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Export Policies Shrink Global Wheat Supply, Increase Uncertainty

By Stephanie Bryant-Erdmann, USW Market Analyst

It is no secret that global wheat production will fall this year due to unfavorable weather across the European Union (EU), Black Sea — Kazakhstan, Russia and Ukraine — and Australia. However, government policies are further constraining the global wheat supply, increasing costs and uncertainty for global wheat buyers.

Currently, there are two countries that have changed their export policies — Argentina and Ukraine — and a third, Russia, is thinking about it. These three countries account for an average 26 percent of global wheat exporter supplies and an average 50.7 MMT of global wheat exports. In Russia and Ukraine, the respective agricultural ministries are actively monitoring domestic wheat prices and wheat export quantities following a decline in 2018/19 production and rising domestic bread prices.

On Aug. 10, the Ukrainian Agricultural Ministry, in consultation with Ukrainian wheat traders, set the 2018/19 wheat export limit at 16.0 million metric tons (MMT), including 8.0 MMT of milling wheat. The export limit will cause Ukraine’s total wheat exports to fall by 7 percent year over year, but the milling wheat portion will fall by 20 percent compared to last year’s milling wheat export volume of 10.0 MMT. The export limit memorandum could be reviewed as early as the end of September, causing additional uncertainty about the availability of Ukrainian wheat.

On Sept. 3, the Russian Agricultural Ministry stated that it did not have plans to implement a grain export duty or “curb grain exports in any other way.” The Ministry released this statement following its second meeting with Russian grain exporters about export volumes in just 17 days. While the statement eased immediate concern from the markets (and resulted in 11 to 16 cent per bushel decreases for nearby wheat futures contracts on Sept. 4), the frequency of the meetings and letters obtained by Reuters have grain markets on edge.

As noted in the Aug. 23 Wheat Letter article A Risky Proposition, Russia implemented export taxes twice and completely banned wheat exports twice over the past decade. Each time, those policy changes resulted in significant, rapid price movement. Russia currently has an export tax on wheat that is set at zero percent, though it can adjust that tax at any time.

While Russia and Ukraine policies are adjusting to decreased domestic production and resulting increases in domestic prices, in Argentina, an export tax has been implemented in an attempt to shore up the domestic currency, which has fallen more than 50 percent compared to the U.S. dollar year over year. On Sept. 3, Argentina President Macri announced a 4 peso per dollar export tax on wheat and corn shipments.

According to International Grains Council (IGC) data, Argentine wheat has averaged $252 per metric ton (MT) since the beginning of the 2018/19 marketing year on June 1. This export tax will raise Argentine wheat prices by roughly 10 percent at today’s exchange rate of 39 Argentine pesos to 1 U.S. dollar, or about $25 per MT, on average. Argentine wheat production is expected to total 19.5 MMT, up 8 percent from 2017/18 and 35 percent above the 5-year average.

These policy changes and uncertainty from three of the world’s top wheat exporters come at a time when global wheat consumption is increasing and with it, the need for additional global exportable supply. USDA expects 2018/19 world wheat trade to rise 1 percent to a new record high of 184 MMT; if realized, it would be 6 percent greater than the 5-year average of 174 MMT.

With all of the uncertainty in the global wheat futures today, the U.S. wheat industry commitment to being the world’s most reliable supplier remains constant. Your local U.S. Wheat Associates representative stands ready to help with any questions about the U.S. marketing system, U.S. wheat supply and demand situation and U.S. wheat pricing.

To track U.S. wheat prices, subscribe to the USW Weekly Price Report.

By law, the only way to block U.S. grain exports is through a presidential declaration of national emergency. Importantly, a national emergency does NOT include short-term, fundamental rises in wheat prices or weakness in the U.S dollar. Further, the U.S. Constitution expressly forbids export taxes.

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Wheat Leaders Will Share Good Will with Nigerian, South African Customers

When he joined USDA in 2017 as the first Undersecretary for Trade and Foreign Agricultural Affairs, Ted McKinney said he anticipated investing significant time overseas building trust, opening doors for farmers and processors [and] removing trade barriers.

“Half the battle of winning the game is showing up,” he said.

U.S. Wheat Associates (USW) completely agrees with Undersecretary McKinney. The U.S. wheat farmers from 17 states who direct our activities fully support eight U.S. citizens and 43 locally employed staff serving customers from 14 offices around the world. USW also sends leading U.S. farmers overseas twice a year to strengthen customer relationships and learn more about how the organization and local USDA Foreign Agricultural Service (FAS) staff are working toward the same goals Mr. McKinney described.

