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By Dalton Henry, USW Vice President of Policy

It is a country that imports about 800,000 metric tons of wheat each year, a mere 90 miles from the United States. Yet the Cuban wheat market has long been a source of optimism and frustration for U.S. wheat farmers. With the change in administrations, there is hope for re-engagement with Cuba, but ultimately the 60-year-old embargo and associated policies still stand as a solid barrier to beneficial trade.

General public opinion polls on Cuba policy consistently show most Americans favor more engagement, the last decade has seen a roller coaster of changes in U.S. policy. Under the Obama-Biden Administration, there were efforts to establish a new relationship and relax tensions. This included a new interpretation of “cash in advance” rules that apply to payment for any agricultural commodities, bilateral exchanges by technical staff in regulatory agencies and the reopening of the U.S. embassy in Havana. However, none of those changes resulted in actual wheat purchases. Then the Trump Administration further restricted trade by limiting any business conducted between American companies and state-owned companies (such as flour mills) in Cuba.


“Wheat is an important food grain that should be above politics, but the embargo will likely have to end before wheat farmers can help … feed the Cuban people.”


With Biden’s return to the White House, Cuba watchers are anxiously awaiting the next curve in the roller coaster ride and are optimistic the administration will return to the Obama-Biden policy of re-engagement. However, any realistic effort to expand ag trade with Cuba needs to focus on the other end of Pennsylvania Avenue by working to secure meaningful change within the halls of Congress and addressing the bipartisan opposition to trade with Cuba.

Just such a Congressional effort was launched last week by U.S. Senators John Boozman of Arkansas and Michael Bennet of Colorado with the introduction of the Agricultural Export Expansion Act. That bill would allow private financing of agricultural commodities by U.S. companies – a small first step toward normalizing the trading relationship, but an important one to put U.S. companies on a near level playing field when working with Cuban buyers. Several U.S. agricultural organizations including U.S. Wheat Associates (USW) and the National Association of Wheat Growers (NAWG) signed a letter of support for the effort as ad hoc members of the United States Agricultural Coalition for Cuba.

More Legislation

The Ag Export Expansion bill is not the only pro-normalization effort within Congress. U.S. Senators Jerry Moran of Kansas, Amy Klobuchar of Minnesota and Patrick Leahy of Vermont, all long-time Cuba trade advocates, earlier this year introduced the Freedom to Export to Cuba Act, which would lift substantial portions of the embargo, including restrictions prohibiting transactions between U.S. and Cuban firms.

Farmers are right to be interested in opening the Cuban wheat market. Cuba produces no wheat domestically and would be a substantial U.S. market if government barriers were to be lifted. But for any of that optimism to come to fruition, it is going to take a literal act of Congress.

“Wheat is an important food grain that should be above politics,” said former USW President Alan Tracy in 2017, “but the embargo will likely have to end before wheat farmers can help meet the increasing demand for agricultural products to help feed the Cuban people.”

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By Jay Sjerven, Food Business News, June 8, 2021, Courtesy of Sosland Publishing Co.

U.S. wheat farmers know that promoting sustainability is increasingly important to the world’s buyers and wheat food processors. In this article, reprinted courtesy of Sosland Publishing Co., the CEO of Cargill, emphasizes how farmers and agricultural companies are moving forward.


Farmers and ranchers are heroes of the food system, playing a critical role in addressing the COVID-19 pandemic and embracing practices and technologies to produce food more sustainably, David MacLennan, chairman and chief executive officer, Cargill, told members of the National Grain and Feed Association on June 4 at that association’s 125th annual convention, which was held in person in Colorado Springs as well as virtually.

“When the world shut down, farmers, ranchers and workers across the food system stepped up to meet the challenge to produce the food and feed that billions of people and animals around the world depend on,” he said.

Photo of Mr. MacLennan, Cargill, speaking on promoting sustainability

David W. MacLennan, Chairman, CEO, Cargill

Mr. MacLennan acknowledged that while disruptions of COVID-19 are still very much at play, the pandemic is not the only urgent challenge the food and agricultural industry faces.

“The greatest challenge we face is feeding a rapidly growing population, sustainably and responsibly – reducing our emissions, protecting our water resources, and improving the health of the soil our crops and harvests depend on,” he said. “Agriculture is part of the solution the world needs right now. Agriculture is how we’ll solve climate change and sustainably feed a growing population.”

