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USW 2020/21 Harvest Reports Return This Week

The new crop U.S. wheat harvest is underway in south Texas and U.S. Wheat Associates (USW) will publish its first “Harvest Report” for marketing year 2020/21 on Friday, May 29.

USW Harvest Reports are published every Friday afternoon, Eastern Daylight Time, throughout the season with updates and comments on harvest progress, crop conditions and current crop quality for hard red winter (HRW), soft red winter (SRW), hard red spring (HRS), soft white (SW) and durum wheat.

Anyone may subscribe to an email version of the “Harvest Report” at this link. USW includes links in the email to additional wheat condition and grading information, including the U.S. Drought Monitor, USDA/NASS Crop Progress and National Wheat Statistics, the official FGIS wheat grade standards and USDA’s World Agricultural Supply and Demand Estimates report. Harvest Reports are also posted online on the USW website here.

The weekly Harvest Report is a key component of USW’s international technical and marketing programs. It is a resource that helps customers understand how the crop situation may affect basis values and export prices.

USW’s overseas offices share the report with their market contacts and use it as a key resource for answering inquiries and meeting with customers. USW/Mexico City also publishes the report in Spanish.

USW wants to thank and acknowledge the organizations that make “Harvest Reports” possible, including:

  • California Wheat Commission Laboratory;
  • Durum Wheat Quality and Pasta Processing Laboratory, North Dakota State University (NDSU)
  • Great Plains Analytical Laboratory;
  • Plains Grains, Inc.;
  • State Wheat Commissions;
  • USDA/Federal Grain Inspection Service;
  • USDA/Foreign Agricultural Service;
  • USDA/Agricultural Research Service Hard Winter Wheat Quality Laboratory;
  • USDA/National Agricultural Statistics Service;
  • Wheat Marketing Center;
  • Wheat Quality & Carbohydrate Research, Department of Plant Sciences, NDSU;
  • Wheat Quality Council.

 

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Dependable People: A Spotlight on Maryland Grain Producers Utilization Board

For 40 years, U.S. wheat farmers have supported U.S. Wheat Associates’ (USW) efforts to work directly with buyers and promote their six classes of wheat. Their contributions to state wheat commissions, who in turn contribute a portion of those funds to USW, qualifies USW to apply for export market development funds managed by USDA’s Foreign Agricultural Service. Currently, 17 state wheat commissions are USW members and this series highlights those partnerships and the work being done state-by-state to provide unmatched service. Behind the world’s most reliable supply of wheat are the world’s most dependable people – and that includes our state wheat commissions.

Member: Maryland Grain Producers Utilization Board
USW Member since 2000

Location: Queenstown, Maryland
Classes of Wheat Grown: Soft Red Winter (SRW)
USW Leadership: Jason Scott, 2016/17 Chairman

The Maryland Grain Producers Utilization Board (MGPUB) works to increase the profitability of Maryland grain production and improve public understanding of agriculture through promotion, education and research.

Maryland wheat farmer Jason Scott (L) retired as 2016/17 Chairman and handed the gavel to 2017/18 Chairman Mike Miller, Washington wheat farmer (R), at the USW Summer Board Meeting in Annapolis, Md.

Why is export market development important to Maryland wheat farmers and why do they continue to support USW?

While Maryland has a large poultry industry in our state as an important customer for our grain, most of the soft red winter wheat grown here is primarily used to mill flour for cookies, pretzels and pastries. MGPUB recognizes that the export market is an important factor in supporting the commodity price for all farmers, including Maryland wheat growers.

How have Maryland wheat farmers recently interacted with overseas customers?

Maryland’s proximity to Washington, D.C. makes it a popular stop for farm tours for buyers and trade teams from different countries. In the last several years, Maryland has hosted trade teams and buyers from nearly twenty different countries showing them the quality of production methods and the soft red winter wheat grown in Maryland.

What is happening lately in Maryland that overseas customers should know about?

Maryland Grain Producers Utilization Board funds several projects focused on wheat quality and production through the University of Maryland. These research projects include “Improving Soft Red Winter Wheat Cultivars,” “Increasing Protein of Soft Red Winter Wheat,” and “Managing for Fusarium Head Blight.”

Maryland Grain Producers Utilization Board is also helps fund Maryland Farm & Harvest, a 30-minute, educational public television show that shares the good news story of farming with the public. Born from an idea at an MGPUB board meeting, the series is now an Emmy-winning, No. 1 rated local program, attracting an audience of over four million viewers.

Learn more about the Maryland Grain Producers Utilization Board on its website and on Facebook and Twitter.

