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News and Information from Around the Wheat Industry

 

Speaking of Wheat

In my view, [news that Cargill and Viterra will stop loading Russian grain] puts more questions around Russia’s ability to export. Russian state exporters claim that they’ll be able to keep grain moving out at the same pace, but major speculative funds holding large short positions may lack confidence in that currently, supporting the recent price recovery as they exit short positions. [March 29] Chicago wheat showed modest gains. All eyes will be focused on [upcoming USDA reports].” Sean Lusk, analyst with Barchart.com.

UK Establishes Scientific Plant Breeding Regulation

On March 23, a United Kingdom (UK) Genetic Technology (Precision Breeding) Bill received Royal Assent and became an Act of Parliament and law. The regulation covers precision-bred plants and animals developed through techniques such as gene editing, which is different from genetic modification, and create a new science-based and streamlined regulatory system to facilitate greater research and innovation in precision breeding while maintaining stricter regulations for genetically modified organisms (GMOs). Read the entire story here.

Cooperators Call for Increased Export Promotion Funding

In a period when inflation has raised the cost of everything in the U.S. wheat export supply chain, agricultural producers and processors have asked Congress to double the funding for the Market Access Program (MAP) and the Foreign Market Development (FMD) Program. Both have not had funding increases since 2006 and 2002 respectively. According to USDA Undersecretary for Trade and Foreign Agricultural Affairs Alexis Taylor, requests for MAP and FMD monies have far exceeded current funding. U.S. Wheat Associates (USW) is one of the organizations that cooperates with USDA’s Foreign Agricultural Service programs to conduct trade service and technical support for export customers. Read the entire story here and visit www.AgExportsCount.com.

National Ag Day Celebration

On March 21 the United States celebrated 50 years of National Ag Day. Started in 1973, National Ag Day increases public awareness about agriculture’s vital role in society. This year, events included grassroots activities across America, and strong social media coverage. Events in Washington, D.C. highlighted U.S. ag’s global impact. The day began with Secretary of Agriculture Tom Vilsack addressing a lively crowd at the USDA, saying “every day should be Ag Day.” Later in the day, a Taste of Ag reception was held at the Library of Congress. Here’s a short video tribute to U.S. farmers, ranchers, and dairy operators:

 

Cargill to Suspend Grain Export Elevations in Russia

Food and agricultural company Cargill announced March 28 it “will stop elevating Russian grain for export in July 2023 after the completion of the 2022-2023 season.” In addition, Viterra announced March 29 it will also stop loading Russian grain. Cargill owns a stake in the grain terminal in the Black Sea port of Novorossiisk but did not specify if it was selling the stake. Reuters reported that Cargill’s shipping unit will continue to carry grain from the country’s ports. Reuters added that the move stoked concerns about global grain supplies disrupted by the Russian invasion of Ukraine, lifting benchmark wheat futures prices this week from earlier losses.

India Cuts Wheat Harvest Estimate

The Indian government could reduce its wheat harvest estimate as unseasonal showers and hailstorms led to sizable damage to the wheat crop in the Indian states of Punjab, Uttar Pradesh and Madhya Pradesh, sources in the agriculture ministry told S&P Global Commodity Insights. According to government sources, the production estimates for marketing year 2022-23 (April-March) are likely to reduce by up to 2 million metric tons (MMT) from the projected output of 112.2 million mt, a record harvest. S&P Global noted however that surveyed market participants expect Indian’s wheat harvest to be lower.

 

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Each year, on March 31, those who grow, trade or import U.S. agricultural commodities look to USDA’s annual Prospective Plantings and Quarterly Grain Stocks Report for indications of potential price movements. The consensus from analysts across the industry on how this week’s reports will affect wheat markets is generally bullish.

For reference, in its January 2023 Wheat Outlook report, USDA estimated total U.S. winter wheat planted area for 2023/24 at 37.0 million acres (14.9 million hectares), up 11% from last year to the highest level since 2015/16. The hard red winter wheat (HRW) area was up 10% to 25.3 M/ac (10.2 M/ha), while white winter wheat is up by 3% to 3.73 M/ac (1.5 M/ha). soft red winter wheat (SRW) experienced the most significant increase, jumping 20% from 2022/23 to 7.9 M/ac (3.2 M/ha). USDA’s February Grains and Oilseed Outlook projected an 8% increase in all wheat planted area to 49.5 M/ac (20.0 M/ha)

U.S. Wheat Associates (USW) compiled the following pre-report perspectives.

Analysts See Lower Planted Area

Bloomberg recently surveyed more than 30 agricultural analysts about their prospective plantings estimates for wheat, corn, soybeans and other crops. The average estimate for the total wheat area came in slightly below USDA’s January estimate at 48.9 M/ac. The average winter wheat estimate was 36.3 M/ac, also less than USDA’s 37.0 M/ac. Spring and durum wheat average among the analysts Bloomberg surveyed was 10.9 M/ac for HRS and 1.7 M/ac for durum.