USW calls such delegations “Board Teams” because they typically include members of USW’s board of directors who are selected by state wheat commission members. The next Board Team leaves soon to visit customers in Lagos, Nigeria, and Johannesburg and Cape Town, South Africa. Farmer participants include USW Past-Chairman Michael Edgar of Yuma, Ariz.; Don Schieber of Ponca City, Okla.; and Jay Armstrong of Muscotah, Kan., a Past-Chairman of the Kansas Wheat Commission and USW director. USW Vice President of Communications Steve Mercer is participating as staff lead in his fourth Board Team since he joined USW in 2006.

The team will get orientated for their trip at USW Headquarters in Arlington, Va., before meeting with senior FAS officials in Washington, D.C. Lagos is the hub of Nigeria’s vital flour milling industry and the participants will meet with executives from four major flour mills as well as FAS staff posted in country. Flour mills and wheat food production facilities are on the itinerary as well for the South African leg of this Board Team.

These trips represent a valuable learning experience for the participating board members and wheat buyers, many of whom have never had the chance to hear why U.S. wheat classes offers the best value directly from the farmers who produce it.

This team will report to their fellow USW directors later this year. USW will post photos and comments from the trip on its Facebook page at www.facebook/uswheat.

Michael Edgar.

Jay Armstrong.

Don Schieber.

Steve Mercer.

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USW Resource: U.S. Wheat Market Information and Activities

When U.S. Wheat Associates (USW) launched its new website in July, we introduced a new section that includes expanded information about its 16 office locations and the countries they serve.

A world map highlighting each of USW’s offices is available under “Office Locations,” and allows viewers to select the office or region of the world about which they would like to know more.

On these individual pages viewers will find:

  • Basic wheat market statistics for the countries that each USW office serves.
  • Highlights of recent wheat industry activities related to the region.
  • A contact form for each USW office.
  • Wheat industry news related to the region.

“We are excited to offer this section of the website as a new resource for our customers and stakeholders,” said Mark Fowler, USW Vice President of Overseas Operations. “As the global wheat market changes, U.S. Wheat Associates will continue providing helpful resources for its audience that reflect the high quality and reliable performance of U.S. wheat.

For more information about USW and its mission click here.

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Wheat Industry News

Recent news and highlights from around the wheat industry.

Quote of the Week: “The indistinguishability of genetic changes made by nature, 20th century mutagenesis and 21st century gene editing highlights the absurdity of regulating genetic modification based on the process used, as the Court of Justice of the European Union (ECJ) ruled in July of 2018.” – Dr. Nina Federoff, Pennsylvania State University, in an opinion editorial on trait-based regulations of GM plants.

Safe Flour Handling. The North American Millers’ Association (NAMA) has created infographics on safe flour handling available here in both English and Spanish. There is also an educational video, available here, endorsed by NAMA and the Canadian National Millers Association. U.S. Wheat Associates (USW) wrote more about the video here.

2018 Borlaug Dialogue International Symposium. Registration is open for the annual Borlaug Dialogue International Symposium Oct. 17 to 19, in Des Moines, Iowa. This year’s theme is “Rise to the Challenge” and will include a panel of leaders in genome engineering and agriculture that will discuss potential uses for CRISPR-CAS technology in agriculture as well as ethical implications of the technology. Click here for registration and more information.

IAOM-KSU Basic and Advanced Milling Principles. The IGP Institute will host three short courses focused on milling principles in October at its conference center in Manhattan, Kan. The Basic Milling Principles short course is scheduled Oct. 8 to 12, 2018, and two sessions of the Advanced Milling Principles short course are scheduled for Oct. 1 to 5, 2018, and Oct. 15 to 19, 2018. Register and learn more about the courses here.

Subscribe to USW Reports. USW publishes a variety of 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 page at https://www.facebook.com/uswheat for the latest updates, photos and discussions of what is going on in the world of wheat. Also, find breaking news on Twitter at www.twitter.com/uswheatassoc and video stories at https://www.youtube.com/uswheatassociates.

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A Risky Proposition

By Steve Mercer, USW Vice President of Communications

Two recent market articles by Reuters have caught our attention here at U.S. Wheat Associates (USW).

At first glance, the Aug. 20  story “Russian Traders May Speed Up Grain Exports Amid Risks of Curbs,” and the Aug. 22 story “Global Wheat Supply to Crisis Levels; Big China Stocks Won’t Provide Relief” may not seem related. Together, however, they are another caution sign for the world’s wheat buyers.

