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By Stephanie Bryant-Erdmann, USW Market Analyst

Total U.S. planted wheat area will rise 500,000 acres (202,000 hectares) in 2018/19 due to an expected increase in spring wheat area (including durum) according to Joanna Hitchner of the USDA World Agricultural Outlook Board. The USDA held its annual Agricultural Outlook Forum on Feb. 22 to 23, where Hitchner presented the 2018/19 Grain and Oilseeds Outlook.

USDA forecasts 2018/19 combined spring wheat and durum planted area at 13.9 million acres (5.63 million hectares). If realized, that would be up 2 percent from 2017/18 and the largest spring and durum planted area since 2015/16. Increased spring wheat and durum planted area is expected to more than offset the lowest U.S. winter wheat planted area since 1909. USDA currently estimates 2018/19 (June to May) wheat acreage at 46.5 million acres (18.8 million hectares), a one percent increase from last year, if realized.

Wheat buyers should note that factors affecting planting decisions can change before seed is sown. Long-term dry conditions in top hard red spring (HRS) and durum producing states of Montana, North Dakota and South Dakota may significantly alter farmers’ plans.

In January, USDA reported U.S. farmers planted 32.6 million acres (13.2 million hectares) of winter wheat last fall, down slightly from 2017/18, but 15 percent below the 5-year average. Increases for soft red winter (SRW) and white wheat offset a decrease in hard red winter (HRW). USDA assessed 2018/19 HRW planted area at 23.1 million acres (9.35 million hectares), down 2 percent from 2017/18 with planted acreage down year over year in nearly every HRW-producing state. However, 2018/19 total SRW planted area of 5.98 million acres (2.42 million hectares) increased 4 percent from last year, and white winter wheat planted area increased to an estimated 3.56 million acres (1.44 million hectares), up 1 percent from the prior year. Winter durum planting in the Southwestern United States was estimated at 74,000 acres (30,000 hectares), down 41 percent from 2017/18 and 51 percent below 2016/17.

Based on trend yields, USDA expects the national average yield to grow to 47.4 bushels per acre, up from 46.3 in 2017/18 due to expected increases in spring and durum wheat yields which were hard hit by last year’s drought. USDA projects the wheat harvested-to-planted ratio will increase to 0.83, up slightly from last year’s 0.82 due to a small decrease in expected abandonment rates. Total U.S. 2018/19 wheat production is forecast to rise by 6 percent year over year to 50.0 million metric tons (MMT).

In addition to lower planted area for winter wheat, crop conditions for many HRW-producing states are deteriorating due to sustained drought conditions. On Feb. 26, USDA rated 12 percent of Kansas winter wheat in good to excellent condition, down from 14 percent at the end of December. Winter wheat condition remained unchanged in Oklahoma with just 4 percent rated good to excellent, but declined in Colorado, Montana, Nebraska, North Dakota and South Dakota. SRW conditions improved in Illinois, where 45 percent of the winter wheat crop was rated in good to excellent condition compared to 38 percent last month. USDA will resume weekly U.S. crop progress reports in April.

A decrease in carryover stocks is expected to offset increased production, and the total U.S. wheat supply is expected to fall in 2018/19. USDA forecasts 2018/19 U.S. supplies at 77.5 MMT, down 2 percent from 2017/18, if realized, in part because USDA anticipates a slight increase in domestic use, from 30.4 to 30.7 MMT.

Price competition and large supplies in other wheat exporting countries will continue to pressure demand for U.S. wheat. USDA expects U.S. exports to fall to 25.2 MMT, down 3 percent from the forecasted 2017/18 U.S. wheat export level of 25.9 MMT.

To read more from the USDA Outlook Forum or to download presentations, please visit https://www.usda.gov/oce/forum/.

To see the latest Drought Monitor, please visit https://droughtmonitor.unl.edu/

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By Stephanie Bryant-Erdmann, USW Market Analyst

Farmers will tell you that winter wheat is a hardy plant; but for the current U.S. winter wheat crop, one of its most important inputs, water, is increasingly in short supply. The Feb. 1 U.S. Drought Monitor showed that drought ranging from abnormally dry to extreme, affects most of the winter wheat production area across the country. Specifically, 81 percent of Oklahoma is in a severe to extreme drought, while 65 percent of Kansas is in a moderate to extreme drought. In South Dakota and Colorado, 64 percent and 59 percent of the topsoil moisture was rated as short to very short, respectively.

USDA noted the drought’s impact on winter wheat crop conditions in its monthly winter wheat crop condition report* on Jan. 29, which showed 29 percent of the area assessed by the survey is in good to excellent condition, down from 41 percent good to excellent at the end of December. USDA rated 35 percent in fair condition and 37 percent in poor or very poor condition, up from 22 percent last month. The assessment covered 69 percent of the estimated 32.6 million acres (13.2 million hectares) planted for 2018/19.

Deteriorating crop conditions could multiply the effect of low planted area to decrease 2018/19 U.S. winter wheat production. USDA noted the 2018/19 winter wheat planted area is 15 percent below the 5-year average in its Jan. 12 Winter Wheat and Canola Seedings report, which is the second lowest number of planted winter wheat acres on record.

