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U.S. Secretary of Agriculture Helps Break Ground on New Agricultural Research Service Facility

Federal officials including U.S. Secretary of Agriculture Tom Vilsack joined Washington state lawmakers and university leaders in early August for the groundbreaking of a new U.S. Department of Agriculture-Agricultural Research Service (USDA-ARS) Plant Sciences Building on the Washington State University (WSU) campus in Pullman.

ARS is USDA’s “in-house research agency” focused on delivering scientific solutions to national and global agricultural challenges. ARS conducts wheat quality research through four regional Wheat Quality Laboratories (WQLs) focused on wheat types commonly grown in its region, including the Western Wheat Quality Laboratory also located at WSU. U.S. Wheat Associates (USW) has strong partnerships with each WQL as well as universities like WSU.

The new building at WSU is planned for opening in 2025. The WSU Plant Pathology, Crop and Soil Sciences, and Horticulture departments will inhabit the new building alongside federal scientists and four ARS research units: Wheat Health, Genetics and Quality; Grain Legume Genetics and Physiology; Northwest Sustainable Agroecosystems; and Plant Germplasm Introduction and Testing.

At the ground-breaking ceremony, more than 150 guests listened as speakers discussed the 20-year path to securing support for this new facility.

U.S. Secretary of Agriculture Tom Vilsack at a podium with the USDA seal addressing participants in a ground breaking ceremony for a new ARS Plant Sciences Building at Washington State University (WSU).

U. S. Secretary of Agriculture Tom Vilsack. WSU Photo.

Secretary Vilsack asked attendees to think ahead to a future when the facility is completed, bustling with students, faculty, and researchers looking to solve the problems facing farmers in Washington and far beyond.

“There’s an effort to try to make sure that we understand how to deal with a particular disease that is impacting wheat production. And imagine the spark, the passion, the energy, the excitement that occurs when the solution is discovered. That’s what this facility is about, that moment of discovery,” he said.

Vilsack noted the new facility will not only be a place for discovery but also a resource that farmers both local and far afield of the Palouse will benefit from in the form of new techniques and greater insight into the vital work they do.

“To the extent that we have a university and a government research entity in partnership, ensuring that farmer, that rancher, that grower, that producer, can continue to be productive is an enormous opportunity for this country, and each one of us should be thankful at this groundbreaking for the science that’ll take place that’ll help these farmers, ranchers, and producers continue to productive,” Vilsack said.

Elizabeth Chilton, the inaugural chancellor of the WSU Pullman campus, noted that the groundbreaking represented much more than the beginning of a new research facility.

“It is evidence of the incredible partnership that WSU celebrates with USDA and our local, state, and federal legislators, commissioners, and communities,” Chilton said. “The groundbreaking research that this facility will support will literally change lives. This building will support faculty members, students, and researchers partnering together to create better crops and more sustainable farming practices so that we’re able to better feed our planet.”

Guests and dignitaries attending a ground breaking ceremony at Washington State University (WSU) for a new ARS Plant Sciences Building.

Washington Grain Commission Vice President Mary Palmer Sullivan (second from right) was among dignitaries and guests at the USDA-ARS Plant Sciences Building Groundbreaking ceremony on the campus of Washington State University Aug. 1, 2023. WSU Photo.

In addition to representatives from the federal government and Washington state agriculture groups (including Washington Grain Commission Vice President Mary Palmer Sullivan), WSU Board of Regents Chair Lisa Schauer and Regent Brent Blankenship, a Washington state wheat farmer and Past President of the National Association of Wheat Growers, also attended the events.

This article includes excerpts and photographs from an article in “WSU Insider” by RJ Wolcott. Read more here.

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The Wheat Marketing Year in Review

Final export commitment data for marketing year (MY) 2022/23 that ended May 31 is now available, providing an overview of the year’s export and demand trends.

In this article, we will look back on the MY 2022/23 demand trends and current MY 2023/24 data to provide context for the year to come as the world wheat market conditions continue to recover from the year’s volatility.

Since the start of 2022/23, wheat prices and freight decreased, and currency markets stabilized following the steep price shock of Mr. Putin’s unprovoked invasion of Ukraine. Despite the improved conditions, volatility and its consequences still reverberate through the U.S. and global wheat markets.

MY 2022/23 Year End Commercial Sales

Even with the year’s price risk, when ordinary hard red winter wheat exported from the Gulf of Mexico averaged $10.70/MT FOB, Mexico, the Philippines, Japan, South Korea, and Taiwan remained among the top U.S. wheat importers in 2022/23 and have consistently been among the leading importers over the last five years.