Eric Spates, Maryland wheat farmer, traveled with USW on the 2017 Board team tour to Latin America, to visit U.S. wheat customers, including this one in Haiti.

Jason Scott (far right), Maryland wheat farmer and Past USW Chairman, joined USW for its 2019 Crop Quality Seminar Tour, visiting several countries in South America to share about the soft red winter wheat crop.

In 2014, a trade delegation from Brazil traveled with USW to the United States and stopped by Jason Scott’s farm in Maryland where they visited with several Maryland wheat farmers.

 

 

 

 

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Dependable People: A Spotlight on the Ohio Small Grains Checkoff

For 40 years, U.S. wheat farmers have supported U.S. Wheat Associates’ (USW) efforts to work directly with buyers and promote their six classes of wheat. Their contributions to state wheat commissions, who in turn contribute a portion of those funds to USW, qualifies USW to apply for export market development funds managed by USDA’s Foreign Agricultural Service. Currently, 17 state wheat commissions are USW members and this series highlights those partnerships and the work being done state-by-state to provide unmatched service. Behind the world’s most reliable supply of wheat are the world’s most dependable people – and that includes our state wheat commissions.

Member: Ohio Small Grains Checkoff
USW Member since 2010

Location: Delaware, Ohio
Classes of wheat grown: Soft Red Winter
USW Leadership: Doug Goyings, 2019/20 Chairman

The Ohio Small Grains Checkoff identifies opportunities to add value to Ohio’s small grains crops, including wheat, barley, rye and oats. Checkoff programs focus on exports, water quality, research, education and promotion, domestic demand and consumer outreach. We base our work on the belief that exports are vital for Ohio’s farmers and the state’s economic development.

2018/19 Chairman Chris Kolstad from Montana (R) passes the gavel to 2019/20 Chairman Doug Goyings from Ohio.

Why is export market development important to Ohio wheat farmers and why do they continue to support USW and its activities?

Ohio farmers value overseas markets for grain. We produce a quality product that is affordable and meets the demand from a growing world. We must continue developing relationships with overseas buyers and U.S. Wheat Associates (USW) helps to accomplish that task for Ohio farmers.

Ohio is a soft red winter (SRW) wheat state. The nature of SRW is ideal for baking pastries, cookies, crackers and soft breads. With Mexico’s demand for SRW, with Brazil being another huge market, Ohio’s production is very important to our overall export strength for this commodity.

A trade delegation from Brazil visiting Stover Farm in Shelby, Ohio in 2019.

How have Ohio wheat farmers recently connected with overseas customers?

From hosting international trade missions on Ohio farms, to participating in foreign trade missions, Ohio farmers continue to help build relationships that will lead to open and honest communication with potential buyers of our wheat. USW is one of our most critical partners in these efforts – connecting our growers with the consumers they serve around the globe.

Most recently, Mexico’s third largest wheat milling operation sourced equivalents to rail car units from Ohio. We stand ready to support the international demand, especially to our closest neighbors.

What’s happening lately in Ohio that overseas customers should know about?

  • The Ohio Small Grains Checkoff is organizing an “Ohio Wheat Profitability Summit”. The goal is to increase planted acres by sharing research and practices that drive profit for SRW.
  • Ohio’s wheat farmers are on the front lines in addressing water quality issues in Ohio and the Great Lakes region. We believe our growers, and our products, provide tremendous value to efforts to reduce nutrient loading into the lakes. Our growers are actively supporting the H2Ohio effort which is driving higher adoption of best management practices on our fields.
  • Ohio Small Grains staff and board members are participating in the Wheat Quality Council’s meetings in Wooster, Ohio, with the USDA Agricultural Research Service (ARS) Soft Wheat Quality Laboratory. The Ohio delegation will network with researchers, millers, and bakers during the event. In addition, they will provide a session to discuss challenges in Ohio wheat production.

Learn more about Ohio Small Grains Checkoff  on its website here and on Facebook, Twitter and YouTube.

Several Ohio wheat farmers at the 2020 Wheat 104 reception during the USW-NAWG Joint Winter Board Meeting in Washington, D.C.

USW technical staff at USDA-ARS Soft Wheat Quality Laboratory in 2016.

In 2017, Ohio wheat farmer Rachael Vonderhaar traveled with USW on a board delegation tour to Haiti, Mexico, Chile and Ecuador.

2019/20 Chairman Doug Goyings welcomes attendees to the 2019 USW Japan Buyers Conference.

