still fresh in the mind of Russia’s President Putin. After he criticized the high price of flour and bread recently, the government quickly announced plans for wheat export taxes and an export quota, even though Russian farmers produced a massive wheat crop for this marketing year.

U.S. Wheat Associates (USW) is not surprised. Despite making up a quarter of the worldwide wheat market, Russia continually insists on controlling exports to keep domestic food prices under control.

Over the last 13 years, Russia has placed some form of restriction on wheat exports six times, including twice in the last year. And, as a result, that choice always led to unnecessary disruptions to wheat buyers from the run up in world wheat prices and uncertainly over supplies.

In 2007, for example, Russia had one of its best crops ever to that point, harvesting just under 50.0 million metric tons (MMT) of wheat. Despite the steady increase in Russian production, a steep rise in the domestic price of wheat was remedied by a 10 percent export tax followed by a 40 percent export tax in January 2008, that continued until July of that year.

Drought and record high temperatures caused severe damage to the 2010 Russian harvest. While global wheat prices tripled, Russia enacted a complete ban on Russian wheat exports that lasted from Aug. 15, 2010, through July 1, 2011.

In early 2015, a depreciation in the Russian ruble led to attractive Black Sea wheat prices. Traders exported a record amount that season. To slow down exports, Russia once again applied an export duty. The tax was lifted in May but implemented again in July (the Russian trade calendar runs from July 1 to June 30).

When uncertainty over the impact of COVID-19 erupted in the spring of 2020 a Russian export quota of 7.0 MMT was applied to the April 1 to June 30, 2020, shipping window. By the end of April, that quota was exhausted and put a stop to all Russian wheat exports until July 1, 2020, the beginning of the new export calendar.

Which brings us to today. Russia has once again announced plans for an export quota that will run between Feb. 15 and June 30, 2021. The plan calls for a €25 per metric ton (MT) export tax on wheat ($30.40/MT) until a 17.5 MMT quota is met – at which point wheat exports will be stopped.

Aside from export taxes and outright bans, the Russian grain industry has also seen rail shipments slow the movement of wheat to export terminals, increased scrutiny on approval paperwork on exporting vessels and a slowdown in receiving phytosanitary certificates to as many as six days.

In fact, grain traders have told news services that they are already experiencing delays in obtaining export documents from Russia’s customs service.

Fortunately, the U.S. wheat industry offers reassurance in the fact that our doors are open for business 365 days per year. In our collective efforts to efficiently supply the widest range of the highest quality wheat in the world, we live up to our claim as the world’s most reliable supplier.

The U.S. government by law cannot block exports except in the cases of a declared national emergency. Further, export taxes are expressly forbidden by the U.S. Constitution.

 

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Federal Agency Helps Keep the Wheat Moving

By Michael Anderson, USW Assistant Director, West Coast Office

The uncertain nature of COVID-19 and the unprecedented changes it brought to how we live our lives has made every industry stop and consider how it can meet customer demands while protecting the health of its employees. While the novelty of the virus may have worn off, its presence has become a fact of life.

As the pandemic continues, the U.S. wheat supply chain is still working hard to meet the needs of customers, ensuring that the U.S. wheat store stays open. One crucial link in that chain is the Federal Grain Inspection Service (FGIS) division of the U.S. Department of Agriculture (USDA) Agriculture Marketing Service. The work of FGIS is valued by overseas wheat buyers because they are assured that an independent agency has certified shipments to meet the weight and quality requirements specified in the sales contract.

“Our system of standardized, independent grain inspection makes U.S. wheat more valuable,” said USW Chairman Darren Padget, a wheat farmer from Grass Valley, OR. “The proof of that came this year when many of our overseas buyers expressed a real concern that the pandemic would interrupt federal grain inspection and our supply chain.”

U.S. Wheat Associates (USW) recently spoke with FGIS about the measures the agency is taking to protect the integrity of the work and its essential workers during the COVID-19 pandemic. Following are the answers provided by an agency spokesperson:

USW: How has the pandemic affected how FGIS manages its team of inspectors?