As U.S. wheat competitiveness began to improve early in calendar 2023, China entered the market, ultimately surpassing Taiwan to claim the number five spot as their purchases surged 38% above the year prior. Moreover, China became the world’s largest wheat importer with the June World Agricultural Supply and Demand Estimates (WASDE) putting Chinese wheat imports at a record 14.0 MMT.

Bar chart compares U.S. wheat sales to top 10 customers in marketing year 2022/23 to MY 2021/22 indicating Mexico, Philippines, Japan, South Korea were among the top importers.

Mexico, the Philippines, Japan, and South Korea have been consistently among the top five U.S. wheat importers. In 2022/23, China became the world’s largest wheat importer, surpassing Taiwan to claim the fifth-place spot among U.S. wheat importers. Source: USW Commercial Sales Report/USDA Export Sales Data.

Hard red winter (HRW) wheat sales were 32% behind 2021/22, a function of high prices driven by drought and exacerbated by the war risks. Hard red spring (HRS) sales were up 4% following the drought in 2021/22 that severely diminished the crop and put exports at their lowest level since 2008/09. Soft red winter (SRW) sales were nearly even with the year prior and 9% above the five-year average as SRW remained competitive on the global market. Following drought-stressed production in 2021/22, white wheat exports were up 35% at 4.5 MMT and tracking SRW trends. Durum sales were up 109% due to improved production increased sales to Algeria and the European Union.

Bar chart compares U.S. wheat by-class sales in marketing year 2023/24 to the same date in MY 2021/22.

Some classes saw improved export sales year-over-year despite an overall reduction in demand. HRW wheat sales were 32% behind 2021/22, HRS was up 4%, SRW was nearly even with the year prior, white wheat was up 35% and durum was up 109%. Source: USW Commercial Sales Report/USDA Export Sales Data.

MY 2023/24 to Date

Demand has been relatively light so far in MY 2023/24 as many buyers delay purchasing decisions for more concrete information about the upcoming harvest and price fundamentals. Adding optimism for importers are recent rains in the U.S. Plains that have helped boost winter wheat crop ratings and rapid planting progress in HRS production areas.

Overall, U.S. wheat commercial sales are down 18% from last year’s pace at 3.9 MMT. Even so, customers in Japan, South Korea, and Taiwan are ahead of their 2022/23 pace, and SRW commitments have surpassed last year’s level by 18% given its competitive price advantage.

USW Commercial Sales Report comparing export sales to specific countries in marketing year 2023/24.

Year-to-date marketing year 2023/24 commercial sales total 3.9 MMT, down 18% from the year prior. Meanwhile, purchases in Japan are 2% ahead of last year, South Korea up 5% and Taiwan up 75%. Vietnam, Guatemala, Ecuador, and Peru have also surpassed last year’s pace, highlighting how the market sentiment has shifted from a year ago. Source: USW Commercial Sales Report/USDA Export Sales Data.

New 2023/24 Estimates

Meanwhile, the June WASDE released on June 9 reported significant increases in world production estimates and ending stocks; however, the increases were unsurprising, leaving futures prices little changed.

World wheat production increased 10.4 MMT from the May estimates to 800.2 MMT on improved output in Russia, India, and the EU. World consumption increased by 4.4 MMT to 796.1 MMT, accounting for increased feed use in China, Russia, and India. Ending stocks increased to 270.7 MMT due to large projected stocks in India, Russia, and the EU. The estimates were also subdued on the domestic front, raising production by 100,000 MT, and increasing ending stocks by 200,000 MT with no other changes to the U.S. balance sheet.

Keep Up To Date

Though it is still very early in MY 2023/24, analyzing past trends and the monthly supply and demand updates helps provide context to aid purchasing decisions. Compared to this time last year, many influences have turned to favor wheat importers, though the war in Ukraine and weather patterns throughout the global wheat growing region add underlying risk. With risk still ever present, information is vital for planning and executing purchases. You can stay current on the latest reports via the U.S. Department of Agriculture and the U.S. Wheat Associates weekly Commercial Sales and Price Reports.

By U.S. Wheat Associates (USW) Market Analyst Tyllor Ledford

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War Disruptions and Logistics Incentivize Imported European Wheat

The news that U.S. flour milling companies have imported European wheat has raised concerns and frustrations for U.S. wheat stakeholders. To an organization like U.S. Wheat Associates (USW) that with our state wheat commission members promotes exports on behalf of U.S. wheat farmers, such news is particularly disappointing. After all, U.S. farmers produce enough wheat each year to meet domestic demand and still offer about half the crop to export markets.

The concern is not about imported wheat per se. Flour millers do import varying amounts of Canadian spring wheat every year. And conditions have in the past made it possible for feed-grade wheat to be imported into coastal pork and poultry production markets. It is important to state that there is more than enough high-quality U.S. wheat available to produce all the flour we need in this country, and the 2023 harvest is already underway.