 

 

 

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Market Offers Soft Red Winter Buying Opportunity

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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Income Potential and Weather Fight Against Winter Wheat Seeding for 2020

By Claire Hutchins, USW Market Analyst

With winter wheat prices remaining at or less than the cost of production and with a very wet planting season, it is no surprise that many U.S. farmers chose to plant slightly less winter wheat for harvest in 2020. USDA’s 2020/21 Winter Wheat Seedings report, released Jan. 10, reported U.S. farmers planted 30.8 million acres (12.5 million hectares) of winter wheat, down slightly from 2019/20 and 7% less than the 5-year average of 33.2 million acres (13.4 million hectares). Decreases for HRW and white winter wheat more than offset an increase in SRW planted area. USDA noted that this is the second smallest number of winter wheat acres on record.

Hard red winter (HRW). USDA assessed HRW planted area at 21.8 million acres (9.35 million hectares), down 1% from 2018. Planted acreage is down year-over-year in several major HRW-producing states with the largest decreases reported in Colorado, Montana and Nebraska. Colorado planted area fell 12% year-over-year to 1.90 million acres due to extreme dryness in the southeast, depressed commodity prices and pest pressure in the northeast. Record low planted area of 900,000 acres (364,000 hectares) in Nebraska can be attributed to weaker marketing conditions and an overly wet, late soybean harvest which prevented fall HRW planting.

“This didn’t just happen overnight,” says Royce Schaneman, executive director of the Nebraska Wheat Board. “State-wide plantings have been trending down for a number of years due to poor marketing conditions.”

HRW planted area in Kansas and Oklahoma is stable year-over-year at 6.90 million acres (2.79 million hectares) and 4.20 million acres (1.7 million hectares), respectively.

Total winter wheat planted area in Texas jumped 9% year-over-year to 4.90 million acres (1.94 million hectares). About 95% of Texas winter wheat is HRW and 5% is SRW.

“Adequate soil moisture in many regions, combined with favorable marketing conditions compared to cotton, allowed producers to maximize HRW acres,” says Darby Campsey, director of communications and producer relations for the Texas Wheat Producers Board.

In South Dakota, North Dakota, Montana and Wyoming, a very wet fall also prevented more HRW seeding, although these states usually plant a relatively small percentage of total U.S. HRW.

Soft red winter (SRW). Total SRW planted area of 5.64 million acres (2.28 million hectares) increased 8% from 2018. Increases in most SRW-producing states more than offset decreases in Delaware, Illinois Indiana, Michigan, Missouri and Wisconsin.

According to Tadd Nicholson, executive director of the Ohio Corn and Wheat Growers Association, the state’s SRW planted area increased 12% over last year to 560,000 acres (227,000 hectares) due to ideal, timely planting conditions following a miserably wet spring which left many corn and soybean acres unplanted.

In Illinois, SRW planted area fell 25% from last year to 490,000 acres (198,000 hectares).

“It was one of the craziest years for weather in Illinois,” says Mike Doherty, interim executive director of the Illinois Wheat Association “It was the third wettest year on record and most of the precipitation fell in the first eight months. Farmers were beside themselves trying to manage other crops through the wet weather. Across the state, corn and soybeans were harvested 30 to 60 days late. You just can’t plant winter wheat if you can’t get the other crops out of the ground.”

There is also SRW grown in areas of Texas and Campsey reports that “strong marketing opportunities and better, dryer planting conditions for SRW compared to last year’s overly wet field conditions led to a significant increase in SRW acreage year-over-year.”

White winter wheat. White winter wheat planted area fell to an estimated 3.37 million acres (1.36 million hectares), down 4% from 2018. White winter wheat planted area in Idaho, Oregon and Washington fell below last year. Idaho farmers reported planting 720,000 acres (291,000 hectares) compared to 730,000 acres (295,000 hectares) in 2018. Planted area in Oregon fell 5% from last year to 700,000 acres (283,000 hectares). Washington planted area fell slightly less than 2018 to 1.70 million acres (688,000 hectares).

Durum. Winter durum planting in the southwestern United States is estimated at 70,000 acres (28,300 hectares), up 9% from 2018 but 41% less than 2017. Arizona and California plant Desert Durum® from December through January for harvest May through July.

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Promoting U.S. Wheat Around the World

As U.S. Wheat Associates (USW) President Vince Peterson often says, at any given hour of the day there is someone, somewhere, talking about the quality, reliability and value of U.S. wheat. Wheat Letter wants to share some of the ways USW was working the past few months to promote all six classes of U.S. wheat in an ever more complex world wheat market.