Promoting Sustainability

Mr. MacLennan emphasized the need for broad and lasting efforts at every point in the supply chain to sustainably and responsibly feed a rapidly growing population estimated to reach close to 10 billion people by 2050.

“Inaction is not an option,” he said. “Too often, our industry gets blamed for climate change. I see a different story. Farmers and ranchers are the heroes of our food system. And they play a critical role in creating a more sustainable future for our industry, and the world. The changes we make at the roots of our supply chain will deliver the greatest impact – by reducing emissions, improving water quality, sequestering carbon, and building up the resilience of our soils for the next generation. Companies can set as many climate goals as we want. But without the support and leadership of farmers, none of it will happen. They’ve got to lead the way, and we’re here to partner with them in this important, ongoing effort.”


“When the world shut down, farmers, ranchers and workers across the food system stepped up to meet the challenge to produce the food billions of people depend on.”


Significant Strides

Mr. MacLennan said Cargill has made significant strides promoting sustainability, including its own science-based climate commitment to reduce greenhouse gas emissions in its global supply chains by 30% per ton of product by 2030. He noted the company also is working to support voluntary, farmer-led adoption of regenerative agriculture across 10 million acres of North American farmland over the same period.

Through financial contributions and partnerships across the supply chain, Cargill is supporting and training farmers, and helping remove financial barriers they may face, in rebuilding the health of their soils, planting cover crops, using more sustainable grazing practices, and making better use of their water, Mr. MacLennan explained. He pointed to the example of the Iowa Soil & Water Outcomes Fund, through which farmers may receive $30 to $50 per acre for practices such as cover crops, reduced tillage, and optimized nutrient management.

Mr. MacLennan added Cargill also is advancing research to evaluate the economic benefits of regenerative agriculture. He noted in a study of 100 farmers across nine states conducted by The Soil Health Institute, researchers found that soil health management systems increased incomes for 85% of farmers growing corn and 88% of farmers growing soybeans. Average incomes increased by $52 per acre for corn growers and $45 per acre for soybean growers. Mr. MacLennan added participating farmers reported reduced average costs, increased yields, better crop resilience against extreme weather events, and improved water quality.

“Farmers are leading the way,” he said. “They’re on the front lines of climate change every day. And we need to lift up the good work they’re doing already. The benefits of regenerative agriculture are clear. But so are the barriers. To see change, we have to work together. Agriculture is how we’ll get it done.”


Read other stories in this series:

Special Climate and Sustainability Committee Launched on Earth Day
Precision Agriculture Improves Environmental Stewardship While Increasing Yields
U.S. Farmers Always Think About Economic and Environmental Sustainability
Technology, Innovative Farming Practices Advance Wheat Farm Sustainability
Minnesota Farmer Spread the News with His Conservation Practices
U.S. Farmers Embrace Conversation Practices
Farmers Look to New Technologies to Foster Precision Agriculture

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Recent news and highlights from around the U.S. wheat industry.

Speaking of Wheat. “Jumping from colder than usual temperatures to high heat, crop conditions are unlikely to stay this favorable for long, especially if drought conditions worsen. These weather shocks are likely to impact estimates for crop supply in the 2021/22 marketing year as demand continues to increase and push prices toward their highest levels since 2013.” – Shelby Myers, Economist, American Farm Bureau Federation. Read more here.

USDA’s New WASDE Report released 6/10/21 raised 2020/21 U.S. exports by 544,366 MT to 26.81 MMT. USDA also estimates larger U.S. wheat supplies, higher domestic use, unchanged exports, and slightly lower stocks for 2021/22. All wheat production is now projected at 51.66 MMT on increased HRW and SRW production, offsetting lower white winter production. The global wheat outlook for 2021/22 is for larger supplies, higher consumption, increased trade, and higher stocks. Global production and use are expected to set new record highs in 2021/22. U.S. Wheat Associates (USW) will update its World Wheat Supply and Demand Report this week.

Creating Value of U.S. Wheat: Through Solvent Retention Capacity. Registration is open for USW’s next monthly technical webinar on June 16. This webinar series provides technical guidance to add value for customers as they make their wheat purchasing decisions. USW technical experts Roy Chung and Tarik Gahi will discuss using SRC analysis as a tool for product quality, with fresh insights into SRC methods, solvent preparation and troubleshooting. Register for the webinar here.