However, imported European wheat to produce domestic flour is a highly unusual situation. USW wanted to share what is behind these imports and perhaps answer the questions from stakeholders.

Dynamic market factors have created a large price spread between similar classes of European and U.S. wheat. In May 2023, according to AgriCensus data, the published FOB export price for Polish wheat was more than $107 per metric ton less than the U.S. hard red winter (HRW) Gulf FOB export price. German wheat export price in May showed a similar discount to Gulf HRW FOB.

In looking at this difference between the bargain purchase price in Europe versus the current U.S. domestic market replacement values, USW President Vince Peterson recently said that “this may be the biggest trade margin that I’ve ever heard of” in all his years in the grain trade.

Supply Shock

This remarkable difference in prices happened mainly because the relative volume of exportable wheat supplies in Eastern Europe has exploded this year. Putin’s invasion of Ukraine drastically curtailed Ukraine’s ability to export by vessel from its Black Sea ports, in turn sending war-distressed Ukrainian wheat and other commodities pouring across their land borders into Eastern European countries. That movement severely depressed local wheat prices, harming EU farmers and causing five EU countries to implement bans on imported Ukrainian grain staying within their countries. Russia’s record 2023 wheat crop and unfettered exports (now projected at 45 million metric tons (MMT), also a record) created more regional price pressure.

Even though the EU-27 is the world’s second largest wheat producer after China and second largest exporter after Russia, EU wheat imports increased by 6 MMT in the 2022/23 marketing year. Combined with the unprecedented disruption of regional grain movement, USDA estimates the EU’s ending wheat stocks will rise from 10.1 MMT in 2020/21 to 16.2 MMT in 2022/23. And USDA expects European wheat production to increase this year over 2022 even though there is dryness in western Europe.

Yet over the same 3 years, U.S. wheat supplies have gone in the opposite direction, especially supplies of HRW wheat. Drought has hurt total U.S. supplies for three years in a row, first reducing hard red spring and soft white crops. Then drought cut HRW production in 2021/22 and intensified in 2022/23, resulting in a high number of abandoned wheat fields and short overall production. U.S. exportable wheat supply concerns, combined with the disruptive news constantly flowing from the Black Sea conflict, are supply shocks that continue to support the surprisingly high gap between U.S. and EU wheat prices.

Ocean v. Rail Rates

Considering imported European wheat, the question must be asked about the difference in cost between bulk ocean freight rates from Europe to the United States and U.S. rail rates to move wheat to its flour mills. Comparing those rates today, U.S. rail tariffs and fuel charges to transport wheat are close to twice the ocean freight cost on a per-metric-ton basis.

Unfortunately, this transportation cost spread indicates that rail rates have been and continue to be a burden on the value of delivered wheat for domestic and export markets.

A 2020 study by USDA found that rail rates increased by 30% for wheat, 32% for corn, and 30% for soybeans from 2000 to 2014, and wheat rail tariff rates have increased by an additional 18% since 2014. Rising and unfair rail rates for wheat erode its competitiveness for domestic as well as overseas buyers.

That is why USW’s Transportation Working Group is focused on addressing uncompetitive wheat rail tariff rates to make sure that when global market conditions readjust – and they will – domestic rail rates for wheat do not diminish U.S. wheat’s value at home and abroad.

Image shows grain rail cars by a country elevator to illustrate USW comments to the Surface Transportation Board.

Rail rates have been and continue to be a burden on the value of delivered wheat for domestic and export markets.

An Unwanted Hit

Without doubt, the import of European wheat and the market factors that encouraged it are most unfortunate. As Kansas Wheat Vice President of Research and Operations Aaron Harries said, this situation is “another hit against our domestic farmers” who are battling drought, increased operating costs and other headwinds to produce high quality wheat that is more than sufficient to supply all U.S. flour mills and export demand.

USW and others in the industry believe the imported European wheat will likely move to coastal U.S. flour mills – in part because of the high rail rates milling companies would have to pay to transport it to interior mills.

The supply challenges in today’s global wheat market are likely to continue at least through the 2023 harvest. USW sincerely believes that absent the illegal and highly disruptive invasion of Ukraine, the price spread incentivizing U.S. imports would be much closer. Sadly, the conflict rages on.

Domestically, higher wheat prices also encourage increased production, seen in the significant increase in U.S. HRW planted area for the 2023 crop. Unfortunately, the devastating drought undercut that positive trend this year, but prices remain an incentive for U.S. farmers.

If there is a grace note to this situation, USW President Peterson points out that the price spread between EU wheat and U.S. HRW wheat has recently narrowed. The potential for recent rainfall in Northern Plains HRW and hard red spring production regions to push 2022/23 production higher than expected would help fill the price gap – and offers hope for a better outcome in 2023/24.