Back in January, agricultural consulting firm Farmers Business Network surveyed U.S. winter wheat farmer members of the organization about their planting intentions. The results showed planted area increases for HRW and SRW, with all U.S. winter wheat planted area seen at 34.2 M/ac for 2023/24, up 900,000 ac compared to their 2022 survey. That is significantly lower than USDA’s 37.0 M/ac January estimate.

Balance Sheet Tightening?

USDA data in a pie chart showing the range of wheat crop conditions in Kansas.

Kansas wheat crop conditions in late March reflects the impact of on-going drought in the western and central areas of the state.

While both Bloomberg’s and FBN’s surveys estimate of winter wheat planted area are up compared to the 2022/23 estimates, FBN Senior commodity Analyst Rejeana Gvillo said U.S. planted is “not large enough to shift the undertone of shrinking global wheat supplies. Given the acreage outlook, the drought in the Southern Plains will need to be broken come spring or summer or the U.S. wheat balance sheet could tighten further.”

Sadly, the drought has not broken in southwest Kansas, southeast Colorado, the northern Texas Panhandle, and the western Oklahoma Panhandle. There has been some easing of drought outside that hard-hit area. Justin Gilpin, CEO of Kansas Wheat does not anticipate major adjustments to USDA’s winter wheat planted area, but he is looking to other farmer decisions ahead.

“Last year, USDA began inching Kansas winter wheat acreage lower in the March report. I expect any changes or adjustments this year to be in the other direction, with slightly higher planted winter wheat acres in Kansas,” Gilpin said, which includes SRW in eastern Kansas. “But any incremental changes at this point are overshadowed by what the harvested acres might be with expected higher abandonment due to the drought conditions and poor stands in southwest Kansas.”

Spring Wheat Planting Delay?

Drought is not the problem in the Northern Plains HRS and durum region. This has been a very wet and cold winter with persistent snow cover.

“Everybody’s pretty much thinking it is going to be a late start” to planting, said Randy Martinson of Martinson Ag Risk Management in a story posted by AgWeek, Fargo, N.D.

On the Agweek Market Wrap, March 24, Martinson said with two feet of snow or more in places in the region and a forecast for little warm up in sight, some farmers already are considering looking for earlier maturing varieties and “questioning whether they should still plan to plant spring wheat.”

Asked about the Prospective Plantings report on March 31, Martinson added that the consensus among farmers he has talked to is there will be more corn and soybeans planted and less spring wheat, though more winter wheat already has been planted. However, he said there likely will be changes depending on how the spring shapes up.

Map of the United States from the USDA Forest Service shows significant snow cover in late March 2023 in the northern plains.

Snow cover in late March is still 10 inches to almost 30 inches deep in parts of U.S. HRS growing regions of South Dakota, North Dakota and Montana. Delayed planting may shift some spring wheat area to other crops this year. Source: USDA Forest Service.

Buy Signals for Speculators

Commercial traders and futures speculators are getting the same information. Barchart analyst Sean Lusk wrote this week that the market is net short in Chicago SRW wheat futures as the plantings and stocks reports are coming on the same day as the month and quarter end. He expected managed money to take profits by buying wheat into the weekend.

In the end, USW believes Martinson is correct in saying the weather and the planting report will be the market movers this week.

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The 2022 U.S. wheat harvest is complete and this week, USDA estimated farmers have seeded 79% of the 2023 winter wheat crop. As winter approaches and the planted crop goes dormant, a supply and demand update across all U.S. wheat classes is warranted. The annual U.S. Wheat Crop Quality Report can be found here.

Last year’s hard red spring (HRS) wheat, durum, and white wheat crops were challenged by dry growing conditions. That is not the case for those classes this year, but hard red winter (HRW) was significantly impacted by adverse growing conditions. Below is an update across the wheat classes.

USDA estimates 2022/23 U.S. wheat production will total 44.9 MMT, 100,000 MT more than 2021/22 but 9% less than the 5-year average and the second lowest level in 20 years. According to USDA, the average yield for all U.S. wheat is forecast at 3.13 MT/HA, or 46.5 bu/acre, 5% higher than last year. The higher yields are due to a rebound in HRS, durum and white wheat yields. The yield for HRW is down significantly. The latest Small Grains Summary placed all wheat planted acres at 45.73 million acres, down 2% compared to 2021/22.

The latest USDA World Agricultural Supply and Demand Estimates (WASDE) report forecast U.S. wheat exports to total 21.09 MMT, down 3% from 2021/22 if realized. Through the week of October 13, USDA reported total wheat sales of 11.2 MMT, down 8% compared to the same time last year. The latest USDA Wheat Outlook suggested that tight supplies and historically high wheat prices have made U.S. wheat less competitive in the international market.

HRW

Hard White Wheat Harvest Narjes NebraskaAccording to USDA, the total HRW planted area fell slightly to 23.08 million acres. The area harvested fell more steeply at 15.24 million acres, 1.95 million acres less than in 2021/22. Overall U.S. HRW production is 14.5 MMT, 29 percent less than last year. Kansas, the largest HRW producing state, saw production drop 119,000 bushels compared to 2021/22. Oklahoma’s production dropped 40%, at 68,600 bushels, according to the Small Grains Report. Exports of HRW are forecast at 6 MMT, 30% less than in 2021/22. Year-to-date HRW sales of 3.1 MMT are 30% less than the pace last year. The top markets for HRW are Mexico, Japan, Nigeria, Brazil, and Colombia.