Montana Wheat and Barley Committee is Hiring. The Montana Wheat and Barley Committee (MWBC) is recruiting to fill its Market Development & Communications Specialist position. This position is responsible for the administration of MWBC’s market development activities, as well as content development, communications and outreach efforts. Learn more about the position and how to apply here.

The 2021 U.S. Wheat Harvest is underway. USW publishes its Harvest Report every Friday afternoon, Eastern Daylight Time, throughout the season with updates and comments on harvest progress, crop conditions and current crop quality for hard red winter (HRW), soft red winter (SRW), hard red spring (HRS), soft white (SW) and durum wheat. Subscribe to receive the report directly to your inbox here. Follow along on social media using #wheatharvest21.

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

Subscribe to USW Reports. USW publishes various reports and content that are available to subscribe to, including a bi-weekly newsletter highlighting recent Wheat Letter blog posts, the weekly Price Report and the weekly Harvest Report (available May to October). Subscribe here.

Follow USW Online. Visit our Facebook page for the latest updates, photos and discussions of what is going on in the world of wheat. Also, find breaking news on Twitter, video stories on Vimeo and more on LinkedIn.

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While it might not result in the iconic photographs we see during harvesting, all of the planning, decision-making and factors that go into wheat seeding are a crucial part of the wheat production process. Preparing for planting looks different for every farm, depending on the region, the soil and the wheat class.

Wheat is grown or harvested every month of the year in the United States in 42 of the 50 states. U.S. agricultural areas differ dramatically in topography, soils and climate, so the kind of wheat grown varies widely by region. One of the factors that determine how classes of U.S. wheat are categorized is when it is planted.

U.S. winter wheat is planted in the fall, typically in September and October. The plant goes into dormancy over the winter months and begins growing again in the spring. Winter wheat is harvested starting in late May and through the summer. U.S. hard red winter and soft red winter varieties are all winter wheat.

U.S. spring wheat varieties of hard red spring and durum are planted in the spring, typically in April and May, and is harvested starting in August.

U.S. soft white and hard white wheat can be planted in either the fall or spring, depending on the variety the farmer chooses. The chart below breaks down when each U.S. wheat class is planted and harvested.

U.S. Wheat Seeding and Harvest Dates

U.S. Wheat Seeding and Harvest Dates

As a part of its film, “Wholesome: The Journey of U.S. Wheat,” U.S. Wheat Associates (USW) is sharing individual chapters of the video throughout the year. “Seeding: Planting the Crop” tells the story of three family farms as they go through the wheat seeding season and put a new crop into the ground.

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With the constraints the COVID-19 pandemic put on travel and meeting in person, videos are more important than ever before. For the U.S. wheat industry, that importance has increased as the pandemic has prevented the industry from meeting face-to-face with its overseas customers. U.S. Wheat Associates (USW) currently has a range of video stories available on Vimeo, including features on U.S. wheat farmers, wheat production and technical milling topics.

Many of USW’s state wheat commission member organizations also have video stories about farmers and the wheat they grow, which we would like to highlight:

Arizona Grain Research & Promotion Council

Kansas Wheat Commission

Montana Wheat & Barley Committee

Oregon Wheat Commission

Washington Grain Commission

Both USW and its members have more videos they plan to publish later this year and USW will continue to share them here on the Wheat Letter blog and social media as they become available.

In the meantime, check out what our other members are doing on their websites and social media:

California Wheat Commission
Colorado Wheat Administrative Committee
Idaho Wheat Commission
Maryland Grain Producers Utilization Board
Minnesota Wheat Research & Promotion Council
Nebraska Wheat Board
North Dakota Wheat Commission
Ohio Small Grains Checkoff
Oklahoma Wheat Commission
South Dakota Wheat Commission
Texas Wheat Producers Board
Wyoming Wheat Marketing Commission

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By Michael Anderson, USW Market Analyst

Hard red spring (HRS) futures rose $0.85 week-over-week to close at $8.10 per bushel on Friday, June 4, a level nearly $3.00 more per bushel than they were a year ago. Some recent rain in western Canada took some pressure off HRS prices, but severe drought in North Dakota, the top producing HRS state, remains the crucial market factor. AgriCensus on June 8 said the USDA is likely to slash its spring wheat forecast in its June 10 WASDE report, following the prolonged period of drought.