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USDA Reports Provides First Look Into 2023/24 Crop Year

On May 12, USDA released its initial estimates for the 2023/24 marketing year (MY) year, providing the first glimpse into how the world wheat situation has shifted in response to political instability, inflation, climate variability, and the volatility seen in the last year. This article will examine key takeaways from the World Agricultural Supply and Demand Estimates (WASDE) and the USDA Crop Production Report, and what it may mean for the 2023/24 crop year.

Global Outlook: A Focus on Weather

Despite recording record wheat production of 789.7 MMT, up 1.5 MMT from 2022/23, world wheat supplies have tightened. Consumption surpasses production by 2.0 MMT for the fourth consecutive year, leading to a decline in global ending stocks. Projections indicate the lowest global ending stocks in eight years at 264.3 MMT. Ending stocks in the five non-Black Sea exporting countries (U.S., Canada, Australia, Argentina, and the EU) have hit their lowest level since 2007/08 at 38.2 MMT.

Production in major exporting countries is also forecast to be down 10.0 MMT to 367.6 MMT from a record 377.5 MMT in 2022/23. Production is predicted to increase in Argentina (+7.0 MMT), Canada (+3.2 MMT), and the EU (+4.7 MMT). However, these increases do not offset flat production in the U.S. (+0.3MMT) and reductions for Ukraine (-4.4 MMT), Russia (-10.5 MMT), and Australia (-10.0 MMT).

Weather poses risks to many production regions, including anticipated dryness in Australia associated with an El Niño weather event and reports of dryness in Canada. USDA predicts improved production in Argentina that hinges on recovery from the 2022/23 drought there. With ending stocks already hovering at 15-year lows, any change in production in major exporting countries could have a direct influence on world wheat prices.

A bar chart from the International Grains Commission (IGC) shows change in wheat production in major exporting countries by year over year and change compared to the 5-year average production.

2023/24 Major Exporter Production Change. With significant production reductions anticipated in Ukraine, Russia, and Australia, any change in the outlook for other major exporters will impact the already tight ending stocks held by exporters. Source: IGC.

U.S. Situation- Bullish Supply Meets Bearish Demand

Much like production in other major exporting countries, the weather has driven the U.S. wheat harvest conversation. As the drought in the U.S. Southern Plains persists, the May 12 USDA crop production figures put Kansas HRW production at 14.0 MMT, the lowest output since 1957/58. Similarly, USDA projections put Kansas (the largest HRW-producing state) wheat production at 181.0 million bushels. The annual Wheat Quality Council (WQC) winter wheat tour confirmed this outlook.

Despite the bullish outlook from the May Crop Production report and the subsequent futures rally, HRW futures prices declined, losing 73 cents in the week ending May 22. Likewise, hard red spring (HRS) and soft red winter (SRW) also softened, down 64 and 55 cents respectively from last week. A key factor contributing to this bearish trend is demand rationing in the face of high prices and seasonal pressures.

Bar chart showing U.S. wheat export sales by class, year-to-date as of May 11, 2023. HRW sales are significantly lower than 2021 at this date.

U.S. HRW commitments as of May 11, 2023, are 32% behind last year’s pace at 5.1 MMT. Meanwhile, HRS sales are up 4% at 5.7 MMT, white wheat is up 39% at 4.7 MMT, SRW is up 1% at 2.9 MMT, and durum has increased 131% to 452,000 MT. Source: USW Commercial Sales Report.

Bright Spots

Despite the complexity of the HRW situation, the outlook for other U.S. wheat classes, especially soft wheat classes, remains optimistic. The Crop Production Report put SRW estimates at 11.0 MMT, a 21% increase from 2022/23, and prices for SW and SRW continue to trend lower to remain competitive with other origins. Likewise, as of the May 21 Crop Progress Report, the winter wheat conditions have begun to see improvement, with a season-high of 31% ranking good to excellent. Spring wheat farmers have also made tremendous planting progress, with a 24% increase in plantings over the week, reaching 64% planted, only 9% behind the five-year average, alleviating concerns about late planting.

A More Detailed Look to Come

In the coming weeks I will recap the 2022/23 U.S. wheat export trends and highlight what to watch as new crop sales increase. In June, USDA will begin revising its initial estimates for the 2023/24 world supply and demand and the July WASDE will provide the first by-class wheat projections for the 2023/24 crop year.

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Wheat Industry News

News and Information from Around the Wheat Industry

Speaking of Wheat

“The ongoing fighting [in Sudan] is preventing WFP from delivering critical emergency food, providing school meals for children, or preventing and treating malnutrition. WFP also cannot carry out its work to support farmers to boost agriculture productivity in a project that aims to more than double Sudan’s annual wheat production, nor help people rebuild their livelihoods.” – UN World Food Programme (WFP) Executive Director Cindy McCain. Read more here.