We understand why the Russian traders would want to “speed up” exports if they could: they are afraid of export restrictions. There is plenty of proof that the Russian government is willing to curb overseas sales. Restrictions in 2007/08 helped tip the markets into a supply shock with unprecedented price increases. A complete Russian export ban in 2010 pushed prices higher and showed complete disregard for the sanctity of sales contracts. Two years later when drought again hurt the Russian crop and the government threatened an export ban, global wheat prices moved up. Then when the government imposed an export tax in 2014, the market reacted as expected.

What is quite striking to us, however, is the fact that the possibility of export restrictions has come up again in a year in which Russia has produced its third largest wheat crop.

As an unnamed industry source in the Reuters article said: “When it comes to choosing between meeting food security or curbing exports, they will be choosing (limits on) exports again and again.”

Yes, a Russian government official said, “the introduction of grain export duty is not planned so far.” But we all saw futures prices bounce up quickly when just the subject of Russian restrictions came up last week. We should not forget that prices jumped “limit up” just on an apparently false rumor that Ukraine’s government might restrict wheat exports.

Which brings up the second Reuters article that started this way:

“A scorching hot, dry summer has ended five years of plenty in many wheat producing countries and drawn down the reserves of major exporters to their lowest level since 2007/08, when low grain stocks contributed to food riots across Africa and Asia.”

A bit of hyperbole there, perhaps, and the article suggests that there are factors that could mitigate a similar supply shock. Yet, the article noted: “Experts predict that by the end of the season, the eight major exporters will be left with 20 percent of world stocks – just 26 days of cover – down from one-third a decade ago.”

“The world just continues to grow,” said USW President Vince Peterson. “If we check on it, we see that world wheat consumption has grown 100 million metric tons in just the last 10 years. And we’re now at a place that even a very good crop in Russia causes concern.”

There is an old saying that keeping all your eggs in one basket is a risky proposition. Instead, the world’s wheat buyers might consider keeping a more diversified stable of suppliers — ahead of what could be, if not yet “crisis level,” at least a steady rise in global wheat prices.

Fortunately, the U.S. government long ago learned from experience that disrupting export grain trade only brings logistical problems and potential economic catastrophe for every segment of the market, including farmers. By law the only way to block U.S. grain exports is through a presidential declaration of national emergency. Importantly, a national emergency does NOT include short-term, fundamental rises in wheat prices. Further, export taxes are expressly forbidden by the U.S. Constitution.

The U.S. wheat industry offers reassurance in the fact that our doors are open for business 365 days per year. In our collective efforts to offer and efficiently supply the widest range of the highest quality wheat in the world, we live up to our claim as the world’s most reliable supplier.

The Russian government’s past actions prove that even a hint of rising domestic food costs can spark intervention in the free flow of its wheat to an increasingly hungry world.

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Can U.S. Wheat Exports Reach USDA’s 27.9 MMT Estimate?

By Stephanie Bryant-Erdmann, USW Market Analyst

On Aug. 10, USDA increased its U.S. wheat export forecast to 27.9 million metric tons (MMT), up 14 percent from 2017/18, if realized. With 2018/19 global wheat production falling to 730 MMT, down 4 percent year over year, and supply in exporting countries shrinking to the lowest level in four years, USDA seems to anticipate global demand turning to U.S. wheat supply. That raises two questions:

  • Is there that much demand for U.S. wheat out there?
  • Can the U.S. grain transportation system handle the increase in wheat exports?

Is there that much demand for U.S. wheat out there?

Based on USDA estimates, global wheat trade will need to increase to a new record high of 184 MMT in 2018/19 to meet global wheat consumption. With Russia and the European Union (EU) wheat exports expected to decline by a combined 7.5 MMT in 2018/19, and the extreme drought in Australia threatening its exportable supply, it is logical that U.S. wheat supplies will fill a crucial role in global wheat consumption.

Still, the United States will need to record an additional 19.6 MMT of export sales in the remaining 42 weeks of the 2018/19 marketing year, which began on June 1, or an increase in weekly sales from an average of 409,300 MT to 466,000 MT. Put another way, the United States needs to sell about two more vessels of wheat per week to reach the USDA estimate.