Daily Futures Settlement Prices 28052021 to 04062021

An unusually dry winter with very little snow cover meant that soil moisture was far below average for the state when spring wheat planting started. Dryness persisted through planting, and following very cool conditions, the HRS production region had been in one of the hottest and driest periods in over 30 years. The dry soil makes it hard for rain to absorb into the hard ground when it has come in localized areas, leading to water runoff. The unusual heat causes the moisture to evaporate quickly.

More Concerned

Erica Olson, Market Development and Research Manager for the North Dakota Wheat Commission (NDWC), remains optimistic but said the HRS and durum crops are definitely stressed. She said rain is needed now, and consistent rain needs to follow. In 2017, North Dakota experienced another dry growing season leading to lower yields and some abandonment. A key difference this year is the lack of soil moisture growers started with. Farmers tell her they are growing more concerned by the day.

Olson noted that they would see more abandonment and a smaller crop with below-average yields if things do not turn around.

 

Farmer anxiety over this year’s crop potential means that grain traders are having difficulty securing offers from growers. Unsure of their yield potential, many farmers are unwilling to commit to much forward sales, and if they have stored wheat to sell, they may expect prices to go higher. A U.S. wheat trader said rain is needed now and compared this year to 1988 when a severe drought cut spring wheat yields in half. The USDA’s initial crop condition rating for spring wheat is the “second-lowest first crop rating ever next to the disastrous year of 1988,” noted one wheat analyst.

“The word of the year will be ‘timely’ rains,” said NDWC Policy and Marketing Director Jim Peterson in an interview with DTN. That article pointed to many factors affecting the current wheat conditions in the Northern Plains. While dryness is expected to continue in the near term, conditions can change quickly.

Speaking of things changing quickly, after this story was written and scheduled to publish June 9, south-central North Dakota received some respite with isolated rain showers overnight on June 8. More rain is expected this week; however, it may not be enough or soon enough to turn conditions around.

Source: North Dakota Agricultural Weather Network

Canada

Farmers in the Canadian Prairie Provinces are also experiencing unseasonably hot weather but recently received what was dubbed the “billion-dollar rainfall” for their spring wheat crops.

USDA reported that drier conditions returned to Manitoba, but beneficial showers continued elsewhere, further improving emerging spring grains and oilseeds prospects. Most agricultural districts in Manitoba received less than 5 mm, with near-complete dryness in Canada’s Red River Valley.

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By USW Vice President of Policy Dalton Henry

Dispute cases in the World Trade Organization (WTO) take a notoriously long time to resolve, but there seems to be at least an outside chance one of the longest-running disputes affecting wheat trade could be nearing its last chapter. Three months ago, the United States and the European Union paused their respective punitive tariffs to work toward a negotiated solution in the long-running civil aircraft dispute over subsidies – often referred to as the Airbus/Boeing disputes. That détente temporarily ended tariffs on non-durum U.S. wheat imports.

Now the two governments are set to meet at a major summit next week, where trade, including the aircraft dispute, is expected to be a major topic.

High Hopes

The optimists have had high hopes for an aircraft dispute resolution since the Biden Administration took office. The campaign rhetoric included reinstating international partnerships and rebuilding multilateral institutions. The aircraft dispute even got major billing on Capitol Hill during then-USTR nominee Katherine Tai’s confirmation hearing. When asked about the potential for a resolution, she wittily quipped that “I would very much be interested in figuring out … how to land that particular plane.”

Both sides have been mum about details of what a resolution might look like, with only until July 11 before tariffs are set to snap back into place.

On The Other Hand

This leads us to the other side, where the cynics (your author included) strongly supported the four-month tariff suspension but know how hard it is to resolve such an intractable dispute in such a short time. The slow pace of confirming political nominees at USTR supports that opinion. The agency has an incredible team of career staff, and Ambassador Tai is quite capable of resolving the dispute. But will that be enough to tips the scales in favor of a long-term resolution? In search of an answer for that question, all eyes turn toward the upcoming U.S.-EU summit, slated for mid-June in Brussels.

Working toward a civil aircraft dispute resolution is one of many topics between the two governments. But the outcome will provide an early test of the Biden administration’s ability to find a trade policy solution that reopens markets and meets its self-stated priority for a “worker-centric trade policy.”

Wheat Trade Needs More Certainty

Industries like those engaged in the wheat trade on both sides of the dispute need predictability. A four-month delay may provide a boost of urgency to negotiators. Still, such short-term delays are challenging for flour mills and wheat exporters alike, leaving both with only uncertainty.