Of the winter wheat classes, hard red winter (HRW) is the most severely affected by drought. USDA reported 23 percent of HRW assessed acres are in good to excellent condition, compared to 35 percent in December. Forty-two percent of HRW acres were rated in poor or very poor condition, up from 25 percent one month prior. The only major HRW state not assessed last week was Texas, where 5 million acres (2.02 million hectares) of winter wheat were planted for 2018/19. However, precipitation maps show it has not rained in 110 days in Northern Texas (accounting for about 60 percent of Texas wheat production). In response to these reports, the Kansas City Board of Trade (KCBT) March wheat contract rallied 20 cents last week to $4.63/bu ($170/MT), the highest point since July 2017.

Soft red winter conditions are variable. USDA rated 58 percent of soft red winter (SRW) wheat assessed acres in good to excellent condition compared to 68 percent four weeks prior, and just 7 percent were rated in poor or very poor condition. However, SRW crop conditions were not uniformly positive. Better crop conditions in Ohio and Tennessee mask worsening moisture conditions in the Southeast and Mid-Atlantic regions. Ninety-five percent of Virginia, 61 percent of North Carolina and most of Maryland are abnormally dry or in moderate drought. Ratings were not available for several southern SRW states where drought conditions are more severe. Deteriorating crop conditions also helped push Chicago Board of Trade (CBOT) March wheat futures price to its highest point in five months at $4.47/bu ($164/MT).

Winter wheat crop conditions were not reported this month for Idaho, Oregon or Washington where exportable soft white wheat supplies are concentrated. However, the Feb. 1 Drought Monitor shows southern Idaho and nearly all of Oregon are abnormally dry. However, precipitation is expected in the next 5 to 10 days that should be beneficial for most of the estimated 3.56 million acres (1.44 million hectares) of white wheat.

Some rain this week pressured wheat prices, showing that the futures markets will likely be volatile until the spring green up tells the final story. It is a long way until harvest, but customers should closely watch weather conditions across the United States and be ready to take advantage of price moves in their favor.

If you have any questions about the current crop conditions or the U.S. marketing system, please contact your local USW representative.

To track U.S. wheat prices, drought conditions and more, subscribe to the USW Weekly Price Report, here.

*From December through March, USDA assesses winter wheat crop conditions in select states on a monthly basis. Weekly crop progress reporting will resume in April.

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By Stephanie Bryant-Erdmann, USW Market Analyst

Six months into marketing year 2017/18 (June to May), total U.S. export sales of 19.5 million metric tons (MMT) are 8 percent behind last year’s pace according to USDA Export Sales data through Jan. 4. However, the estimated total value of U.S. wheat export sales is 4 percent greater than last year on the same date at $4.72 billion, due to slightly higher export prices according to USDA Export Sales data and USW Price Report data.

A deeper analysis of USDA data shows total sales to six of the top 10 U.S. export markets in 2016/17 are ahead of last year’s pace, demonstrating strong demand for U.S. wheat. Sales of soft red winter (SRW) and soft white (SW) are both ahead of last year’s pace. USDA projects total 2017/18 exports will fall slightly to 26.5 MMT, which, if realized, would be 8 percent below 2016/17 but 1 percent above the 5-year average pace.

USDA reported hard red winter (HRW) year-to-date exports at 7.79 MMT, down 10 percent from the prior year. Still, 2017/18 export sales are 10 percent ahead of the 5-year average due to competitive prices for medium protein HRW and the good, overall quality of this year’s crop. The estimated value of year-to-date HRW export sales is 6 percent above 2016/17 due to a 14 percent increase in the average U.S. HRW free-on-board (FOB) price that is supported by the increased premiums for HRW with higher protein. Mexico is currently the number one HRW purchaser. As of Jan. 4, HRW sales to Mexico totaled 1.58 MMT, up 28 percent from last year’s pace. Sales to Indonesia are also up 28 percent year over year at 430,000 metric tons (MT). HRW purchases by Algeria total 456,000 MT, more than double last year’s sales on this date. To date, HRW sales to Venezuela totaling 120,000 MT are nearly four times great than the 2016/17 pace.

Both export sales volume and value of SRW for 2017/18 are up due to the excellent quality of this year’s crop and relatively competitive pricing. Export sales are up 7 percent year over year at 2.02 MMT, boosting estimated export sales value to $400 million, or 12 percent more so far this year. As of Jan. 4, total sales to 11 of the top 20 U.S. SRW export markets from 2016/17 are higher than last year. Sales to Colombia are 12 percent ahead of 2016/17 at 198,000 MT. Nigerian SRW purchases total 234,000 MT, up 12 percent from last year. Sales to other Central and South American countries, including Brazil, Peru, Panama, Venezuela and El Salvador, are also ahead of the 2016/17 pace.