However, nearly two-thirds of that increase could come from just the top 20 U.S. customers, excluding China, based on historic buying patterns. For example, the top five U.S. wheat customers — Japan, Mexico, the Philippines, Nigeria and Korea — imported an average of 11.4 MMT of U.S. wheat exports the past five years. U.S. export sales to many top customers are behind last year’s pace, traders report continued interest in U.S. wheat and note that many customers are engaging in “just-in-time” buying patterns that result in large, last minute shipments that are challenging logistically. And that leads to the question:

Can the U.S. grain transportation system handle the increase in wheat exports?

The short answer is, “it depends.” The slightly longer answer is, “it depends on weather and trade policies.” Both of which are relative unknowns at this point. One thing is certain. Winter is coming and will bring, as it always does to some extent, cold weather and snow across the U.S. Northern Plains and Pacific Northwest (PNW) and ice and fog on the Mississippi River system, along with associated commodity movement delays.

During the winter months of December, January and February, U.S. Gulf all grain exports — including corn, sorghum, soybeans and wheat — average 6.67 MMT per month, down 24 percent from the peak month of October when 8.81 MMT of grain typically moves through the ports. For comparison, PNW all grain winter month exports average 3.13 MMT per month. This is an average 19 percent below the PNW peak export month of October when all grain PNW exports average 3.86 MMT.

Trade policies will determine how much competition U.S. wheat exports face for freight and export elevation. U.S. Gulf grain exports center around four main commodities — corn, sorghum, soybeans and wheat, while U.S. PNW grain exports typically include barley, canola, corn, flaxseed, sorghum, soybeans and wheat. In the Gulf, soybeans account for roughly two-thirds of total grain shipments during the peak fall months of October and November. In the PNW, it is closer to 75 percent.

USDA’s August estimate is based on the current, enacted trade policies. As such, USDA expects U.S. feed grain and soybean exports to decrease by a combined 3.53 MMT year over year due primarily to decreased demand from China. In theory, reduced U.S. feed grains and soybean exports should increase freight and export elevation availability for wheat. However, through Aug. 16, there are already 8.86 MMT of U.S. corn export sales booked for the 2018/19 marketing year (beginning Sept. 1).  That is up 54 percent from last year and 12 percent above the 5-year average. U.S. soybean export sales for the new marketing year (beginning Sept. 1) are also up 45 percent year over year at 11.5 MMT. That increased drain on export capacity and the tightening global feed grain supply situation, as discussed in Ahead of USDA Report, Wheat Futures on a Powder Keg, indicate there may be upside potential for USDA’s estimates even with the existing uncertainty around U.S. trade policies. Customers should carefully watch the corn, soybean and feed grain supply and demand situation as it will impact freight and export elevation demand. While the expectation is that U.S. soybean and corn exports will be down, right now the data suggests otherwise.

With increased global demand for U.S. wheat likely and an uncertain outlook for U.S. transportation logistics, customers should take a serious look at the benefits of securing U.S. wheat supplies now. As always, the U.S. wheat store is open and ready to supply high-quality wheat — there just may be longer lines at checkout this year.

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In Spite of Trade Conflicts, U.S. Wheat Farmers Will Not Abandon Customers in China

By Vince Peterson, USW President

Chinese Vice Minister of Agriculture Han Jun recently acknowledged the decades of work that U.S. farmers have put into growing the Chinese market for U.S agriculture. He then warned that this market may never come back to where it was if the trade dispute with the United States continues much longer.

We can guarantee the Vice Minister, and the wheat food industry in China, that U.S. Wheat Associates (USW) and the farmers we represent will not turn our backs on our outstanding customers in China. We remain dedicated to our core mission in China, as we are everywhere in the world, to bring profitability and value to our customers even if that is temporarily more difficult today.

Presumably, Chinese leaders believe that U.S. farmers can persuade the Trump Administration to end this trade war with China. However, U.S. farmers have been clear with their own government that China’s predictable response to the conflict has harmed them and we have supported negotiations to resolve this conflict. While we agree that escalating rounds of tariffs are a bad idea, we also believe that many of the U.S. government complaints about China’s policies are valid.

In our experience, state disruption of the wheat trade has been an enormous problem, severely limiting opportunities and profitability for both U.S. farmers and our wheat food industry customers in China. Through opaque administration of its wheat tariff rate quota (TRQ), China has deprived its flour mills of an average of 6.5 MMT of imported wheat annually over the past decade. In fact, recent import volumes are still well below what China imported in the 1980s and early 1990s; that is, before it joined the World Trade Organization (WTO). One could be forgiven for thinking China was a more promising market before joining the WTO than after; almost entirely because of excessive subsidies to the domestic wheat crop in recent years, as well as tight limits on TRQ access. This is why the U.S. government, under the Obama Administration, initiated two WTO cases on these issues in the fall of 2016. The prosecution of those cases have been continued and pressed forward by the Trump Administration. We are highly supportive of this action.