China

The value of flour made from U.S. wheat shines in quality intensive applications that demand stability and performance. Frozen dough is just such an application. Wheat flour that may pass muster in traditional baked foods can fail when the rigors of freezing, storage, thawing and baking are involved. Moreover, in many Asian markets such as Taiwan and China, the penetration of frozen dough products is still in its early stages, so there is a great interest in discovering solutions to common problems in the production process.

To better understand the current frozen dough market in China and to meet the industry’s demands for frozen dough knowledge, USW/Beijing and USW/Taipei in 2019 invited veteran food production expert Dr. Kirk O’ Donnell of Bakers Growth, LLC, to provide technical services to selected frozen dough manufactures in Mainland China and Taiwan, and to conduct a seminar on freezing technology at the China Grain Products Research and Development Institute (CGPRDI) in Taipei. In addition to providing valuable technical support, USW was able to gain a greater understanding of this growing industry segment.

Dr. Kirk O’Donnell conducts a USW-sponsored frozen dough technology seminar at the CGPRDI.

Mexico

USW/Mexico colleagues and USW farmer directors were invited to the dedication of a newly constructed shuttle train facility located in Villagran, Guanajuato, Mexico. USW was proud to be among more than 300 industry leaders including Mexican wheat buyers, executives from Mexico’s Ferromex railroad, U.S. rail executives and a large contingent from the Mexican grain trade. An average of about 50 percent of roughly 3.0 million metric tons (MMT) of recent annual U.S. wheat exports to Mexico move there by rail. Even before its dedication in September, the new facility had already received nine shuttle trains of U.S. wheat including seven trains of hard red winter (HRW) and two trains of soft red winter (SRW) carrying a total of about 100,000 metric tons.

Ribbon-cutting at the dedication of the new grain shuttle train unloading facility in Mexico.

European Union

USW/Rotterdam Regional Marketing Manager Rutger Koekoek accompanied five European participants to the Northern Crop Institute (NCI) Grain Procurement Management for Importers short course. The focus was on risk management and procurement strategies for U.S. wheat importers. The participants were able to meet representatives of leading grain trading companies and, for the first time ever, were able to board a vessel being loaded with northern durum wheat at the CHS export elevator in the Port of Duluth-Superior (see photo above). Koekoek also organized meetings with NDSU’s Durum Wheat Breeder to discuss the new durum wheat varieties that have recently been released.

Algeria

USW/Casablanca Milling and Baking Technologist Tarik Gahi traveled to Blida, Algeria, to meet with millers and biscuit and cake manufacturers who processed U.S. SRW wheat under a USW Quality Samples Program (QSP) funded by USDA’s Foreign Agricultural Service. The sample was milled in July and the flour was distributed to the processors. Gahi reported back that all the companies were impressed by the SRW flour quality, above all with the low water absorption and the fact that the flour performed very well without adding any chemical enzyme additives. He said the customers noted that more gluten strength would be needed for Maria-type biscuits, which, Gahi explained, can easily be managed by blending with higher protein flour such as from U.S. HRW.

U.S. SRW wheat flour milled from a sample supplied by USW, are a key ingredient in biscuits (above), otherwise known as cookies in the United States.

Brazil

USW President Vince Peterson, USW Chairman Doug Goyings, USW/Santiago Regional Director Miguel Galdos, USW/Santiago Assistant Regional Director Osvaldo Seco and USW/Santiago Technical Specialist Andres Saturno participated in the 26th ABITRIGO Congress, sponsored by the Brazilian Wheat Industry Association, near Sao Paulo, Brazil. Although USW always represents U.S. wheat farmers at this event, this delegation was particularly important given the news that Brazil’s government had agreed to fully open its tariff rate quota (TRQ) for 750,000 MT of wheat imported from outside the Mercosur trade agreement. In a few past years when Brazil opened the TRQ because of limited Mercosur supplies, U.S. wheat represented most of the import volume. At the meeting, the industry was informed that the TRQ would be opened late in 2019, rather than the expected timing of later in 2020.

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Production Update: USDA Confirms High U.S. Wheat Yields Offset Reduced Planted Area

By Claire Hutchins, USW Market Analyst

On Sept. 30, USDA released its Small Grains Summary noting that 2019/20 U.S. wheat production increased to 53.3 million metric tons (MMT), up 4 percent from last year due to significant improvements in yield despite lower planted area. While this is still 2 percent below the 5-year average of 54.2 MMT, the production volume coupled with significant carry-in stocks ensure that the U.S. wheat remains the most reliable supply for 2019/20. Here is a look at 2019/20 U.S. wheat production by class.

USDA’s Small Grains Summary indicates U.S. wheat yields offset a reduced planted area for 2019/20.