HRS

HRS wheat harvest 2022USDA estimates total HRS planted area in 2022 was 10.20 million acres, 390,000 fewer acres than 2021. The area harvest was up 5%, at 9.82 million acres. Heavy rain and cool temperatures early in the planting season slowed down spring wheat planting in parts of North Dakota and Minnesota. North Dakota HRS yield rebounded 49% from last year to 50 bushels per acre. USDA estimates total HRS production will rebound from last season and reach 12.1 MMT, 49% higher than in 2021. HRS exports are expected to reach 6.1 MMT, 400,000 MT higher than last season. Total HRS sales in 2022/23 were 2% higher than last year at 3.3 MMT. The top markets for HRS are the Philippines, Mexico, Japan, Taiwan, and South Korea.

SRW

 

Harvest scene to illustrate 2021 soft red winter wheat crop story

The total planted area for SRW is 6.57 million acres, 78,000 acres less than last season. The area harvested was 4.79 million acres, down slightly from last season. USDA estimates total SRW production in 2022 fell 600,000 MT to 9.2 MMT. However, exports are expected to increase year-over-year to 3.7 MMT. Total SRW sales in 2022/23 are 16% higher than the year prior at 2.0 MMT. The top markets for SRW were Mexico, Colombia, Ecuador, and China.

White

Image of wheat harvest with four harvesters in the distance combining soft white wheat in Idaho.White wheat planted area, which includes more than 99% soft white (SW), totaled 4.24 million acres in 2022. The area harvested is 4.02 million acres, nearly identical to 2021/22. Improved growing conditions in Washington and Oregon increased yields significantly. Washington yields are 61% higher than last year, while Oregon’s yields are 51% higher, according to the Small Grains Report. White wheat production is estimated at 7.4 MMT, 1.9 MMT more than in 2021/22. Exports are expected to reach 4.6 MMT. Total white wheat (soft and hard) sales in 2022/23 are 17% higher than last year at 2.5 MMT. The top markets for white wheat were the Philippines, Japan, China, and South Korea.

Durum

 

Photo of durum kernels to illustrate durum production story

Total U.S. durum planted area in 2022 was 1.63 million acres, 10,000 acres less than last season. The area harvested was 1.58 million acres, 4% higher than last year. Improved weather conditions increased total durum yields by 64% to 40.5 bu/acre. USDA expects total U.S. durum production will be 1.7 MMT, rebounding 70% from last year’s drought-stricken crop. Exports are expected to total 700,000 MT. Total durum sales in 2022/23 are up 14% compared to the year prior at 139,300 MT. The top markets for durum were Italy, Algeria, Guatemala, and Japan.Conclusion

In the latest Wheat Outlook published by the USDA ERS division, the authors note the challenge posed by U.S. wheat competitors. The smaller U.S. wheat crop, higher barge (and rail) rates, continued logistical challenges, and the strong U.S. dollar will cut into the competitiveness of U.S. wheat exports. Putin’s war with Ukraine compounds these challenges.

U.S. wheat farmers continue to produce sufficient supplies of high-quality wheat to meet both domestic and international needs for literally hundreds of unique baked goods. And the U.S. wheat export system remains open for business.

In marketing year 2022/23 to date, Mexico is the top U.S. wheat buyer, despite purchasing 4% less than at the same time last year. The Philippines is the second largest U.S. wheat buyer, 20% behind its pace last year. Japan is the third largest U.S. wheat customer but remains 8% behind its purchase pace of last year.

*All sales data is through the week of October 13, 2022.

By USW Market Analyst Michael Anderson

 

 

 

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In an example of USW’s commitment to service, it has combined knowledge with experience to extend the shelf life of bakery products. Headline photo: USW Baking Consultant Roy Chung leading a bread baking course at the UFM Baking and Cooking School in Bangkok, Thailand. (Photo courtesy of UFM)

Expanding the window of time breads and cakes remain fresh would help retailers, food distributors and bakers around the world broaden their customer bases and grow their businesses. It would also benefit the U.S. wheat industry, which provides a key ingredient for baked goods in international markets.

But can the window really be expanded? U.S. Wheat Associates (USW) believes it can.

In an example of USW’s commitment to service, the organization’s technical staff and consultants have combined knowledge with experience to extend the shelf life of bakery products. USW has “explored all possibilities” to develop processes and procedures that result in products remaining fresh for days – even weeks – longer than current standards.

Eager to Share the Knowledge

USW, which plans to conduct educational courses late next year or early in 2024 to share what it has learned on the topic, is confident its classrooms will be full.

Most of USW’s work on extending shelf life has been conducted in Southeast Asia, but the lessons learned apply to every bakery across the globe.