Hard red spring (HRS) sales of 5.15 MMT are down 25 percent year over year and 7 percent below the 5-year average. Higher prices due to smaller 2017/18 production have slowed HRS exports thus far in 2017/18, but global demand for HRS is strong. Year-to-date in 2017/18, the average FOB price of HRS is $293 per metric ton ($7.97 per bushel), compared to $241 per metric ton ($6.55/bu) in 2016/17, according to USW Price Report data. As of Jan. 4, buyers in Japan purchased 878,000 MT, up 20 percent from 2016/17. Sales to Taiwan of 518,000 MT are up 17 percent from last year’s sales on the same date. The Philippines continues to import the largest volume of HRS, though at a 6 percent slower pace so far.

As of Jan. 4, exports of soft white (SW) wheat are up 22 percent year over year at 4.30 MMT. That is 28 percent greater than the 5-year average. Sales to the top 10 SW customers are ahead of last year’s pace, supporting an estimated export value of $896 million, up 25 percent from the prior year. Philippine millers purchased 946,000 MT, up 16 percent compared to last year’s sales on the same date. South Korean sales are up 43 percent at 674,000 MT. U.S. SW sales to China, Thailand and Indonesia are also up. Year-to-date, Indonesia has purchased 515,000 MT, compared to total 2016/17 purchases of 270,000 MT. Thailand sales are up 18 percent year over year at 217,000 MT. Chinese purchases of 306,000 MT are already greater than 2016/17 total SW sales.

Year to date durum exports total 272,000 MT, down 32 percent from the same time last year, and below the 5-year average, with tighter supplies and resulting higher prices. The average export price for U.S. durum is up 5 percent over last year at this time according to USW Price Report data. To date, Nigeria, the European Union (EU), Algeria and Guatemala are the top durum buyers. A significant portion of the first quarter 2017/18 sales is designated as “sales to unknown designations.

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Last week in the United States, the potential effects of severe cold over most of the U.S. hard red winter (HRW) and soft red winter (SRW) crops got the lion’s share of attention in media covering wheat production and markets.

To be sure, bitterly cold temperatures across the United States may have hurt some wheat in parts of the Plains, southern Midwest and Southeast without snow cover. A senior agricultural meteorologist was quoted saying “damage occurred in about a quarter of the hard red winter wheat belt in the Central Plains, with about 5 percent of the soft red wheat belt in the Midwest seeing impacts.”

Agronomists with Kansas State University confirmed that winter kill may be an issue in north central Kansas, where soil temperatures were sustained at potentially damaging levels for the longest time.

“It is difficult to truly assess the extent of the damage at this point,” they reported. “Provided that the crown is not damaged, the wheat will recover from this foliar damage in the spring with possibly little yield loss.”

Winter kill potential and the logistical problems with such cold did spark a brief uptick in KCBT and CBOT futures prices last week. Yet of all the threats to wheat, winter kill is not making the top of the list for farmers. What is keeping more of them up at night now is the lack of moisture.

“I think if we lose wheat, it will be from dry conditions rather than winter kill,” said Don Schieber, a Ponca City wheat farmer and a past chairman of U.S. Wheat Associates (USW). “Some of the wheat that was planted early is big, but some is hurting and turning blue. It is so dry that some farmers have stopped grazing their fields because the cattle are pulling whole wheat plants out of the ground.”

The National Agricultural Statistics Service indicates that drought conditions in Oklahoma, the Texas Panhandle and much of southwestern and central Kansas are very dry, noting that for the month of December 2017, topsoil moisture in Kansas was rated 28 percent very short, 49 short, 23 adequate, with no surplus in the state. In northeastern Colorado, dry conditions increased concerns that cold snaps without the benefit of snow cover may have hurt fall-seeded HRW wheat.

Wheat is a hearty crop and Kansas State agronomists made the point that we will only be able to assess the true extent of any damage at spring green-up. But this continues to be a challenging season for HRW in the Plains.

On Jan. 9, Kansas Wheat Marketing Director Aaron Harries shared photos of a field of stunted wheat in south-central Kansas on Twitter that, he suggested, was “one of the better-looking fields in the area.” It was 65° F when he took the photo and wrote that “48 hours from now: 50 mph north wind and single digit temps with no snow cover – #sad, #drought, #prayforrain, @KansasWheat.

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By Stephanie Bryant-Erdmann, USW Market Analyst

As the Dec. 12 World Agricultural Supply and Demand Estimate (WASDE) confirms, global wheat supplies are at a record high this year. USDA increased its estimate for 2017/18 global wheat production to 755 million metric tons (MMT), up slightly from 2016/17 and a new record high. If realized, it would be the fifth consecutive year of increased global wheat production.

The record large global wheat production has pressured U.S. wheat futures to six and twelve-month lows. Since the beginning of the 2017/18 marketing year, the Chicago Board of Trade (CBOT) soft red winter (SRW) wheat futures and the Kansas City Board of Trade (KCBT) hard red winter (HRW) wheat futures have fallen 37 cents and 32 cents, respectively to levels not seen since last December. The Minneapolis Grain Exchange (MGEX) hard red spring (HRS) wheat futures climbed in July, supported by concerns over severe drought in the U.S. Northern Plains, but has since fallen to within 14 cents of the June 2 price. This decline in wheat futures prices represents a significant opportunity for customers to lock in low futures values to hedge the risk of growing protein premiums due to the tight global supply of high protein wheat.