Obscuring Price Discovery

Cargill’s world trading head Alex Sanfeliu told Bloomberg recently that Russia’s increased control of its wheat exports threatens to obscure prices and curb efficiency in the global grains market. “The price discovery is going to be way more opaque,” and because Russian wheat tends to be the price setter “that puts an additional difficulty for all the wheat traders across the globe.” Read more here.

Bearish News

Barchart Analyst Sean Lusk noted three bearish market factors for wheat this week: rain (finally) in the parched Southern Plains; Canadian spring wheat planting intention estimate coming in above trade expectations; and a UN-confirmed Russian export deal that may have side-stepped Western sanctions. Lusk also commented that “managed funds have pushed out to a net short of approximately 130,000 contracts…that seems to be nearing the record managed short of 171,000 last decade.”

Canadians to Seed More Wheat

Statistics Canada reported this week that farmers will seed 26.968 million acres of wheat, up 6.2% from 2022, the largest area since 2001, if achieved. Spring wheat area is expected to increase 7.5% to 19.39 million acres, durum wheat is expected to edge up 0.9% to 6.06 million acres, while winter wheat area (mostly soft red winter in eastern Canada) is forecast up 12.7% to 1.52 million acres. Mike Jubinville with MarketFarm said, “The gain in spring wheat was anticipated. The one surprise … is a rise rather than slight decline registered in this report on durum acres.” Read more here.

Striking Workers Target Canadian Port

The Wheat Growers Association has called for the Canadian government to allow outside workers to weigh and inspect grain at a Vancouver port as a massive strike by public sector workers threatens shipments. Unionized inspectors at the Cascadia Terminal have purposely targeted the port, according to a news release by the group, which advocates for farmers. The protests could further tighten global supplies already affected by the war in Ukraine.

Rain Arrives; Too Late for Regional HRW Wheat?

Local media are reporting on a good, soaking rain over much of the exceptional drought areas in Kansas, Oklahoma, Texas, and Colorado this week. Southwestern Kansas farmer and U.S. Wheat Associates (USW) director Gary Millershaski told Brownfield Network rain is “going to help me plant some dryland corn and a lot of milo [sorghum],” but it will not help his winter wheat. In Okarche, Okla., northwest of Oklahoma City, wheat farmer and USW Vice Chairman Michael Peters said rain this week will help with grain fill and could help push his winter wheat yields up to an average of about 25 bushels per, lower than normal but more than expected before the rain.

National Weather Service map of southwest Kansas showing accumulated rainfall on April 26, 2023

Rain At Last. Substantial rain fell in southwestern Kansas April 26, the literal center of an area of exceptional drought. The rain was welcome but mainly as an opportunity to plant spring crops like corn or grain sorghum (milo).

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Perspectives From the Field on 2023 Drought

The impact of drought in the Central and Southern U.S. Plains is the dominant topic of conversation about the 2023/24 hard red winter (HRW) crop. Industry participants agree there will be a lot of HRW fields abandoned before harvest from Texas to South Dakota. Rain expected this week is a hopeful sign but likely comes too late to provide extensive recovery.

Following are the latest perspectives on the now two year long drought from state wheat commission executives and media covering the market.

In his April 21 weekly report, Kansas Wheat Chief Executive Officer Justin Gilpin compared past drought year abandonment, specifically in 1989, to 2023. That year unharvested planted acres hit 28.2% following drought conditions that Gilpin and others said are very similar to the current situation.

This chart shows historial perspective on the effect of drought on harvested area and abandonment of wheat acres over 30 years in Kansas.

Another Year of Abandonment? Data shared by Kansas Wheat CEO Justin Gilpin compares planted wheat acres, harvested acres, and the percent of abandonment since 1973. Gilpin said many industry folks compare the drought of 2023 with a very similar situation in 1989 when abandonment reached more than 28%.

A Crazy, Common Theme

“What is crazy in reading through high abandonment years, there is a common theme,” Gilpin said, “poor conditions through March into April…then, heavy rains began in May through June impacting harvest, but too late to help the western Kansas wheat crop.”

USDA’s April 24 crop conditions report echoed Gilpin’s comparison. It rated 26% of U.S. winter wheat in good to excellent condition, the lowest for this time of year since 1989. Reuters also noted “wheat in portions of central Kansas may have suffered damage from cold temperatures over the April 22-23 weekend. It is important to recognize that USDA’s winter wheat report includes the 2023 soft red winter (SRW) and soft white (SW) winter crops that are generally in much better condition.

In a call with state wheat commission representatives April 20, Darby Campsey with the Texas Wheat Producers Board reported that 30% of the state is in exceptional to extreme drought. In the Texas Panhandle, “much of the dryland wheat has failed.” Only 16% of Texas wheat is in good to excellent condition, mainly in the “black soil” region where mainly SRW is grown.