“In Southeast Asia, a typical shelf life of bread is seven days, and the maximum shelf life is about 10 days,” explained USW Baking Consultant Roy Chung, who is based in Singapore. “For large bakeries and food distributors, extending it beyond that 10 days would mean they could sell baked goods in towns and villages farther away from their manufacturing base. Retail markets would benefit. Consumers would benefit. Everyone up and down the supply chain would benefit, too.”

USW is planning to conduct educational courses to share what it has learned about extending the shelf life of baked goods.

USW is planning to conduct educational courses to share what it has learned about extending the shelf life of bread and other baked goods. Lessons taught in the courses will apply to bakeries in every region of the world.

The ‘Squeeze Test’

Shelf life is defined as “the time during which a freshly-manufactured product remains acceptable to the consumer.”  Of course, consumers in each region have different tastes and preferences, but the main goal of extending shelf life is universal: The product must pass the “squeeze test.”

The test plays out every day, in every grocery or supermarket. A shopper eases up to a bakery shelf, positions a hand over an unsuspecting loaf of bread and gently squeezes in order to judge the freshness of a prospective purchase.

USW’s work aims to help more loaves and baked goods pass the squeeze test long after leaving a baker’s oven. The result would be more consumers in more places having the ability to purchase the products. That in turn creates more demand for U.S. wheat.

Enemies of Shelf Life

According to Chung, the two major factors that lead to failure in extending shelf life are mold and staling.

“These are separate issues that must be tackled separately, and those are the things we have been working on,” he said. “The mold problem involves things like sanitation, moisture, temperature, relative humidity, water activity and the use of preservatives. The staling problem involves formulation and ingredients selection.”

Tools and formulas in the effort are many, including natural gums and enzymes, sugars and fats, and chemical additives and alternatives to chemical additives. Packaging innovations are being addressed, too, such as packing bread and other baked goods in airtight plastic under a modified atmosphere.

The tools and formulas used are designed to match consumer preferences.

For example, the European market is less accepting of additives. The typical shelf life of a loaf of bread was traditionally one day, but now is 2 to 3 days.

“This is achieved either by using very high-quality wheat such as hard red winter (HRW) or hard red spring (HRS), which have a slower rate of natural staling than some lower-cost wheats,” Peter Lloyd, USW Regional Technical Manager based in Morocco, said. “Our efforts in the European Union and Middle East regions also promotes the use of HRS wheat in bread as a way of getting to cleaner labeling (less additives), a growing issue in that part of the world.”

Longer Shelf Life, Cleaner Labels

The various requirements and preferences in different countries and regions makes the USW effort to extend shelf life of breads and baked goods an ideal subject for baker education.

And a perfect topic for USW’s planned training course and technical support for its overseas customers.

“There are many details involved in achieving the ultimate goal of reaching more consumers with quality bakery products made with U.S. wheat,” said Chung. “We are planning to offer a course that addresses all those details, and from the conversations we have had, there is tremendous interest everywhere.”

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A dramatic increase in demand for oilseeds could impact U.S. wheat production in coming years, with significantly more acres expected to be planted in soybeans destined for new and expanded crushing facilities.

Between 20 million and 25 million additional acres of soybeans will be needed to meet requirements of the renewable diesel industry, some analysts are predicting.

At the same time, global demand for wheat is also expected to rise, setting up dynamic competition for acreage in states where both crops are grown. For the U.S. wheat industry, the situation creates important questions: How much wheat acreage could potentially be lost to soybeans? Will lost acres impact the U.S.’ standing as the world’s most dependable wheat supplier? Can wheat and soybeans co-exist in a competitive environment?

This chart shows acreage planted in soybeans and wheat in 2022 in the country's top 10 soybean states, according to USDA's National Agricultural Statistics Service.

This chart shows total acreage planted in soybeans and total acreage planted in wheat in the country’s top 10 soybean states in 2022, according to USDA’s National Agricultural Statistics Service (NASS).

Where possible, farmers may adapt and double-crop more wheat and soybeans to maintain supplies of both crops. It is already a common practice in top soybean states like Illinois, Indiana and Ohio, where soft red winter wheat is the dominant class. But in soybean states that produce hard red winter and hard red spring wheat – Kansas, Nebraska, South Dakota and North Dakota, for example – allotting acreage is more complicated due to average rainfall and shorter growing seasons.

The ultimate question is if U.S. farmers will be able to meet the demand for both wheat and soybeans by doing what they have always done – figure out a way to do more with less.

Many Options, Limited Acres

Mike Krueger, a grain industry consultant with Lida Communications, put a spotlight on the emerging “competition for acreage” during last month’s U.S. Wheat Associates World Staff Conference.

While describing volatility in global wheat and grain markets due uncertain market conditions, Krueger noted a more predictable factor that will affect markets and decisions made by U.S farmers.

“Renewable diesel is projected to increase eight-fold by 2030 and significant investments of more than $2 billion are being put into new and expanded soybean processing plants in the U.S. right now,” Krueger explained. “The U.S. soybean crush will expand by 10%, or more. We are talking vast numbers, and while sunflower and canola should be big beneficiaries of renewable diesel, soybeans are certainly going to be in even higher demand.”

A boost of 20 million acres would catapult soybean and go a long way toward meeting the projected oilseeds demand.