The USDA report also noted that lower year over year wheat production for 2017/18 was reported in Canada, Kazakhstan, Ukraine and the United States, and is also expected in Australia. This is important for customers needing high protein wheat, because nearly all the world’s high protein wheat exports (13 percent protein on a 12 percent moisture basis (mb) or higher) originate from those five countries plus Russia.

While Russian wheat yields exceeded expectations and boosted total production, high protein wheat supplies are very limited according to the Federal Centre of Grain Quality and Safety Assurance for Grain and Grain Products (Centre) preliminary data for winter wheat. According to Centre data, 25 percent of samples graded as Russian 3rd class wheat (10.5 to 11.9 percent protein on a 12 percent mb); 44 percent of the samples graded as Russian 4th class wheat (8.8 to 10.5 percent protein on a 12 percent mb); and 31 percent as 5th class wheat (feed wheat). Less than 1 percent of samples graded as Russian 2nd class wheat (11.9 to 12.8 percent protein on a 12 percent mb).

With global high protein wheat supplies shrinking for the second consecutive year and demand continuing to be strong, the premium between MGEX and KCBT wheat futures has continued to widen. In 2016/17, the inter-market spread between MGEX and KCBT averaged $1.05 compared to just 40 cents the prior marketing year. Year to date in 2017/18, the MGEX to KCBT spread averages $2.09.

The demand for higher protein wheat also supports HRW protein export basis spreads, which have widened significantly this year at both Gulf and Pacific Northwest (PNW) ports. Over the past 15 years, the average premium for 12 percent protein (12 percent mb) at the Gulf has been 14 cents per bushel. This year that premium is $1.96 per bushel. The 15-year average premium for 12 percent protein HRW at the PNW is $1.09 per bushel. Since the beginning of the 2016/17 marketing year on June 1, that average premium is $1.94 per bushel.

Despite the increased premiums for high protein HRW and HRS, a review of USDA Federal Grain Inspection Service (FGIS) data reveals an increased percentage of high protein exports. Seventy-seven percent of 2017/18 HRS exports have at least 14 percent protein (12 percent mb), compared to the 5-year average of 70 percent. The percentage of HRW exports of 13 percent protein and above (12 percent mb) is double the 5-year average.

With six months left in the marketing year, many customers are securing their high protein wheat demands for the year. While premiums for high protein continue to grow, U.S. wheat futures markets have fallen for four straight weeks, which offers a good opportunity for customers to lock in the lowest HRS futures prices seen since June and the lowest SRW and HRW futures prices since last December.

Please call your local U.S. Wheat Associates (USW) representative if you have any questions about the U.S. wheat marketing system or U.S. wheat supply.

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From USDA and Media Reports

Hours of work will come to fruition this week for market analysts at USDA and the farmers and buyers they serve. The results of some new reports provide an early look at the next U.S. winter wheat crop, which includes hard red winter (HRW), soft red winter (SRW) and fall-planted soft white (SW) classes.

Starting with a brief look back, we do know that U.S. farmers harvested the smallest area of wheat in 2017 since detailed records started in 1919. That was not a surprise because USDA had estimated planted area for all wheat classes, including spring wheat, for 2017/18 at a similar record low. Winter wheat planted area was down 9 percent from 2016/17.

New estimates suggest the base will be even lower for 2018/19. Reuters reported Nov. 28 that USDA estimates U.S. farmers are likely to expand corn and soybean plantings while reducing wheat seedings to 45.0 million acres for 2018/19, down from the record low of 46.0 million for 2017/18. Reuters noted that the forecasts are developed by consensus within the USDA on a long-term scenario for the agricultural sector for the next decade. USDA will release its complete report on projections for the next 10 years in February.

Arlan Suderman, chief commodities economist for INTL FCStone, expects U.S. wheat farmers will continue plant less wheat because of the price pressure from the record global wheat stocks. He estimates seeded area will be down another 4 percent to 6 percent in 2018. Suderman said the strong U.S. dollar pressures demand for U.S. wheat while encouraging wheat expansion overseas, such as in the Black Sea region. He believes markets that value high quality wheat and strong protein offer stronger opportunity for U.S. wheat.

As a counterpoint, a poll by a national agricultural publication fielded last July suggests farmers may slightly increase wheat seedings. The Farm Futures magazine survey found growers wanting to boost wheat seedings by 2.5 million acres to 48.1 million, a 5.4 percent increase over 2017. The survey suggested that winter wheat would make up nearly 90 percent of that increase.

The first official estimate of winter wheat planted area from USDA will be released in its Prospective Plantings report in March 2018.