Hard Red Winter (HRW). Last fall, U.S. farmers decreased HRW planting in the U.S. Southern and Central Plans due to extremely wet conditions which delayed the soybean harvest and in turn HRW planting. A slight uptick in planted area in Montana and South Dakota partially offset reductions in other states. Total U.S. HRW planted area fell 2 percent year-over-year to 22.7 million acres (9.19 million hectares), 15 percent below the 5-year average of 26.6 million acres (10.8 million hectares). Cool temperatures and favorable moisture during the growing season boosted HRW yields substantially year-over-year in Kansas, Nebraska and Oklahoma. In Kansas, the largest HRW producing state, a higher average yield offset lower planted area and production increased 22 percent over 2018/19 levels to 338 million bushels (9.17 MMT). USDA estimates total 2019/20 HRW production increased 26 percent over last year to 834 million bushels (22.7 MMT).

Hard Red Spring (HRS). Cold soil temperatures and excessive moisture in certain areas delayed HRS planting across much of the Northern Plains. USDA says U.S. farmers planted 12.0 million acres (4.86 million hectares), 6% below last year but slightly higher than the 5-year average of 11.8 million acres (4.78 million hectares). A cool summer boosted HRS yields in Montana and South Dakota. Heavy, persistent rain has severely delayed the 2019 HRS harvest. According to USDA, as of September 30, U.S. spring wheat harvest is only 90 percent complete compared to the 5-year average of 99 percent. USDA estimates 2019 HRS production will total 558 million bushels (15.2 MMT), 5 percent lower than 2018, but 8 percent higher than the 5-year average of 518 million bushels (14.1 MMT).

Soft Red Winter (SRW). Last fall, U.S. farmers planted 5.54 million acres (2.24 million hectares) of SRW, down 6 percent from the year prior and 18 percent from the 5-year average of 6.7 million acres (2.71 million hectares) due to low wheat prices compared to soybeans and delayed planting. Excessive moisture continued through the growing season and slowed harvest progress in many places. USDA reported SRW production totaled 239 million bushels (6.50 MMT), down 16 percent from last year and 31 percent below the 5-year average of 348 million bushels (9.46 MMT).

White Wheat (Soft White, Club and Hard White). U.S. white wheat planted area fell 4 percent below 2018/19 levels to 3.95 million acres (1.60 million hectares). Mild growing conditions and good soil moisture in the Pacific Northwest (PNW) supported above-average winter and spring wheat yields. The average white winter wheat yield in Oregon increased 1.0 bu/acre (.067 MT/hectare) over last year to 68.0 bu/acre (4.57 MT/hectare) in 2019. Slightly lower planted area and above-average yields kept U.S. white wheat production stable year-over-year at 273 million bushels (7.43 MMT) and 8 percent higher than the 5-year average of 252 million bushels (6.87 MMT).

Durum. Anticipating less-than break even prices, farmers planted less durum area this year. In its Small Grains 2019 Summary, USDA estimated 1.34 million acres (542,000 hectares) were planted to durum, down 35 percent from 2018/19 and 32 percent below the 5-year average of 2.0 million acres (664,000 hectares). USDA estimated total 2019/20 U.S. durum production at 57.3 million bushels (1.57 MMT), down 26 percent from last year. Cool, wet weather boosted yields in the U.S. Northern plains. Both Montana and North Dakota durum yield potential reached a record high in 2019. The country’s average durum yield also reached a record high of 44.8 bu/acre (3.01 MT/hectare), up 13 percent from last year. However, as with HRS, a significant portion of the northern durum crop has not yet been harvested. Desert Durum® production fell 46 percent year-over year to 5.67 million bushels (154,000 MT) due to sharply lower planted area in both Arizona and California.

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Too Much Rain on a Smaller Soft Red Winter Crop

Following planting in the fall of 2018, much of the U.S. soft red winter (SRW) growing area received excessive moisture throughout the winter and spring, which also caused lengthy harvest delays in many areas. The excessive moisture adversely affected quality by reducing falling number values and increasing DON values in some areas. At an estimated 7.01 million metric tons (MMT), this is a smaller crop than in 2018 because farmers seeded less and average yield per harvested acre was below last year and the five-year average. Processors should find good qualities in the 2019 SRW crop for cookies and crackers and segments of the crop showed good cake qualities.

That is a summary of results from the U.S. Wheat Associates (USW) 2019 SRW Crop Quality Report, now posted online at https://bit.ly/SRWCQ0919. To complete the report, Great Plains Analytical Laboratory in Kansas City, Mo., collected and analyzed 261 samples from 18 reporting areas in the 11 states that account for about 72% of total 2019 SRW production. Funding for the annual survey come from state wheat commission USW members and the USDA Foreign Agricultural Service.