But at what cost?

The U.S. has consistently ranked as one of the top five wheat producing countries in the world and one of the top three wheat exporting countries. Would a major shift in acreage affect U.S. production, thus its place as a supplier?

“We must remember there’s also a global demand for wheat, as well as corn, and we have to consider ongoing drought and weather patterns, not to mention political conflicts that are impacting grain production and supplies all over the world,” Krueger said. “All of this, all the things going on that affect global trade, will put major emphasis on overall crop production in the U.S. and the entire Northern Hemisphere. To be honest, no crop can afford to give up or lose acres.”

Can Double-cropping Help?

Higher prices caused by global demand for wheat and soybeans appears to be motivating more farmers in the Midwest to consider seeding soft red winter wheat in the fall and soybeans in the same field following wheat harvest.

About 40% of producers responding to a Purdue University Ag Economy Barometer survey in June indicated they have utilized a wheat and soybean double-crop rotation in the past. About 28% of those producers planned to increase the amount of cropland devoted to this rotation by seeding more wheat this fall followed by soybean plantings on the same acres in spring 2023.

Some analysts have predicted that renewable diesel demand in coming years will require the planting of at least 20 million additional acres of soybeans. This chart from USDA shows soybean acreage over the past decade.

Some analysts have predicted that renewable diesel demand in coming years will require the planting of at least 20 million additional acres of soybeans. This chart from USDA shows soybean acreage and harvest over the past decade.

Ultimately, the biggest factor behind whether farmers begin growing an extra crop of wheat is what price they can get for the crop.

“The shift toward increasing soft red winter wheat acreage is likely the result of the expected profitability improvement of the wheat and double-crop soybean rotation,” James Mintert and Michael Langemeier, authors of the Purdue survey, noted.

A move by the federal government earlier this year to increase the number of counties eligible for double-cropping insurance was a move aimed at boosting U.S. production of wheat and soybeans by reducing the risk for farmers who decide to take the double-crop route.

Producers are well-aware that there are drawbacks to double-cropping wheat and soybeans.

“Compared to single-crop soybeans, double-crop soybeans have a shorter growing season due to the delay in planting until the wheat is harvested, which often result in reduced yields,” said Scott Gerlt, Chief Economist for the American Soybean Association (ASA). “Despite this drawback, double-cropping does allow increased production.”

Wheat Demand to Grow

Despite questions about acreage and production, U.S. wheat continues to be in demand by international customers because of its consistent quality and reliability.

Krueger expects the demand will continue to expand.

“A primary reason is that global wheat supplies are likely to shrink due to a renewed focus on soybeans, and to a lesser extent, corn,” Krueger said. “Another factor favoring U.S. producers involves shipping and logistics limitations that hamper competing wheat-growing countries, including Russia and Ukraine.”

Effects from a third consecutive La Nina would further pressure global supplies.

“These things will undoubtedly lead to more export demand for wheat,” Krueger said. “Can the U.S. meet the demand? That is the puzzle that’s still being put together. Farmers make decisions every single planting season. They only have so many acres to work with.”

 

 

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USW Vice Chair Michael Peter( left) with Sen. Frank Lucas, R-Oklahoman (center) and Yi-Cheun "Tony" Shu, chair of the TFMA, after the Letter of Intent signing at the U.S. Capitol.

USW Vice Chair Michael Peters ( left) with Sen. Frank Lucas, R-Oklahoma (center) and Yi-Cheun “Tony” Shu, chair of the TFMA, after the Letter of Intent signing at the U.S. Capitol.

Representatives from the Taiwan Flour Millers Association (TFMA) signed a Letter of Intent September 14, 2022,  with U.S. Wheat Associates (USW) to purchase 1.9 million metric tons – about 69.8 million bushels – of wheat from the U.S. over the next two years, a commitment with an estimated value of $576 million.

The signing, held at the U.S. Capitol in Washington, D.C., was a much-anticipated stop for the 2022 Taiwan Agricultural Trade Goodwill Mission, a team made up of Taiwanese government officials and representatives of some of the largest importers of U.S. grains. The group is led by Yi-Cheun “Tony” Shu, chair of the TFMA and of Formosa Oilseed Processing Co. Also participating is Dr. Ching-Cheng Huang, deputy minister of Taiwan’s Council of Agriculture.

Taiwan is the 6th largest U.S. wheat export market and the 7th largest overseas market for U.S. agricultural products. Along with its intent to purchase U.S. wheat in 2023 and 2024, the team also signed Letters of Intent with the U.S. Soybean Export Council (USSEC) and the U.S. Grains Council (USG) to purchase soybeans and corn. The total estimated commitment in the three letters total $3.2 billion.

Michael Peters, USW Vice Chairman, signed the TFMA Letter of Intent on behalf of the U.S. wheat industry.

“American farmers place great value on the relationship between U.S. agriculture and Taiwan,” Peters, a wheat producer and cattle rancher from Okarche, Oklahoma, said during the signing ceremony. “We pride ourselves as being dependable partners who grow the highest quality agriculture products in the world. The TFMA and its members have been great trading partners who fully recognize the value of purchasing U.S. wheat.”