Dry as Death Valley

“In those regions that are in exceptional and extreme drought, you can certainly see why things are not favorable in northwest Oklahoma and the panhandle regions where we have the majority of our top wheat producing counties,” said Oklahoma Wheat Executive Director Mike Schulte.

There has been less than 0.8 cm of rain in that area of Oklahoma the last 220 days. Mark Hodges of Plains Grains noted that the Oklahoma Panhandle has received less moisture than Death Valley, California, the past 12 months.

“I don’t know that the rest of the world is taking into account how bad it is in the Southern Plains,” Schulte said in an interview with Oklahoma Farm Report. “I am hoping at some point in time the market is going to react to that.”

This map and data indicates that 2023 is the driest year on record for many counties in Oklahoma's western and panhandle regions following a two-year drought.

Driest in More Than 100 Years. The two-year-old drought has hit Oklahoma’s main wheat producing regions hard. In 3 counties, August 2022 through March 2023 was the driest on records going back to 1895.

Colorado, Nebraska and South Dakota

Southeastern Colorado is also within the exceptional, long-term drought area. HRW and hard white (HW) wheat grown in northeastern Colorado has fared better with more rain and snow, but “needs more rain in May” to get closer to its yield potential. The state commission there reported that while 23% of wheat is in good to excellent conditions, 38% is rated poor to very poor.

Sub-soil moisture in the western and panhandle regions of Nebraska remains low with HRW and HW wheat in similar condition as in Colorado. Fields are “patchy” with 40% rated poor to very poor.

Abandonment of HRW in South Dakota is also a concern reported South Dakota Wheat Commission Executive Director Reid Christopherson. He said it was so dry last fall a significant portion of seeded fields did not emerge. After receiving more moisture over the winter, South Dakota HRW is now emerging, but if stands are not good, farmers may make crop insurance claims and replant to corn, Christopherson said.

Rain Too Late for Wheat

Returning to Justin Gilpin’s note that past drought years have seen rain coming too late for wheat crops, sure enough widespread rain was in the forecast for the Central and Southern Plains the week of April 24 “and could be substantial in some areas,” according to a weather brief by DTN Meteorologist Jon Baranick. “That will help to reduce the impact of the drought but will not make much of a dent in it. Additional showers could be possible late this week with another system. Wheat may not benefit from the rain too much due to poor conditions, but the increased soil moisture would favor corn [sorghum] and soybean planting.”

Farmers facing the difficult situation of losing a crop to drought that they worked hard to produce and the uncertainty of its impact on their family’s livelihood, have only the perspective of the generations before them to rely on.

“The key to remember here is that droughts are cyclical,” wrote columnist Brandon Case in the Pratt (KS) Tribune recently. “The land of Kansas has suffered from droughts long before it became a state and it will continue to experience droughts in the future. No one knows how long the current one will last and about the only thing any of us can do is pray for rain.”

 

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Wheat Industry News

News and Information from Around the Wheat Industry

 

Speaking of Wheat

“Until some of these geopolitical conflicts are resolved — it’s difficult to envision a return to the level of free trade we enjoyed through the late 20th and early 21st centuries. Difficult as it may be, governments must resist the urge to limit or ban grain exports unless the food security situation in their countries is truly dire. The fate of a growing number of food insecure people on this planet — estimated at nearly 350 million people (more than the population of the United States) in 2023 by the World Food Programme — depends on it.” – Arvin Donley, Editor, World Grain. Read more here.

SW Kansas: “One of the Worst Wheat Crops in 50 Years”

That is how wheat farmer and agricultural journalist Vance Ehmke described the situation in the southwestern corner of Kansas. Ehmke said there will be “no dryland [winter] wheat at all” this year there and extending about 160 kilometers into the Texas and Oklahoma Panhandles and southeastern Colorado. “I looked at 30 to 35 years of Kansas wheat crops and abandonment runs about 10%. I could see 25% abandoned here this year with very low yields on the rest,” he wrote in The Hutchinson News. See also Bloomberg News’ video summary here.

Winter Wheat Conditions Still Lower

Farm broadcaster Ron Hays’ Oklahoma Farm Report notes the April 10 USDA NASS Crop Progress Report shows U.S. winter wheat conditions are tied with 1996 for the lowest rating in 40 years. Nationwide, winter wheat is 27% good to excellent. That is down one point from the previous week and compares to 32% good to excellent at the same time in 2022. Read more here.