FGIS: “Within the Federal Grain Inspection Service (FGIS) we’ve conducted over 100 staffing actions in the past year (either new hires or promotions into new positions). The increase in hiring actions is a result of both the pandemic and an increase in inspections overall. We developed virtual onboarding so staff could be trained quickly and remotely. Our national network of field offices allows us to send additional staff on detail assignments to busy offices during the natural ebb and flow of the harvests and export patterns. We do this on a limited basis in any given season. When the COVID national emergency started we expanded that practice and set up an active list of interested personnel should a need arise somewhere. However, we have not had any shortages due to the COVID-19 pandemic and that list has not been needed.”

USW: It cannot be easy keeping people socially distanced, when you think about the nature of exporting, transfer of samples/people in and out of facilities that are open around the clock. Yet, you have done that – any special steps that you have taken there?

FGIS: “Exporters have been essential in helping us ensure that FGIS on-site labs and common areas are clean and set up for social distancing. Most of our laboratories allow for social distancing and masks are required when that is not possible. USDA has ensured that all staff have access to cleaning supplies and personal protective equipment. In fact, our labs at AMS made hand sanitizer and masks for fellow employees this past spring when national supplies ran tight.”

USW: The U.S. government declared workers in the food industry and specifically agricultural workers essential in March 2020 to ensure the food supply chain would not be disrupted. Like a lot of essential industries, FGIS inspectors and staff must be taking extra precautions to stay healthy and avoid the risk of quarantine. Any special instructions that have been provided to them, or directives in terms of helping to keep them healthy?

FGIS: “We follow guidelines from the Centers for Disease Control and Prevention. We also mandate that employees clean their work-spaces after each shift, and do not enter any vessel offices while conducting stowage exams on ships.”

USW: Looking ahead, what can buyers of U.S. wheat and other commodities expect?

FGIS: “Our goal is to provide service safely, without interruption. We know the U.S. grain supply is essential to providing nutritious food around the world and we are proud of the role we play to keep those products moving with accurate and timely grades and weights for grain exports. FGIS has had no interruptions since the national emergency began and none are planned. We will continue to take actions to ensure inspection and weighing service can be provided safely, and we will continue to adapt and adjust to meet the needs of our customers.”

Through the committed efforts that extend from the farm to the FGIS inspectors and export elevator staff, wheat grown in the United States continues to flow to importing customers to continue feeding people around the world.

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

 

 

 

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Deadly Wildfires, Smoky Air Has Not Interrupted U.S. Wheat Exports

By Michael Anderson, USW Assistant Director, West Coast Office

For the past several days, many wildfires across the western United States have left devastating damage and loss of life. Across the Pacific Northwest. Unusually high winds on Sept. 7 dramatically expanded the fires in Washington state and Oregon. While many of the fires have been contained, the smoke has caused dangerously high levels of air pollution over the entire region.

Despite the choking smoke and destructive force of the blazes, damage to the U.S. wheat crop and infrastructure has been limited. Export facilities and wheat export logistics are still operating as usual. The export facilities in the Columbia River system continue to operate normally and without delay.

Smoke from massive wildfires obscures the familiar view of a vessel being loaded across the Willamette River from USW’s West Coast Office in Portland, Ore.

 

While there were no delays in vessel loading, sadly, fires in Eastern Washington state ignited recently harvested wheat piles next to the Pine City Grain Elevator south of Spokane. Rural communities in both Washington and Oregon have been heavily impacted. Some wheat fields in both Oregon and Washington received some low-level fire damage but much of the crop was already harvested. Far worse, the fires have killed many people.

Low visibility has caused barges to limit the amount of wheat they can carry west to Portland, but the barge companies are accustomed to such hazards as limited visibility caused by fog is common in the Pacific Northwest.

Smoke is expected to continue expanding east across the continent with haze reported as far east as New York, N.Y., and the Arlington, Va., headquarters of U.S. Wheat Associates (USW) nearly 3,000 miles away.

Everyone at USW shares concerns about the people who grow and deliver U.S. wheat and our colleagues in the Pacific Northwest. A change in the weather pattern that will help end this natural disaster is very much needed.

Photo at top by Bongil Lee.

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U.S. Wheat Supply Chain System: Exporters, Inspectors and USW Overseas Offices

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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U.S. Wheat Supply Chain System: Grain Handlers

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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U.S. Wheat Supply Chain System: Farmers and State Wheat Commissions

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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U.S. Wheat Supply Chain System: Research and Plant Breeding

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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