Among U.S. officials on hand were Senators Kevin Cramer, R-North Dakota, John Hoeven, R-North Dakota, Frank Lucas, R-Oklahoma, Jim Risch, R-Idaho, and Chuck Grassley, R-Iowa. Representative Steven Chabot, R-Ohio, co-chair of the Congressional Taiwan Caucus, was also present to witness the signing.

Following the visit to Washington, D.C., flour millers on the Mission headed west to get a first-hand look at U.S. wheat production and meet the people responsible for supplying high-quality wheat to Taiwan. The team is scheduled to visit wheat farmers in Kansas, Idaho and Oregon. Other scheduled stops also include the Kansas Wheat Innovation Center and the Port of Portland in Oregon.

USW also joined USSEC, USGC, the National Association of Wheat Growers (NAWG) and the North American Export Grain Association (NAEGA) in hosting a reception for the Mission team on September 13. The event provided leaders of the U.S. wheat and grain industry an opportunity to catch up with members of the Taiwan Goodwill Mission, which last visited the United States in 2019.

USW President Vince Peterson addresses those gathered for a reception welcoming the 2022 Taiwan Agricultural Trade Goodwill Mission

USW President Vince Peterson addresses those gathered for a reception welcoming the 2022 Taiwan Agricultural Trade Goodwill Mission

USW President Vince Peterson addressed the gathering by pointing out the long and beneficial history of cooperation between Taiwan’s flour milling industry and the U.S. wheat industry that first opened a promotional office in Taipei 56 years ago.

“Our legacy organization Western Wheat Associates established a presence in Taiwan in 1966, so we are going on six decades of working with the country’s flour millers and food industry,” Peterson said. “In that time, Taiwan has purchased more than 45 million metric tons of U.S. wheat. This partnership between TFMA, U.S. Wheat Associates and U.S. wheat producers has been on a great path, and we plan to continue on that path in the future. We truly thank the Taiwan Goodwill Mission for coming to the United States and for its ongoing preference for U.S. wheat and other agricultural products.”

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Before providing a simple and straightforward description of the global wheat and grain markets, Mike Krueger paused to consider a handful of variables facing importers, exporters and producers.

Then he used a word that is opposite of simple and straightforward.

“It’s complicated,” Krueger told those attending the 2022 U.S. Wheat Associates (USW) World Staff Conference August 23, 2022.

The quality and reliability of U.S. wheat has long created demand among importers, Krueger noted. Due to increased competition for acreage, political and economic strife in key regions and the potential for weather events to influence yields, Krueger expects demand will expand.

To put it simply: Export opportunities await U.S. wheat.

“A primary reason is that global wheat supplies are likely to shrink due to a renewed focus on soybeans and corn,” Krueger said. “Another factor favoring U.S. producers involves shipping and logistics limitations that hamper competing wheat-growing countries.”

Add in drought effects from a third consecutive La Niña? The effects would further pressure global supplies.

“These things are pushing more export demand for wheat,” Krueger explained. “Can the U.S. meet the demand? That’s a question that hasn’t been answered. will corn, soybeans or wheat be planted? Business decisions are made every single planting season. Our acres are limited.”

Effects of ‘Rush to Crush’

Krueger, a grain industry consultant with Lida Communications and owner of The Money Farm, has nearly 50 years of grain marketing and trading experience. He’s seen how world events and weather can spin wheat supply

Mike Krueger at U.S. Wheat Associates' World Staff Conference

Mike Krueger explains how a growing demand for renewable diesel in coming years will affect worldwide acreage dedicated to soybean production

and demand at the international level. During his “World Supply and Demand Update” presentation at the USW conference, Krueger reported conditions that are ripe for volatility that could continue for years.

“We have tight global supplies to begin with, and we also have a lot of issues that complicate things – including a war in the Black Sea region,” Krueger said, referring to the Ukraine-Russia battle that has the wheat industry keeping a close eye on the news. “Another thing is what we call the ‘Rush to Crush.’ The demand for renewable diesel and other renewable fuels is erasing vegetable oil supplies and that will dramatically boost demand for soybeans and canola. And a new interest in sustainable aviation fuel (SAF) is just one more item that will put pressure on soybean supplies.”

The Rush to Crush movement includes significant investment in soybean crushing facilities in the U.S., setting up a situation where farmers will be enticed to dedicate more acreage to soybeans. This while corn supplies remain tight everywhere, Krueger noted.

“It’s being estimated that perhaps 20 to 30 million more acres of soybeans would be needed to meet such demand, which certainly would be a huge factor in the competition for acreage that we already see,” Krueger said.

Corn seeded area is expected to ramp up as U.S. ethanol demand increases due to high gas prices and enhanced ethanol allowances. Corn exports by the U.S. could rise, too, as China’s surplus stock is typically overstated, according to Krueger.

All this while drought cut soybean production across South America and Brazil’s safrinha (second crop) corn production is smaller than what had initially been estimated.

Export Opportunities Await U.S. Wheat

Ukraine and Russia export roughly 30% of the world’s wheat – and Russia has a record crop under its belt – but the ongoing war is an intangible, Krueger pointed out.