For example, if tariffs return, will shipments in transit be exempt? What about supplies contracted but not yet “on the water?” If a mill agrees to supply a specific flour customer, will they be able to purchase the wheat to meet those flour specifications?

If it becomes clear that no long-term resolution is possible ahead of the July 11 end of the tariff pause, negotiators would be widely praised by industry for quickly announcing an extension of the duty suspension.

Whether or not a permanent aircraft dispute resolution will be found is hard to predict. U.S. hard red spring wheat farmers will be watching the outcome closely, as will their valued European customers, anxious for the return of days when weather and prices were easier to predict than government barriers to trade.

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U.S. wheat farmers know that precision agriculture practices that foster economic and environmental stewardship are increasingly important to the world’s buyers and wheat food processors. In this article, originally published Nov. 30, 2020, by Agri-Pulse and reprinted with permission, the author Steve Davies discusses how new technologies are changing U.S. farms.


New forms of farming equipment could make it easier for growers to more precisely apply nitrogen fertilizer and other inputs — in other words, make precision agriculture more precise.

Much of the increase in productivity is likely to come from technology — the satellites, soil sensors, computer modeling and data-crunching that will provide usable information for growers.

“There is a ton of technology embedded into accelerating the process of improving soil health,” says Dorn Cox of the Wolfe’s Neck Center, which is working with corporate, government and nonprofit partners to develop an Open Technology Ecosystem for Agricultural Management (OpenTEAM) that promises to provide farmers access to site-specific data by 2024.

“We’re moving into essentially managing much more complex systems, especially in light of climate change,” says Cox. Much of what OpenTEAM is doing, he says, is trying to tie together all the different tools that are available, including artificial intelligence, remote sensing, lower-cost edge computing devices, and analytics.

“A lot of those pieces are there, but they have not been connected into a coherent ecosystem that is useful for a researcher or producer,” he says.

More Farmers Adopting Precision Agriculture

Rates of adoption for precision agriculture vary widely by region, says Curt Blades, senior vice president for agriculture and forestry at the Association of Equipment Manufacturers, which is releasing a study early next year on the environmental benefits of precision agriculture.

Citing USDA data, he says yield monitors are being used by 69% of growers, and auto-steer, which enables farmers to precisely navigate their fields, is being used about by two-thirds, though rates are higher when looking only at row crops.

Use of variable rate technology, allowing precision application of inputs, stands at about 41%, he said. “Where you really unlock the power of a yield monitor is when you tie it to a map” showing the conditions in a field, allowing growers to pinpoint which area might need more fertilizer or which might need more water, he says.

“All of those things would not be available if you didn’t have GPS technology,” he said. He emphasized the importance of rural broadband, which he calls “critical to the future of our country. It’s got to be wireless to the field to really take full advantage of some of this great technology.”

Just using auto-steer and ensuring the machine’s computer systems are all working together properly — or telematics — saves 6% on fuel, Blades says. In addition, the new generation of farm equipment is about 20% more fuel-efficient than the previous one, causing some farmers to tell Blades they upgraded their combines based on fuel efficiency alone.

Precision agriculture is possible though new GPS-equipped technology.

“This machine is almost as late and great as you can get on technology,” says Oregon farmer Logan Padget about their input application equipment. “It is GPS-controlled. Once I make the first pass on a field, the GPS can perfectly mimic that line all the way across the field. It will do it with just a very little, one-third of a meter of overlap, which is better than anybody could drive by hand.”

Optimizing Inputs and Yields

Nathan Fields, vice president of production and sustainability at National Corn Growers Association, thinks over the next decade, growers will be looking more at optimizing input use as opposed to simply increasing yields.

“Optimization does not necessarily mean yield,” he said. “It could mean yield and profitability.” But that can mean taking a “multi-year, almost a decade-long approach. And that is really hard to do with cash rent. That is really hard to do with the capital cycles that growers have to operate under.”

New tools are coming all the time. Anticipating commercialization, AMVAC Chemical Corp. and Corteva Agriscience just announced completion of testing on AMVAC’s proprietary SIMPAS prescriptive application equipment, which “allows farmers to prescriptively apply multiple at-plant solutions,” the companies said.

SIMPAS equipment can apply multiple products in fields similar to the way a printer dispenses ink from ink cartridges, the companies say. The system uses software to control the application rate of each product on every row at every location in the field.