The Chinese government should recognize that its many years of flouting international commitments and highly interventionist “state capitalism” have led directly to the present conflict. If China had lived up to the commitments made when it joined the WTO, it is highly doubtful that we would still find ourselves in this situation. If Chinese leaders want to avoid further conflict and bolster the international trading system that they claim to defend, China can first start behaving like a responsible economy and adhere to its trade commitments in both letter and spirit. Of course, we are urging the same from the United States, which must also approach China with clear demands and a path towards achieving them.

Nevertheless, we are confident that this trade confrontation will one day be resolved. In the meantime, we will continue to reach out to our customers and friends in China, to reassure them of our unfailing dedication to our work with them. Further, we will make the guarantee that, once this trade dispute is resolved and behind us, we will work harder than ever to continue earning their business as we chart a path, together, to build the commercial channels that hold so much promise for Chinese and American industries and people.

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The Wheat Code is Finally Cracked

By Haley Ahlers, Innovation Lab for Applied Wheat Genomics Project Manager. Reprinted with permission from Kansas Wheat. See the original article here.

Kansas State University scientists, in collaboration with the International Wheat Genome Sequencing Consortium (IWGSC), published in the international journal Science on August 16, 2018, a detailed description of the complete genome of bread wheat, the world’s most widely-cultivated crop. This work will pave the way for the production of wheat varieties better adapted to climate challenges, with higher yields, enhanced nutritional quality and improved sustainability.

The research article-authored by more than 200 scientists from 73 research institutions in 20 countries- presents the reference genome of the bread wheat variety Chinese Spring. The DNA sequence ordered along the 21 wheat chromosomes is the highest quality genome sequence produced to date for wheat. It is the result of 13 years of collaborative international research and the generous support of the National Science Foundation, Kansas farmers and many others.

“It is a dream come true for Kansas wheat farmers, who were the first to invest in the wheat genome sequencing project and pivotal in rallying U.S. wheat farmers in support of the wheat genome sequencing project,” said Dr. Bikram Gill, distinguished professor at Kansas State University who organized the first National Science Foundation and U.S. Department of Agriculture-sponsored workshop planning meeting on wheat genome sequencing in Washington, D.C., in 2003.

A key crop for food security, wheat is the staple food of more than a third of the global human population and accounts for almost 20 percent of the total calories consumed by humans worldwide, more than any other single food source. It also serves as an important source of vitamins and minerals.

Kansas farmers grow an average of 340 million bushels of wheat each year, but acres planted to wheat have dropped dramatically over the past decade, from 10 million acres to fewer than 8 million. To meet future demands of a projected world population of 9.6 billion by 2050, wheat productivity needs to increase by 1.6 percent each year. In order to preserve biodiversity, water and nutrient resources, the majority of this increase has to be achieved via crop and trait improvement on land currently cultivated, rather than committing new land to cultivation. In order for farmers to dedicate these precious resources to wheat production rather than production of other crops, wheat farming must become profitable.

With the reference genome sequence now completed, breeders have at their fingertips new tools to address global challenges. They will be able to more rapidly identify genes and regulatory elements underlying complex agronomic traits such as yield, grain quality, resistance to fungal diseases and tolerance to physical stress-and produce hardier wheat varieties.

“Completion of the sequence is a landmark event that will serve as a critical foundation for future wheat improvement,” said Dr. Allan Fritz, Kansas State University professor and wheat breeder. “It is the key to allowing efficient, real-time integration of relevant genetics, making the selection process more efficient-it’s a turbocharger for wheat breeding!”

It is expected that the availability of a high-quality reference genome sequence will boost wheat improvement over the next decades, with benefits similar to those observed with maize and rice after their reference sequences were produced.

“Kansas wheat farmers have been supporting the wheat genome sequencing efforts through the Kansas Wheat Commission’s wheat assessment since the establishment of the IWGSC in 2005, with a cumulative amount of nearly a quarter of a million dollars,” said Justin Gilpin, chief executive officer for Kansas Wheat. “The sequence of the bread wheat genome has already had a positive effect on wheat improvement, which not only affects the science behind wheat breeding, but has a long-lasting positive outcome in regard to wheat producer productivity, profitability and, ultimately, livelihoods.”

Sequencing the bread wheat genome was long considered an impossible task, due to its enormous size – five times larger than the human genome-and complexity-bread wheat has three sub-genomes and more than 85% of the genome is composed of repeated elements.