USDA’s latest conditions report released on Nov. 26 suggests the new HRW wheat crop seeded in the Central and Southern Plains is stressed by dry weather. Oklahoma farm broadcaster Ron Hays reported that “winter wheat crop ratings continue to slide as Oklahoma, Kansas and Texas wheat conditions all fell in the latest reporting week. Oklahoma has seen its good to excellent score on the 2018 wheat crop drop from 41 percent two weeks ago to 30 percent this week; Kansas dropped five points from two weeks ago to 51 percent good to excellent and Texas dropped ten percentage points to 36 percent good with no score for excellent in this week’s final weekly score of the season.”

On Nov. 30, USDA will issue a quarterly update to its forecast of U.S. farm exports for fiscal year 2018 (Oct. 2017 to Sept. 2018). In a previous report, USDA said the total of $140.5 billion for FY2017 ended a two-year decline and was the third-highest on record. USDA currently forecasts U.S. wheat exports for marketing year 2017/18 at 27.2 million metric tons (MMT), down slightly from 28.7 MMT in 2016/17.

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Original article published on Oct. 12, 2017 by the American Farm Bureau Federation in collaboration with U.S. Wheat Associates.

Before the North American Free Trade Agreement (NAFTA) entered into force on Jan. 1, 1994, state intervention and import tariffs held back U.S. wheat exports from the Mexican market. NAFTA ended both, and the newly opened market helped the Mexican flour milling and wheat foods industries to flourish, along with U.S. wheat imports (see chart).

USW represents the interests of U.S. wheat farmers in international markets. As it does with all U.S. wheat importing customers, USW focuses on helping Mexico’s sophisticated buyers, millers and food processors solve problems or increase their business opportunities utilizing specific U.S. wheat classes as ingredients in specific types of wheat foods. This effort, supported by wheat farmers and the partnership with the Market Access Program (MAP) and Foreign Market Development (FMD) program, has fostered a productive relationship that has endured for decades through many challenges.

Source: USDA Foreign Agricultural Service, Official USDA Estimates.

Mexico Leads All U.S. Wheat Importers

Today, Mexico is one of the largest U.S. wheat buyers in the world, importing just under 3.0 MMT on average going back many years. Mexico’s U.S. wheat imports typically only fall just short of the volume Japan imports. Not in marketing year 2016/17 (June to May), however, when Mexico’s flour millers imported more than 3.3 MMT of U.S. wheat, which is more than any other country. That volume is up 39 percent over marketing year 2015/16.

Breaking down their purchases by class, flour millers in Mexico generate strong demand for U.S. HRW wheat. The association representing Mexican flour millers says a rising number of industrial bakeries, along with traditional artisanal bakeries, account for about 70 percent of the country’s wheat consumption. That puts HRW producers in a good position to meet that demand. In 2015/16, Mexico was the leading HRW importer and buyers took advantage of favorable prices and the high quality of the 2016/17 HRW crop to import 2.0 MMT. That is 79 percent more HRW imports compared to 2015/16 and again led buyers of that class. Being closer to HRW production and having a highly functioning ability to import a large share of HRW directly via rail from the Plains states — duty free under NAFTA — is an advantage for Mexico’s buyers.

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

The successful story of how U.S. wheat farmers and their customers in Mexico have worked together in a mutually beneficial way under NAFTA and, for now, U.S. wheat continues to flow to our customers in Mexico. Total exports sales to Mexico returned more than $633 million to wheat farmers across the Plains and east of the Mississippi River in 2016/17.

The data for this map is based on Mexico’s market ranking for primary class of wheat grown in that state in the 2015/16 marketing year. Most wheat states’ farmers rely on Mexico as their number one market.

Source: Small Grains Summary and Export Sales, USDA

Increasing Competition

With U.S. wheat farmers facing financial hurdles, open access to the Mexican market is needed now more than ever. A prosperous Mexico is crucial for U.S. wheat farmers. But these savvy Mexican milling and baking sector customers have shown they can also adapt to other wheat supplies.

After a price shock in 2007/08, Mexico lifted its non-NAFTA wheat import tariff and wheat from other origins began to trickle in. From the first single boat carrying French wheat in 2010/11, non-NAFTA imports became a quarter of all Mexico’s wheat imports by 2015/16. The cost of U.S. wheat has a freight advantage over competitors, but if Mexico encourages purchasing from other origins or a new NAFTA agreement results in impediments to U.S. wheat imports, it has plenty of supply alternatives that are ultimately harmful to U.S. wheat growers.

Source: Global Trade Atlas

New Negotiations Can Build on NAFTA’s Success

Wheat trade with Mexico under NAFTA is already open and fair, but improvements to the agreement are possible. The three NAFTA parties agreed to some improvements as part of the Trans-Pacific Partnership (TPP) agreement that could be incorporated into a NAFTA update. TPP would have updated rules on sanitary and phytosanitary (SPS) measures, which have created major trade problems in some markets. U.S.-initiated trade restrictions often backfire on U.S. agricultural exports, so the wheat industry supports maintaining open markets for all parties.

Renegotiations could also enable full reciprocity for cross-border wheat trade with Canada. Canada allows tariff-free access to wheat from the United States and certain other foreign sources. However, a Canadian law requires that imported wheat, even wheat of the highest quality, must be segregated from most Canadian wheat. It is automatically given the lowest grade established by regulation and therefore receives the lowest possible price.