The Passing of Joe Kejr

U.S. Wheat Associates (USW) joins so many others in our industry in expressing our condolences to the family of Ottawa County, Kan., farmer Joe Kejr, who passed away suddenly April 8, 2023. “Joe loved being a wheat farmer — thoughtfully growing, observing and discussing the crop throughout each unique season,” said Justin Knopf, immediate past president of the Kansas Association of Wheat Growers and close family friend. “We will miss his focus and efforts on building relationships, trust and unity throughout the industry. His example, steady presence, leadership and friendship will be sorely missed by so many of us here in his community and across the country.” Learn more about the Kejr’s farm operation here.

China to Lead 2022/23 Wheat Import Volume

USDA reports that Chinese wheat imports are forecast up to 12.0 million tons in 2022/23—the country’s highest level of imports since 1995/96 when imports reached 12.5 million. Domestic grain prices have remained high given the country’s minimum support price policy and reduced auction activity amidst uncertainty surrounding the government’s COVID-19 policies. Competitive pricing has prompted China to import large volumes of both milling and feed quality wheat. Australian wheat is especially competitive following 3 consecutive years of record crops. China continues to aggressively purchase Australian wheat supplies, with July-February imports up 66% compared to the previous year. Read more.

2023 Hard Winter Wheat Quality Tour Registration Ends May 1

The tour, sponsored by the Wheat Quality Council, will be May 15 to 18. Register for the Wheat Tour at wheatqualitycouncil.org. The tour brings in participants from around the world who interact with Kansas farmers, network with their peers, learn more about wheat production while they assess the condition and yield potential of the hard winter wheat crop across the state of Kansas. USW will report on tour results in Wheat Letter.

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USDA Reports Confirm the Tight U.S. Wheat Balance Sheet

On March 31, the United States Department of Agriculture (USDA) released its yearly Prospective Plantings Report, and Quarterly Grains Stocks reports. The reports provide valuable insights for U.S. wheat importing customers as we enter the final two months of the 2022/23 marketing year and look ahead to the 2023 harvest. In this article, we will analyze USDA’s recent reports and their implications while also looking at the broader market conditions not encapsulated in USDA’s data.

Prospective Plantings Reaction

USDA estimates the total wheat area for the marketing year 2023/24 at 20.1 million hectares (mha) (49.9 million acres), up 9% from 2022 and 8% above the five-year average.

With a 9% increase in the total area year over year and the highest planted area since 2016, the numbers appear bearish at first glance. However, on Friday, March 31, Kansas City Board of Trade HRW futures closed up 6 cents, Minneapolis Grains Exchange HRS futures closed up 16 cents, and Chicago Merchants Exchange SRW futures remained unchanged. The market reaction points to more bullish influences outside the USDA report scope.

Map of U.S. states showing acre volume and % change in planted area compared to 2022.

Winter wheat planted area is up 13% at 15.2 mha (37.5 million acres). HRW seeding is up 13% at 10.5 mha (26.0 million acres), SRW area increased 18% to 3.1 mha (7.8 million acres), and white winter wheat is at 1.5 mha (3.7 million acres). Source: Prospective Plantings Agricultural Statistics Board Briefing, March 31, 2023.

Despite the increase in overall wheat area, spring wheat area dropped 2% to its lowest level since 2017, 4.3 million hectares (10.6 million acres). Likewise, even as the winter wheat seeding outlook appears positive, the assumption that increased planted area equates to increased production does not always hold, especially as drought persists in the U.S. Southern Plains.

Map of U.S. states shows planted area and % change compared to 2022 for spring wheat.

USDA report showing total spring wheat acres are projected to be down 2% from 2022 at 4.3 million hectares (10.6 million acres). USDA forecasts HRS seedings at 4.0 mha (9.9 million acres), down 3% from 2022/23. Durum plantings are up 9% at 728,000 hectares (1.8 million acres). Source: Prospective Plantings Agricultural Statistics Board Briefing, March 31, 2023.

Weather Risk Creates Uncertainty

Since the spring of 2022, conditions in the U.S. Southern Plains have steadily deteriorated. A continued lack of precipitation and above-normal temperatures has left 48% of the winter wheat-growing region in drought. The severe dryness increases the likelihood of abandonment (particularly in Hard Red Winter wheat) and has a detrimental impact on the yield of the fields that make it to harvest.

Vertical bar chart from USDA Reports showing a comparison of wheat planted and harvested area since 2017.

Winter wheat abandonment has averaged 33% the last five years, , though in 2022/23, it increased to 42%. As drought persists, the share of area abandoned may increase. Source: USDA National Agricultural Statistics Service.

Meanwhile, late-season snow and cold temperatures in the HRS planting region have delayed spring fieldwork. A late spring may affect spring wheat plans, increasing the likelihood of prevent plant as farmers run up against crop insurance deadlines. A rapid warm-up is not yet out of the question.

Map of the U.S. from USDA reports showing snow depth and winter wheat production areas.