Fields thinks adoption of precision ag equipment will increase as the ag economy improves. “I think growers are looking for more of a stable ag economy in the coming years,” which will spur adoption, he said. “That’s what we saw in that commodity super-cycle from 2007 to 2012. You know, technology adoption just ran rampant those years.”


Read other stories in this series:

Special Climate and Sustainability Committee Launched on Earth Day
Precision Agriculture Improves Environmental Stewardship While Increasing Yields
U.S. Farmers Always Think About Economic and Environmental Sustainability
Technology, Innovative Farming Practices Advance Wheat Farm Sustainability
Minnesota Farmer Spread the News with His Conservation Practices
U.S. Farmers Embrace Conversation Practices
Cargill CEO Highlights Farmers Role in Pandemic and Promoting Sustainability

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Recent news and highlights from around the U.S. wheat industry.

Speaking of Wheat.

“The drought monitor has been around for more than two decades, and we have only seen four springs where we’ve seen more than 40% drought coverage in the lower 48 states. For the record, those years were 2000, 2003, and then in the wake of the big 2012, drought with the spring of 2013. 2021 is among those years, with nearly 60% of the U.S. seeing drought.” – Brad Rippey, USDA meteorologist and an author of the monitor. Read more.

The 2021 U.S. Wheat Harvest has begun with the winter wheat crop in Texas. USW publishes a harvest report every Friday afternoon, Eastern Daylight Time, throughout the season with updates and comments on harvest progress, crop conditions and current crop quality for hard red winter (HRW), soft red winter (SRW), hard red spring (HRS), soft white (SW) and durum wheat. Subscribe to receive the report directly to your inbox here. Follow along on social media using #wheatharvest21.

NAWG Promotes Jake Westlin. The National Association of Wheat Growers (NAWG) recently promoted Jake Westlin to Senior Director of Policy and Communications. Jake joined NAWG in October 2019 and has been a key part of NAWG’s policy team, and has managed many projects during his tenure. Through Jake’s six years working with Capitol Hill and his work on two farm bills as part of Senator Heitkamp’s (D-ND) legislative team, he has brought a fundamental understanding of agricultural policy to NAWG. Additionally, from his time at Forbes Tate Partners as a research and policy analyst, Jake has an extensive background in agriculture, public lands, and food and nutrition policy. In Jake’s new role, he will oversee the policy and communications team and continue being a voice for wheat growers on the Hill.

IGP Institute Flour Milling and Grain Processing Course Schedule. The IGP Institute at Kansas State University in Manhattan, Kan., has several flour milling and grain processing courses planned for 2021, covering all aspects of managing the flour milling process. View the full course schedule and register here.

Brett Carver Explains. The newest video series from the Wheat Foods Council (WFC) features Brett Carver, Oklahoma State University wheat breeder and WFC Board of Advisors member, covering a range of wheat topics. The most recent video is called “How our choices influence wheat production.” View the series and other WFC video resources here.

Subscribe to USW Reports. USW publishes various reports and content that are available to subscribe to, including a bi-weekly newsletter highlighting recent Wheat Letter blog posts, the weekly Price Report and the weekly Harvest Report (available May to October). Subscribe here.

Follow USW Online. Visit our Facebook page for the latest updates, photos and discussions of what is going on in the world of wheat. Also, find breaking news on Twitter, video stories on Vimeo and more on LinkedIn.

 

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By Michael Anderson, USW Market Analyst

The first predictions for global wheat supplies and demand in the new U.S. marketing year (June 1, 2021, to May 31, 2022) are in. Most estimates call for relatively stable world supplies in 2021/22. Only time will tell the real story, but U.S. Wheat Associates (USW) will be watching several market factors closely over the next few months.

USDA published its initial supply and demand forecast for the new 2021/22 U.S. marketing year this month. According to the May World Agricultural Supply and Demand Estimates (WASDE), estimated world beginning stocks will be 295 million metric tons (MMT), down 2% from 2020/21, with ending stocks also projected at 295 MMT. While global wheat production is expected to reach a record 789 MMT, global consumption is also forecast at a record 789 MMT.

U.S. Stocks Decline

In the United States, except for soft red winter (SRW) wheat, the stocks-to-use ratio for the other wheat classes all declined in 2020/21. For example, soft white (SW) wheat stocks-to-use ratio went from 35% in 2019/20 to 15% in 2020/21.