As always, buyers are encouraged to review their quality specifications to ensure that their purchases meet their expectations.

Wheat and Grade Data. The overall average grade of the samples collected for the 2019 SRW harvest survey is U.S. No. 2. The average test weight is 58.1 lb/bu (76.5 kg/hl), equal to the 5-year average and above the 57.9 lb/bu (76.2 kg/hl) average in 2018. The Gulf Port average of 58.5 lb/bu (76.9 kg/hl) is above both last year and the 5-year average. The East Coast test weight average of 56.9 lb/bu (75.0 kg/hl) is above last year but below the 5-year average of 57.4 lb/bu (75.6 kg/hl).

The East Coast Total Defects average of 2.5% is above last year and the 5-year average, indicating that damaged and shrunken and broken kernels are slightly higher than usual in that portion of the crop. The Gulf Port Total Defects is 1.1%, above 2018 but almost half of the 5-year average. Other Gulf Port grade factors, dockage and moisture are close to or higher than 2018 and 5-year average values.

The Composite average wheat protein content of 9.5% (12% moisture basis) is lower than 2018’s 9.9% and the 5-year average of 9.7%. Both the Gulf Port protein average of 9.4% and East Coast average of 9.7% are below the respective 2018 and 5-year averages. The Composite average falling number of 288 seconds is significantly lower than 2018 and the 5-year average. The Gulf Port average of 289 seconds and the East Coast average of 283 seconds are both significantly below 2018 and the 5-year averages. Approximately 21% of samples had a falling number below 250 seconds in 2019, with 13% below 225. The Composite DON average of 1.3 ppm is above the 2018 average and close to the 5-year average of 1.2 ppm. The East Coast value of 0.5 ppm is below the 5-year average while the Gulf Port value of 1.5 ppm is above the 5-year average. Of the samples tested for DON, 33% of the Gulf Port results and 84% of the East Coast results were less than 1.0 ppm.

Flour and Baking Data. The Composite, East Coast and Gulf Port Buhler laboratory mill flour extraction averages are below 2018 and the 5-year averages. The farinograph peak and absorption values are similar to 5-year averages, but the stability values are all below the 5-year averages. The SRC values generally indicate good quality for cookies. The Composite, East Coast and Gulf Port alveograph L averages of 81 are lower than last year and the 5-year average, indicating lower extensibility. All other alveograph averages are similar to the respective 5-year averages given the variability of alveograph analysis. The Gulf amylograph average of 392 BU and East average of 462 indicate relatively high levels of amylase activity in the crop and are consistent with the low falling numbers.

The Composite, East Coast and Gulf Port cookie spread ratios are all higher than last year and the 5-year averages, indicating good extensibility. Average loaf volumes are all lower than last year and the 5-year averages.

USW will share complete data for all classes of U.S. wheat in future Wheat Letter posts and with hundreds of overseas customers at several upcoming events, including USW’s annual Crop Quality Seminars, and in its annual Crop Quality Report.

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U.S. Wheat Prices Competitive with Corn for Domestic Feed Use

By Claire Hutchins, USW Market Analyst

According to USDA’s June WASDE (World Agricultural Supply and Demand Estimates) report, U.S. feed wheat consumption will increase 64% in marketing year (MY) 2019/20 to 3.81 million metric tons (MMT), compared to 1.36 MMT in MY 2018/19. U.S. Wheat Associates (USW) believes the current price relationship between domestic wheat and corn and the nutritional value of U.S. hard red winter (HRW) wheat and soft red winter (SRW) wheat support USDA’s estimates.

When the cash price gap between U.S. wheat and corn shrinks, wheat becomes an attractive feed ingredient for the cattle, swine and poultry industries. Per bushel, wheat is typically more expensive than corn, making it economically less practical as a staple ingredient in U.S. feedlots. However, recent market conditions are changing wheat and corn feeding ratios across the United States. The spot price gaps between U.S. winter wheat and corn have diminished, and even inverted, over the past several months as the potential for a bountiful wheat harvest offsets the potential for lower corn production due to late spring planting in the Midwest.

HRW can be substituted for corn as cattle feed in the High and Southern Plains where much of the country’s HRW wheat is grown. The cattle industry, predominant in Kansas and Texas, favors wheat as a feed ingredient when HRW is less than $1.00/bu more expensive than corn. Between early May and late June, the average cash price for wheat and corn increased steadily in both states, but the price gap narrowed and eventually inverted by early July.