By contrast, Canadian producers are free to market their wheat in the United States through normal marketing channels. When graded at a U.S. elevator, Canadian wheat is treated the same as U.S.-origin wheat and is assigned a grade based on objective quality criteria, meaning that unlike U.S. wheat going north, it retains its value when it crosses the border.

“U.S. farmers should be able to deliver their wheat to a Canadian elevator and not automatically receive the lowest grade because it was grown on our side of the border,” said Ben Conner, USW Director of Policy. “This concept is needed for U.S. wheat farmers who live near the Canadian border, is supported by the Western Canadian Wheat Growers Association, and is already Canada’s legal obligation under existing trade agreements.”

The map above illustrates U.S. land that would be most affected by an open border with Canada for wheat via truck. The blue rings represent land south of the border that is within 25, 50 and 100 miles away from a Canadian elevator.

Do No Harm, Please

The U.S. wheat industry welcomes the opportunity for improving the framework for cross border wheat trade between the United States, Canada and Mexico, but would strongly oppose changes that might limit the current NAFTA’s benefits for wheat farmers and their customers, particularly in the Mexican food processing industries.

“I cannot emphasize enough how important our Mexican customers are to U.S. wheat farmers,” said Jason Scott, a wheat farmer from Easton, Md., and USW Past Chairman. “There is nothing wrong with modernizing a 23-year-old agreement, but that must be done in a way that benefits the food and agriculture sectors in both countries.”

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By Stephanie Bryant-Erdmann, USW Market Analyst

USDA’s Sept. 30 Small Grains Summary reported that U.S. farmers harvested 37.6 million acres (15.2 million hectares) of wheat for the 2017/18 crop, a 14 percent reduction from 2016/17 and the smallest harvested area since 1890. USDA estimated U.S. 2017/18 wheat production at 47.4 million metric tons (MMT) (1.74 billion bushels), down 25 percent year over year and 15 percent below the 5-year average. The smallest planted area since USDA record began in 1919, adverse weather conditions and wheat streak mosaic virus all contributed to reduced harvested area.

The largest beginning stocks since 1988/89 will partially offset lower production. USDA expects 2017/18 U.S. beginning stocks to total 32.2 MMT (1.18 billion bushels), up 21 percent year over year and 57 percent greater than the 5-year average. Total 2017/18 U.S. wheat supply is forecast at 79.6 MMT (2.92 billion bushels), down 11 percent from 2016/17 but in line with the 5-year average. Despite the sharp year over year reduction in yields, USDA expects the final average yield to reach 46.3 bu/acre (3.11 MT/ha), similar to the 5-year average of 46.6 bu/acre (3.13 MT/ha).

Last fall, low farm gate prices and large carry-in stocks prompted U.S. farmers to plant 32.7 million acres (13.2 million hectares) of winter wheat, down 9 percent from 2016/17. The winter wheat crop went into winter dormancy in good or above average condition. A mild winter and early spring was beneficial for both winter wheat and, unfortunately, the mites that carry wheat streak mosaic virus. The disease was widespread in Kansas, Oklahoma and parts of Nebraska, cutting yields and causing higher rates of abandonment in affected hard red winter (HRW) areas. A late spring blizzard in western Kansas cut yields and increased abandonment. Soft red winter (SRW) generally came out of dormancy in better than normal conditions, but growing conditions also varied widely across the Southeast. In some areas, excessive moisture helped boost yields, in others it delayed or prevented emergence.

As with winter wheat, low spring wheat and durum farm gate prices and large carry-in stocks reduced planted areas. After planting (which is generally early), drought conditions spread across Montana, North Dakota and South Dakota with devastating effects on yield. As a result, the rate of abandonment in South Dakota, which was particularly hard hit, is estimated at 37 percent — nearly triple the state’s 5-year average.

Here is a by-class breakdown of the Sept. 30 report.

Hard Red Winter (HRW). USDA estimates total 2017/18 HRW production fell to 20.4 MMT (750 million bushels), down 31 percent from 2016/17 and 15 percent below the 5-year average. USDA forecast 2017/18 HRW beginning stocks at 16.1 MMT (593 million bushels), up 33 percent year over year and 81 percent above the 5-year average. Even with large beginning stocks, total HRW supply will fall 12 percent year over year to 36.5 MMT (1.34 billion bushels). Total HRW planted area fell to 23.8 million acres (9.63 million hectares), down 10 percent from 2016/17. Yields also fell an average 13 percent from 2016/17 in the top HRW-producing states of Texas, Oklahoma and Kansas.