Along with USW, buyers of soft white (SW) and hard red spring (HRS) wheat will want to monitor the weather across the PNW and Northern Plains, where conditions have been very dry for growing winter crops and newly seeded spring crops. Recent rain has been helpful but spotty. Timely rains will be needed to avoid a fall-off in production for those wheat classes and northern durum.

Late rain in the primary hard red winter (HRW) states has helped the new crop, but it is too soon to know if that precipitation came too late for wheat in sections of Colorado, Kansas and Oklahoma. USW’s Harvest Report is a helpful way to track crop conditions.

Supplies in Other Exporting Countries

Beginning stocks for the five major historic exporters, the United States, Canada, Australia, Argentina, and the European Union (EU), are forecast to be 45 MMT, down from 50 MMT in 2020/21. Ending stocks for 2021/22 U.S. marketing year are forecast to be 42 MMT, a decline of 3 MMT compared to 2020/21.

Ending stocks for the United States, Canada, Australia, Argentina, and the EU reached their highest on record in 2017/18 with 60.0 MMT of global ending stocks. Since then, stocks have fallen. If realized, USDA now expects 2021/22 ending stocks for those five major exporters will be the lowest since 2007/08 at 42 MMT, down 19% from the 10-year average. However, beginning stocks for 2021/22 for Black Sea exporters Russia, Ukraine and Kazakhstan are forecast at 15 MMT, up 67% from 2020/21. The ending stocks forecast for the Black Sea exporters was also raised compared to 2020/21 and double 2019/20 to 18 MMT.

Canada is experiencing dry weather in its key growing regions, adding to anxiety there, beginning stocks and production are all projected down.

Australia is poised for a second consecutive bumper wheat crop. Near perfect conditions ahead of planting season in April and May and favorable crop weather forecasts from the Australian weather bureau have traders there confident. One broker called for a 29.5 MMT crop compared to the WASDE forecast of 27 MMT.

The Rosario Grain Exchange (BCR), an Argentine association, projects a record 20.0 MMT crop for the lead South American wheat producer following a 3% increase in planted area.

Coceral, an EU-based association representing the cereals trade, revised its EU wheat output upward by 4.3 MMT after “excellent yield prospects in the Balkan countries and Spain.” Germany also increased winter wheat sown area by 3%. The European Commission increased its forecast for common wheat production to 126.2 MMT, 6% less than the most recent WASDE report forecast for 2021/22.

Russia Weighs In

It will be interesting to see how USDA adjusts its forecast for Russian wheat production in 2021/22 in its June WASDE report. The May WASDE forecasted 2021/22 production in Russia, the leading world wheat exporter, at 85 MMT, down slightly from the record 2020/21 crop. However, a separate report from the USDA Foreign Agriculture Service Attaché based in Moscow forecast Russian wheat production at a much lower volume. SovEcon, a Russia-based analyst, forecast in May that the Russian wheat crop will be 81.7 MMT.

China Demands Attention

Monitoring China’s actions in global grain trade will be important over the next few months.

Record corn imports have slashed world corn stocks. China has purchased 11.38 MMT of U.S. corn in the current marketing year, and an additional 11.98 MMT is still awaiting shipment. China purchased $400 million of U.S. corn in May 2021 alone.

The effect of China’s unprecedented corn demand on the wheat market should draw any wheat buyer’s attention. China’s unusually large wheat imports beginning in early 2020 through most of 2020/21, including 3.2 MMT of U.S. wheat, helped pull up global wheat prices. Then, as China’s government buyers ramped up corn imports, the price relationship between corn and wheat narrowed and even reversed at times.

Market watchers know that USDA expects wheat feeding in China to reach 40 MMT in 2021/22 but also expects its notoriously large volume of wheat stocks to decline by only 3.0 MMT. And China, notoriously, holds half the world’s wheat stocks, but USDA’s forecast expects ending stocks to be 3.0 MMT less than 2020/21.

IGC Expects Higher Prices

In its May Grain Market Report, the International Grains Council (IGC) noted that despite an increase in wheat production, a rise in consumption and tightened ending stocks in 2020/21 will lead to a drawdown in global grain stocks for 2021/22. The IGC said that ending stocks will be at a seven-year low.

As the 2021 U.S. wheat harvest moves north, USW colleagues, our state wheat commission members and farmers across the country will continue monitoring the critical market factors that affect our overseas customers.