In early May, the cash price for HRW in Kansas, the third largest cattle-producing state in the country, was $0.49/bu higher than corn. By early June, the price gap dropped to $0.29/bu. On July 1, the average cash price for both commodities settled around $4.06/bu and by July 5, HRW was $.06/bu cheaper than corn at $4.20/bu. According to Aaron Harries, Kansas Wheat Commission Vice President of Research and Operations, Kansas feedlots are already feeding more wheat than usual as managers respond to market incentives. Importantly, the decision to feed more wheat is made based on months of efficient market conditions as the ideal cattle diet consists of at least six months of a consistent ingredient blend.

Source: Reuters Eikon

In Texas, the largest cattle-producing state in the country, the recent spot price relationship between HRW and corn has been much tighter. In the first half of May, the cash prices for HRW and corn were nearly tied around an average of $3.92/bu. By early June, the average cash price for HRW dropped $0.24 below corn’s $4.50/bu. The cash-price relationship between wheat and corn is still inverted as of early July and HRW is, on average, $0.37/bu cheaper than corn.

“We are seeing a trend of feedlots purchasing more wheat directly from producers and elevators,” says Darby Campsey, Texas Wheat Producers Board, Director of Communications and Producer Relations. “Market conditions and wheat quality are increasing the value of wheat compared to corn in some cases.”

Campsey explains that in addition to market conditions, Texas livestock producers make grain purchasing decisions based on nutritional needs and local supplies. When wheat protein is lower than average, producers may be more likely to sell to feedlots, where quality requirements are slightly easier to meet than milling standards.

In the Midwest and South, where much of the country’s SRW is grown, swine producers are willing to pay more for wheat than corn because of wheat’s high nutritional value, according to Joel DeRouchey, Kansas State University professor in swine nutrition and management. Corn is used as a feed ingredient for swine because it is cheaper and a higher source of energy than wheat, but wheat brings a higher concentration of amino acids and phosphorous to the animal’s diet. The same market conditions affecting Kansas and Texas can be seen in Illinois and North Carolina, making wheat an even more attractive feed ingredient for swine producers.

In Illinois, the fourth largest swine-producing state in the country, the average spot price gap between SRW and corn decreased significantly between early May and early July. In early May, SRW was, on average, $.90 more expensive than corn. By July 8, the difference collapsed to $.50 as SRW prices continued their decline to $4.92/bu and corn prices continued their incline to $4.42/bu.

Source: Reuters Eikon

At an elevator in North Carolina, the second largest swine-producing state in the country, the spot price for corn surpassed the spot price for SRW between early June and early July. Between June 24 and July 5, the spot price for SRW sank from $4.82/bu to $4.38/bu while the price of corn hovered around an average $4.81/bu.

Wheat is also used as a corn feed substitute in the poultry industry due to its high protein content. Wheat becomes attractive to broiler producers when the price gap between SRW and corn narrows to $.50/bu. The average cash price for SRW in Kentucky, the seventh largest broiler producer in the country, decreased significantly between June 26 at $5.39/bu and July 5 at $4.91/bu, while the average price of corn increased from $4.36/bu to $4.60/bu. In early June, the average spread between SRW and corn was $.81/bu. As of July 5, the spread narrowed to just $.31/bu.

Source: Reuters Eikon

“I wouldn’t be surprised if more chicken producers are feeding wheat. Corn is preferred for chickens, because of its high energy levels, until corn prices rise too high, and right now cash prices for wheat and corn in Maryland are pretty close,” says Jason Scott, Maryland wheat farmer and USW past chairman. As of July 8, the average SRW spot price in Maryland, a top ten broiler producing state, was only $.10/bu higher than corn.

If the narrow or inverted price gaps between wheat and corn persist across the country, producers could continue to increase the amount of wheat used in feed blends for cattle, swine and poultry, potentially surpassing USDA’s estimate of 3.81 MMT.

Every month, USW publishes a graphic summary of the latest data from USDA’s WASDE report, including global wheat market factors, major country and regional export history and U.S. wheat supply and demand summaries by class. View the monthly summary here.

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U.S. Wheat Exports End Year Close to USDA Estimate

By Claire Hutchins, USW Market Analyst

Despite challenging market factors, U.S. wheat exports for marketing year (MY) 2018/19, which ended May 31, totaled 25.8 million metric tons (MMT) (948 million bushels), in line with USDA’s adjusted export volume estimate. That is 9% ahead of MY 2017/18 and 1% ahead of the 5-year average of 25.5 MMT (937 million bushels). Commercial sales of all classes of wheat in MY 2018/19 exceeded 2017/18 levels due to abundant exportable supplies, excellent harvest qualities, competitive export prices and sustained service from U.S. Wheat Associates (USW) representatives supported by its state commissions and USDA’s Foreign Agricultural Service programs. This offset the bearish factors including a strong U.S. dollar, competitor’s advantages, uncertainty about U.S. trade policies and difficult inland transportation logistics.