Hard Red Spring (HRS). USDA estimates total 2017/18 HRS production fell to 10.5 MMT (385 million bushels), down 22 percent from 2016/17 and 26 percent below the 5-year average. USDA forecast 2017/18 HRS beginning stocks at 6.40 MMT (235 million bushels), down 14 percent year over year but still 21 percent above the 5-year average. Total HRS supply will fall 12 percent year over year to 16.9 MMT (620 million bushels). USDA estimates farmers planted 10.3 million acres (4.17 million hectares) to HRS, 10 percent below 2016/17 levels. The drought cut yields an average of 11 bu/acre (0.74 MT/ha) in Montana, North Dakota and South Dakota. Abandonment in Montana and North Dakota was double the respective 5-year averages at 9 and 6 percent, and South Dakota farmers abandoned 37 percent of wheat fields due to the drought. The single bright spot for HRS production was Minnesota, with a record high average yield of 67.0 bu/acre (4.50 MT/ha) offsetting lower harvested area.

Soft Red Winter (SRW). USDA estimates total 2017/18 SRW production fell to 7.95 MMT (292 million bushels), down 15 percent from 2016/17 and 32 percent below the 5-year average. USDA reported 24 percent of SRW acres were abandoned compared to 17 percent last year. Record high yields in six SRW producing states partially offset the lower harvested area. USDA forecast 2017/18 SRW beginning stocks at 5.85 MMT (215 million bushels), up 37 percent year over year and 47 percent greater than the 5-year average. So, total SRW supply will rise slightly year over year to 13.8 MMT (507 million bushels). USDA estimates total 2017/18 SRW planted area at 5.61 million acres (2.27 million hectares), 15 percent lower than 2016/17 and 30 percent below the 5-year average.

Soft White (SW). USDA estimates total 2017/18 SW production declined to 6.14 MMT (226 million bushels), down 11 percent from 2016/17 due to small declines in harvested area and average yields in Washington and Idaho that were down 7 and 10 percent, respectively. USDA reports white wheat planted area decreased 3 percent year over year. White wheat planted area fell to 4.02 million acres (1.63 million hectares), 2 percent below the 5-year average. USDA projected white wheat beginning stocks will increase 42 percent year over year to 3.02 MMT (105 million bushels). If realized, that would be 65 percent above the 5-year average.

Durum. U.S. durum production fell 51 percent in 2017/18 to 1.49 MMT (54.9 million bushels) from lower planted area and yields in Montana, North Dakota and South Dakota. USDA estimates 1.91 million acres (773,000 hectares) were planted to durum, down 11 percent from 2016/17 but still 6 percent above the 5-year average of 1.80 million acres (729,000 hectares). Abandonment also increased this year from 2 percent in 2016/17 to 8 percent in 2017/18, due to the drought. USDA projected 2017/18 durum beginning stocks to climb to 980,000 metric tons (MT) (36 million bushels), nearly double the 5-year average and 29 percent above 2016/17 levels. USDA forecast total U.S. durum supply at 2.48 MMT (91 million bushels), down 31 percent year over year.

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By Stephanie Bryant-Erdmann, USW Market Analyst

Three months into the 2017/18 marketing year (June to May), total U.S. export sales-to-date of 12.1 million metric tons (MMT) are 2 percent ahead of last year’s pace and in line with the 5-year average pace. Though hard red winter (HRW) and hard red spring (HRS) sales are currently below last year’s levels, both are ahead of the respective 5-year averages. As of Aug. 24, total sales to eight of the top 10 2016/17 U.S. export markets are higher than last year. In addition, the other three U.S. wheat classes are all ahead of last year’s pace. USDA projects 2017/18 exports will fall to 26.5 MMT, which, if realized, would be 8 percent below 2016/17, but 1 percent above the 5-year average pace.

USDA reported HRW year-to-date exports at 4.49 MMT, down 7 percent from the prior year but 10 percent ahead of the 5-year average due to competitive prices and good quality. Mexico is currently the number one HRW purchaser. As of Aug. 24, before Hurricane Harvey’s catastrophic flooding closed Texas Gulf ports, HRW sales to Mexico totaled 973,000 metric tons (MT), up 72 percent from last year’s pace. Sales to Nigeria are also up 19 percent year over year at 488,000 MT. HRW purchases by Indonesia total 335,000 MT, three times greater than last year’s sales on this date. To date, HRW sales to Algeria totaling 273,000 MT are five times greater than the 2016/17 pace. It is too early to tell if Texas Gulf closures will affect total exports for 2017/18, but current reports suggest that rail and port facilities are making good progress toward resuming operations (Read more in Rail and Port Operation Recovery in Texas Gulf is Encouraging, below).

Sales of soft red winter (SRW) for 2017/18 are up 8 percent year over year at 1.19 MMT due to the excellent quality of this year’s crop. As of Aug. 24, total sales to four of the top 10 U.S. SRW export markets from 2016/17 are higher than last year. Sales to Mexico are 12 percent ahead of 2016/17 at 472,000 MT. Colombian SRW purchases total 121,000 MT, up 50 percent from last year. Sales to other Central and South American countries, including Ecuador, Peru, Panama, Brazil, Guatemala and El Salvador, are also ahead of the 2016/17 pace.