Krueger emphasized how the quality and reliability of U.S. wheat helps create demand in the global marketplace

Krueger emphasized how the quality and reliability of U.S. wheat helps create demand in the global marketplace

“Russia has record production, yet the question is do they have the logistical capacity to export the crop – logistics on the Black Sea are a mess,” he said. “As for Ukraine, the war could really affect their production. Plus, it’s suspected that the amount of wheat that could come out of Ukraine is overstated. It’s really an unknown at this point.”

Where does this leave the U.S. wheat industry? Krueger summed it up with a series of questions, such as: Are there any supply “cushions” outside of Russia and Australia, which is also expecting increased production?

“None,” Krueger replied.

Will world consumption somehow contract? Krueger reminded everyone that “It rarely has.”

Are China’s production numbers real? “Everyone is skeptical,” he warned.

And finally, how will world politics – the war in Ukraine, China’s relationship with Taiwan and ongoing inflation concerns in the U.S. – affect the grain markets and global trade?

Krueger returned to his original assessment.

“Export opportunities await U.S. wheat,” he said. “Again, it’s complicated.”

 

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The USDA’s National Agricultural Statistics Service (NASS) released its latest Grain Stocks report and Prospective Plantings report March 31. The report echoed what many market analysts expected, tighter U.S. wheat stocks and higher planted winter wheat area. One significant exception was a slight decline in spring wheat planted area intentions compared to USDA’s previous prediction that planted area would be up.

The Grain Stocks report placed wheat storage at 27.2 MMT, down 22% from last year. The Prospective Plantings report estimated all wheat plantings up 1% compared to 2021 to 47.4 million acres (19.1 million hectares). Despite the increased planted acres year-over-year, if realized, the all-wheat planted area is the fifth-lowest since USDA began keeping records in 1919.

The initial market reaction reflected the relatively unchanged expectation for U.S. winter wheat and the more bullish spring wheat reports.

Grain Stocks

In the quarterly Grain Stocks report, all wheat stored as of March 1, 2022, was 1.02 billion bushels (27.7 MMT), down 22% from a year ago and the lowest in 14 years. On-farm stocks were estimated to fall 39% to 174 million bushels (4.7 MMT).

In North Dakota, the largest spring wheat producer, stocks were down 33%. In Kansas, the largest winter wheat producer, stocks were down 16%. Durum wheat, last updated on December 1, 2021, was reported to fall 30% year-over-year to 43 million bushels (1.1 MMT). Corn stocks were up 2% from last year at 7.85 billion bushels (213.6 MMT).

The latest Grain Stocks report, with reduced supplies, shows the impact drought had on the crop harvested in 2021. The March World Agricultural Supply and Demand Estimates (WASDE) reported U.S. ending stocks for all wheat classes at 17.8 MMT, 23% lower than last year. The next report will be published Friday, April 8.

Photo of three grain bins.

U.S. Wheat Stocks Down. Following severe drought, U.S. wheat stocks are down significantly, according to the USDA 2022 Grain Stocks report.

Prospective Plantings

The 2022 Prospective Plantings report confirmed a predicted 2% increase in U.S. winter wheat planted area while indicating a similar percentage decline in U.S. spring wheat and durum planted area. This report is based on a farmer survey taken earlier in March.

In February, USDA expected U.S. winter wheat planted area of 34.4 million acres would be up 2% overall compared to the 2021 crop. Projections now are slightly less at 34.2 million acres, including 23.7 million acres of HRW, 6.89 million acres of SRW, and 3.62 million acres of white wheat (99% soft white).

However, the hard red spring (HRS) and durum prediction are down 2% from USDA’s February estimate to 13.2 million acres and 2% down from planted area in 2021. The report indicates that farmers intend to plant 11.2 million acres of HRS, down from 11.5 million acres in 2021. But durum intentions are pegged up 17% at just under 2.0 million acres.

USDA will update these farmer intentions at the end of June 2022 and provide a final planted area in its annual production report in January 2023.

Alternative Crops Expected Up

Farmers are now considering the profit potential of crops other than spring wheat. In fact, USDA’s survey shows farmers in the Northern Plains spring wheat and durum production area intend to plant 584,000 more acres of barley, dry peas, sunflowers, lentils and flax this year compared to 2021. That is what USDA expected based on the favorable prices of those alternative crops.

Field of barley to illustrate alternative crops

Alternative Spring Crop Planting Predicted Up. USDA’s 2022 Planting Intentions report suggests that U.S. farmers will plant more alternative crops like barley (above) in the spring wheat and durum production area.

There can be significant differences between the March Prospective Plantings, June Acreage, and final planted area of crops like spring wheat and durum. In addition to decisions about alternative crops, total planted area of spring wheat and durum will also be affected by the weather. DTN Contributing Analyst Joel Karlin provided perspective on these potential differences in a Progressive Farmer column published March 30.

The report suggests another crossover of U.S. corn and soybean planting intentions. Farmers told USDA/NASS they expect to plant 4% less corn and 4% more soybeans in 2022. If realized, soybean planted area of 91 million acres would be a record amount.