Winter weather persists in much of the Northern Plains. As of April 1, farmers in the Dakotas, Montana, and Minnesota have had less than 1 day suitable for fieldwork. Late planting has a negative impact on yield and area. Source: USDA Weekly Weather and Crop Bulletin.

A Tight U.S. Balance Sheet

As drought persists in the U.S. Southern Plains and cold lingers in the North, the weather fuels supply concerns; thus, supporting wheat prices. In addition to weather fears, the USDA Quarterly Grains Stocks report put all wheat stocks at 25.7 MMT, down 8% from last year and hovering at their lowest level since 2008. Meanwhile, the April World Agricultural Supply and Demand Estimates forecast 2022/23 U.S. ending stocks at 16.3 MMT, up 5% from the March estimates, but still down 14% from 2021/22.

Though ending stocks rest precariously above historic lows, April’s increase may help alleviate some price pressure, especially as weather remains an unpredictable bullish factor. Nevertheless, as the end of the marketing year approaches, a tighter balance sheet and weather uncertainty will continue to influence U.S. prices until well into the 2023 harvest.

By USW Market Analyst Tyllor Ledford

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Wheat Industry News

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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Changing Weather Patterns Could Favor U.S. Wheat Production

Over the last few weeks, we have analyzed several factors that are shifting or have the potential to shift U.S. wheat value toward wheat importers. A combination of lower futures prices, a break in dry bulk freight prices, an increase in planted area, and the potential for a weaker dollar all point to a wheat market that has turned to favor buyers after two years of price risk. Though it is the most unpredictable of all the factors influencing U.S. wheat prices, the weather is arguably the most critical component in determining U.S. wheat production and price.

El Niño Southern Oscillation

In a cycle called El Niño Southern Oscillation (ENSO), meteorologists study the air and water conditions in the equatorial Pacific and the subsequent impact on global weather patterns.

This image shows a map of the world and the expected rainfall patterns in different regions in a La Nina weather pattern.

Three consecutive La Niña weather events have brought increased moisture to Australia, boosting their wheat production. Meanwhile, drought conditions have persisted in Argentina and the U.S., severely affecting production and yields. Source: International Research Institute for Climate and Society.

“Triple Dip” La Niña

Usually lasting nine to 12 months, the most recent La Niña event persisted for three cycles, marking the first “Triple Dip” La Niña since 2001.

The three consecutive La Niña events have brought above normal rains to Australia during their wheat growing season. As a result, Australia has boasted three years of record wheat production. The average production from 2020-2023 is 66% higher than the previous five-year average.

Simultaneously, the La Niña weather event brought dry conditions to the U.S. and Argentina. U.S. Hard Red Winter wheat (HRW) production, the largest class of U.S. wheat grown primarily in the U.S. Southern Plains, decreased by 29% on the year to 14.5 MMT due to severe drought in the region. Likewise, USDA estimates put Argentine wheat production at 12.9 MMT, down 41% from the year prior and 33% from the five-year average, with persistent drought also acting as the primary cause.

Chart shows Australian wheat production, domestic use and exports over the past 10 years to show the effects of La Nina.

Australia has produced three consecutive record wheat crops as increased moisture benefitted its growing regions. As a result of increased production and stocks, Australian wheat exports have also reached record highs. Source: March USDA World Agricultural Supply and Demand Estimates.

Chart shows Argentinian wheat production, domestic use and exports over the past 10 years to show the effects of La Nina.

Drought severely impacted 2022/23 wheat production in Argentina. Source: March USDA World Agricultural Supply and Demand Estimates

A Break in The Cycle

In recent weeks, climate experts have predicted the end of La Niña, with an increased likelihood of an El Niño weather event forming. As the La Niña dissipates, there is potential for increased moisture in the U.S. Southern Plains and Argentina, while Australia will likely see drier conditions.

This map of the world shows rainfall patterns in regions from an El Nino patters, relative to La Nina patterns.

An El Niño weather event could bring dryness to Australia and increased precipitation to Argentina and the U.S., potentially favoring western hemisphere wheat production regions. Source: International Research Institute for Climate and Society.

What Does This Mean?

The market has already begun to weigh the impact of the shifting weather patterns. The Australian Bureau of Agricultural and Resource Economics and Statistics has already lowered 2023/24 wheat production estimates by 28% to 28.2 MMT in response to the new weather data.

As the weather changes and the potential for moisture increases in the U.S. Southern Plains, the production outlook in the U.S. may improve. Increased production would help take pressure off the tight U.S. balance sheet with the potential to bring down relatively high U.S. wheat export prices. Nevertheless, given the unpredictability of the weather, the actual impacts will not be known until well into the 2023/24 marketing year.

By USW Market Analyst Tyllor Ledford

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