HRS sales of 3.26 MMT are down 13 percent year over year, but remain 4 percent above the 5-year average. Higher prices due to smaller 2017/18 production have slowed HRS exports thus far in 2017/18, but global demand for HRS is strong. As of Aug. 24, buyers in the Philippines held the top purchaser post with 746,000 MT, up 27 percent from 2016/17. Sales to seven of the top ten HRS customers are also ahead of last year’s pace. Sales to Japan of 475,000 MT are up 25 percent from last year’s sales on the same date, while year-to-date sales to Taiwan of 321,000 MT are up 93 percent from 2016/17.

As of Aug. 24, exports of soft white (SW) wheat are up 47 percent year over year at 2.93 MMT. That is 56 percent greater than the 5-year average. Sales to nine of the top 10 SW customers are ahead of last year’s pace. Philippine millers purchased 578,000 MT, up 19 percent compared to last year’s sales on the same date. South Korean sales are up 65 percent at 477,000 MT. Sales to Japan are up 24 percent year over year at 301,000 MT. U.S. SW sales to China, Thailand and Indonesia are also up. Year-to-date, Indonesia has purchased 266,000 MT, compared to total 2016/17 purchases of 193,000 MT. Thailand sales are up 72 percent year over year at 147,000 MT. Chinese purchases of 271,000 MT are already greater than 2016/17 total SW sales.

On average, 24 percent of U.S. total durum sales occur in first quarter of the marketing year, compared to 29 percent from September through November. Year to date durum exports total 211,000 MT, up 20 percent from the same time last year, still 14 percent below the 5-year average. Many durum buyers may be waiting for final quality reports for the Canadian crop before making purchasing decisions. To date, Nigeria, the European Union (EU), Algeria and Nigeria are the top durum buyers. A significant portion of the first quarter 2017/18 sales is designated as “sales to unknown designations.”

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U.S. farmers produced lower volumes of a very good SRW crop for marketing year 2017/18. This SRW crop has uniformly low dockage, good test weight, somewhat lower protein, very good kernel size and weight, low DON values and no notable pockets of low falling number. Flour extraction rate is somewhat lower than last year.

That is a good summary of results from USW’s 2017 SRW Quality Survey Report, now posted online at www.uswheat.org/cropQuality. To complete the report, Great Plains Analytical Laboratory in Kansas City, Mo., collected and analyzed 270 samples from 18 reporting areas in the 11 states that account for 77 percent of total SRW 2017 production. USW and the USDA FAS fund the annual SRW survey.

Economic conditions kept 2017 SRW seedings down and USDA estimates production at 8.3 MMT. That is down from 9.4 MMT in 2016 and well below the 5-year average. However, USDA estimates that the total SRW supply (excluding imports) for the 2017/18 marketing year is 4 percent higher than 2016/17 because of higher 2017/18 beginning stocks.

The overall average 2017 SRW grade is U.S. No. 2. The overall weighted average test weight is 59.1 pounds per bushel, which is above the 5-year and 2016 averages. The Gulf Port average is similar to 2016, while the East Coast average is well-above its 2016 average. The Gulf Port dockage value of 0.3 percent is lower than any recorded in the previous five years. Other grade factors, including moisture and dockage for both areas are similar to or better than the 5-year averages.

The survey indicates almost no significant quality issues with the crop in any area. Average wheat protein content of 9.5 percent (12 percent moisture basis) is similar to last year and only slightly below the 5-year average of 9.8 percent. The 2017 East Coast and Gulf Port protein averages are similar. However, the East Coast average protein of 9.4 percent is below the region’s 2016 and 5-year averages, while the Gulf Port average of 9.5 percent is above the region’s 2016 average of 9.1 percent and slightly below its 5-year average. The composite average falling number of 319 seconds is below 2016, but above the 5-year average. The composite DON average of 0.4 ppm is below the 2016 value of 0.6 ppm and well-below the 5-year average of 1.3 ppm, indicating that the crop sampled is relatively free of DON. The East Coast DON value of 0.8 ppm and the Gulf Port value of 0.3 ppm are both below last year’s values and 5-year averages.

A summary of flour and baking data shows Buhler laboratory mill flour extraction averages overall are below the 2016 and 5-year averages. The composite farinograph peak and absorption values are similar to 5-year averages, but the stability value of 2.2 minutes is slightly shorter than last year and the 5-year average. The Gulf Port peak and stability averages of 1.3 min and 2.4 min, respectively, are similar to last year and the 5-year averages, while the East Coast peak and stability values of 1.2 min and 1.7 min are both shorter than last year and the 5-year averages. The composite and Gulf Port alveograph W values of 91 and 93, respectively, are higher than the 5-year averages. The East Coast alveograph W values and the remaining L and P values for the composite and both regions are all similar to the 5-year averages, given the variability of alveograph analysis. The composite and Gulf Port cookie spread ratios are lower than last year and the 5-year average while the average loaf volumes are all similar to last year and the 5-year averages.

Buyers are encouraged to construct specifications carefully to be sure they receive qualities that meet their needs either for traditional soft wheat products or for blending with higher protein wheat.

USW will share complete data for all classes of U.S. wheat with hundreds of overseas customers at USW’s annual Crop Quality Seminars, and in its annual Crop Quality Report.