Hard Red Winter. USDA reported hard red winter (HRW) 2018/19 sales totaled 9.40 MMT (345 million bushels), 1% above 2017/18 and 1% above the 5-year average of 9.30 MMT (342 million bushels). Customers took advantage of the highest quality HRW crop in several years at attractive export prices compared to 2017/18. Out of the Gulf, between Jan. 1 and May 31, 2019, the average export price of U.S. HRW 12.0 protein (12% moisture basis) cost $227/metric ton (MT) compared to $257/MT over the same period in 2018. Sales to Mexico and Nigeria were up 6% and 36% respectively, while sales to Japan were down 6%. Sales to Mexico totaled 2.15 MMT (79.0 million bushels), 44% above the 5-year average of 1.49 MMT (55.0 million bushels), once again making Mexico the top HRW buyer. Commercial sales to Iraq, now the fourth-largest consumer of U.S. HRW, were in line with 2017/18 levels at 674,000 metric tons (MT) (24.7 million bushels).

Soft Red Winter. 2018/19 soft red winter (SRW) sales increased 33% year-over-year to 3.33 MMT (123 million bushels), still 14% below the 5-year average of 3.92 MMT (144 million bushels) despite difficult inland transportation logistical issues due to major flooding on the Mississippi River and its tributaries. The 2018/19 SRW crop boasted higher protein levels and good extensibility, making it a valuable blending ingredient for cookies and cakes. A steady decline in SRW futures prices between mid-December 2018 and mid-May 2019 encouraged strong commercial sales to top SRW-importing regions. Export sales to three of the top five SRW purchasers increased or remained steady compared to 2017/18. Sales to Mexico, the top importer of U.S. SRW, increased 25% over last year to 917,000 MT (33.6 million bushels) and sales to Peru, the fifth-largest importer of U.S. SRW, increased 13% over last year to 175,000 MT (6.46 million bushels). Export sales to Nigeria held strong at 272,000 MT (9.96 million bushels).

Hard Red Spring. By the end of MY 2018/19, hard red spring (HRS) export sales totaled 7.15 MMT (263 million bushels), 16% ahead of last year’s pace, despite a 94% decrease in commercial sales to China, formerly the fourth-largest importer of U.S. HRS. A 60% year-over-year increase in HRS production, at 16.0 MMT (588 million bushels), higher ending stocks, high protein content and competitive export prices all supported export sales. Gulf exports of HRS 14.0 protein between Jan. 1 and May 31, 2019, cost, on average, $263/MT compared to $305/MT over the same period in 2018. Seven of the country’s top ten HRS-importing partners increased commercial sales year over year. Commercial sales to the Philippines, the top importer of U.S. HRS, jumped to 1.85 MMT (68.0 million bushels) in 2018/19, 39% ahead of last year and 38% ahead of the 5-year average of 1.34 MMT (49.2 million bushels).

White wheat. Total commercial sales of soft white (SW) and hard white (HW) wheat climbed to 5.45 MMT (200 million bushels) in 2018/19, which includes about 165,000 MT of HW sales to Nigeria. That is slightly ahead of last year’s pace and 21% ahead of the 5-year average of 4.51 MMT (166 million bushels) due to increased production, increased exportable supplies and below-average protein levels compared to years prior. Sales to the Philippines and Japan, the top two importers of U.S. SW, respectively, increased 13% and 7% over 2017/18 levels. The Philippines purchased 1.32 MMT (48.9 million bushels) of SW compared to 1.17 MMT (43.0 million bushels) in 2017/18. White wheat sales to Japan increased to 889,000 MT (32.7 million bushels) compared to 829,000 MT (30.4 million bushels) in 2017/18.

Durum. USDA reported 2018/19 durum sales at 504,000 MT (19.8 million bushels), up 24% from the year prior, but 12% below the 5-year average of 573,000 MT (21.0 million bushels). Increased production, high protein content, excellent kernel characteristics and competitive prices throughout the marketing year all supported northern durum export levels. Increased sales to four of the five top markets for U.S. durum boosted export figures. The European Union (EU) purchased 290,000 MT (10.7 million bushels) of U.S. durum in 2018/19, up 71% year-over-year following a drought that cut production in many EU countries.

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