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Last week, USDA released three reports giving some indication of what may be ahead for the 2022 global wheat market. Those USDA reports were the monthly World Agricultural Supply and Demand Estimates (WASDE) report, the quarterly Grain Stocks report, and the annual Winter Wheat Seedings report.

Considering all three reports, U.S. Wheat Associates (USW) notes that the latest WASDE report showed few unexpected changes to the worldwide balance sheet of wheat. Some upward revisions were made in Argentina and the EU. Still, the reports forecast global consumption far higher than production. The Grain Stocks report reflected the significant drop in total 2021/22 U.S. wheat production. Predictably, U.S. farmers seeded more winter wheat for a second year in a row.

In fact, after winter wheat plantings fell to their lowest level in more than a century in 2020/21, U.S. winter wheat seeded area for marketing year 2022/23 has increased for the second year in a row, up 2% from 2021 and 13% compared to 2020 reported the National Agricultural Statistics Service (NASS) in their annual Winter Wheat Seedings report released Jan. 12, 2022. Winter wheat seeded acres are the most they have been since 2016/17.

Bar graph showing annual U.S. winter wheat seeded area indicates an increase over the past two years to illustrate USDA Reports story.

According to recent USDA reports, U.S. farmers are responding to increased global demand and lower U.S. stocks by seeding more winter wheat in 2022.

The Winter Wheat Seedings report showed farmers planted 23.8 million acres (9.6 million hectares) of hard red winter (HRW). This report is up 1% from 2021, led by Kansas, up 3%, and Texas, up 2%. Notable drops in seeded area came in Colorado, down 2%, and New Mexico down 11%.

The quarterly USDA Grain Stocks report confirmed all U.S. wheat in storage, both on and off farm, was down 18% compared to a year ago, while disappearance was down 16% compared to the year before. Analysts expect ending stocks for the 2021/22 marketing year to be the smallest since 2013/14 at 628 million bushels (17.09/MMT).

Price Signals

Increased cash price this year has no doubt played a role in farmer decisions to seed more HRW acres. Kansas Wheat Commission CEO Justin Gilpin noted higher HRW prices as one reason for a second consecutive year of higher wheat plantings. Year-over-year prices for HRW at 12% protein (12% moisture basis) are up 24%.

Soft red winter (SRW) farmers have also taken advantage of strong pricing and increased export demand to plant more SRW acres. Estimates of SRW for the 2022/23 marketing year are 7.07 million acres (2.86 million hectares), 6% higher than last year. Increased acres are largest in Missouri, up 38%, North Carolina is up 31% and Ohio up 21%. USDA reported decreases in Maryland, down 16%, and Michigan, down 23%. The 2021/22 SRW export pace is 50% ahead of last year’s pace year-to-date.

Estimated white winter wheat (soft white and hard white) are 3.56 million acres (1.44 million hectares). This estimate is up 2% from 2021.

Desert Durum® seeded area in California and Arizona of 90,000 acres (36,421 hectares) is up 15% compared to last year and 20% compared to 2020.

Drought Lingers in the Plains

In the monthly “Wheat Outlook” report published by the Economic Research Service (ERS) of the USDA, analysts reported that major HRW producing states, mostly concentrated in the Plains states, saw conditions for winter wheat degrade since November but noted that spring conditions are more influential on production numbers. Kansas’s Gilpin noted “attention has turned to expanding drought ratings across HRW regions and potentially yield and production impacts. Dry conditions and higher input costs both are concerns.”

NOAA map shows where U.S. wheat production areas overlap with drought conditions to supplement USDA reports article.

By Michael Anderson, USW Market Analyst

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In 2020, U.S. Wheat Associates (USW) introduced the first digital map of the U.S. wheat export supply system as a visual planning tool for its overseas representatives and their customers. The “USW Wheat Export Supply System” map is posted here on the USW website and was built in cooperation with Heartland GIS using funds from the USDA Foreign Agricultural Service Agricultural Trade Promotion program.

“With six distinct wheat classes grown across many states and delivered by many different routes, the U.S. wheat supply chain truly is driven by geography,” said USW Vice President of Overseas Operations Mike Spier. “The map provides a geographical information system that our team of representatives can use to help the world’s wheat buyers literally see where the wheat they are buying is grown and how it can be transported to the export elevator.”

“Assisting overseas customers is a very important service that helps add value to U.S. wheat,” said USW Vice President of Communications Steve Mercer. “This map is a unique and very useful addition to the trade service our representatives conduct all around the world.”

Picture of U.S. wheat export supply map.

The map includes a selection tool that allows the viewer to identify, in any combination, U.S. wheat production by class, wheat shuttle loading terminals, Class 1 U.S. rail lines and spurs, river terminals, major rivers and export elevator locations.

“Working with U.S. Wheat Associates and its state wheat commissions, we used data from multiple sources, including satellite imagery, to identify wheat planted area between 2013 and 2019,” said Todd Tucky, Owner and Senior Consultant of Heartland GIS. “I believe this is the most accurate representation ever developed of where individual wheat classes have been produced in the United States.”