“It is exciting to be a part of this landmark achievement,” said Dr. Jesse Poland, associate professor at Kansas State University and director of the Wheat Genetics Resource Center and the USAID Innovation Lab for Applied Wheat Genomics. “This international effort, toward something that was once deemed impossible, will have tremendous impact on wheat in Kansas, and the world.”

The impact of the wheat reference sequence has already been significant in the scientific community, as exemplified by the publication on the same date of six additional publications describing and using the reference sequence resource, one appearing in the same issue of Science, one in Science Advances and four in Genome Biology. In addition, more than 100 publications crediting the reference sequence have been published since the resource was made available to the scientific community in January 2017.  “We are extensively using the new reference sequence for more informed molecular breeding” commented Poland.  “It is really having a big impact.”

In addition to the sequence of the 21 chromosomes, the Science article also presents the precise location of 107,891 genes and of more than 4 million molecular markers, as well as sequence information between the genes and markers containing the regulatory elements influencing the expression of genes.

The IWGSC achieved this result by combining the resources it generated over the last 13 years using classic physical mapping methods and the most recent DNA sequencing technologies; the sequence data were assembled and ordered along the 21 chromosomes using highly efficient algorithms, and genes were identified with dedicated software programs.

All IWGSC reference sequence resources are publicly available at the IWGSC data repository at URGI-INRA Versailles and at other international scientific databases such as GrainGenes and Ensembl Plants.

The Science article is entitled “Shifting the limits in wheat research and breeding using a fully annotated reference genome” and can be read here.

About the IWGSC

The IWGSC, with 2,400 members in 68 countries, is an international, collaborative consortium, established in 2005 by a group of wheat growers, plant scientists, and public and private breeders. The goal of the IWGSC is to make a high-quality genome sequence of bread wheat publicly available, in order to lay a foundation for basic research that will enable breeders to develop improved varieties. The IWGSC is a U.S. 501(c)(3) non-profit organization. www.wheatgenome.org

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Rain-Challenged 2018 SRW Crop Still Grades Above Average and Offers Performance Value

U.S. farmers growing soft red winter (SRW) wheat, especially in the East Coast states, experienced difficult growing conditions in 2018 with excessive moisture affecting test weight, falling number and DON values. Overall, however, several grade factors in the 2018 SRW crop are better than the 5-year averages, protein is somewhat above average, and DON is somewhat below average. Processors should find good qualities for crackers and segments of the crop with good cookie and cake qualities. With higher protein and good extensibility, the crop should also be valuable in blending for baking applications.

That is a summary of results from the U.S. Wheat Associates (USW) 2018 SRW Crop Quality Report, now posted online here. To complete the report, Great Plains Analytical Laboratory in Kansas City, Mo., collected and analyzed 265 samples from 18 reporting areas in the 11 states that account for most of U.S. SRW 2018 production. USW and the USDA Foreign Agricultural Service fund the annual survey.

Wheat and Grade Data

With analysis result weighted by estimated state production, the average grade of all samples collected for the 2018 SRW harvest survey is U.S. No. 3. The weighted average test weight is 57.9 lb/bu (76.2 kg/hl), slightly below the 59.1 lb/bu (77.1 kg/hl) 2017 average. The Gulf Port average of 58.2 lb/bu is similar to the 5-year average of 58.4 lb/bu (76.8 kg/hl). The East Coast test weight average of 56.6 lb/bu (74.5 kg/hl) is below both last year. All other grade factors, dockage and moisture are similar to or lower than 2017 average values. The Gulf Port Total Defects average of 0.8% is below the previous 5-year minimum, indicating that damaged and shrunken and broken kernels are unusually low in that portion of the crop.

The composite average wheat protein content of 9.9% (12% moisture basis) is higher than 2017’s 9.5% and the 5-year average of 9.7%. Both the Gulf Port protein average of 9.9% and East Coast average of 10.2% are above the 2017 and 5-year averages. The composite average falling number of 322 seconds is similar to 2017. The Gulf Port average of 327 seconds is slightly above last year, while the East Coast average of 301 seconds is slightly below last year. Fewer than 10% of samples had a falling number below 250 seconds in 2018. The composite DON average of 0.7 ppm is above the very low 2017 value of 0.2 ppm but is below the 5-year average of 1.3 ppm. The East Coast value of 1.1 ppm is similar to the 5-year average while the Gulf Port value of 0.7 ppm is below the 5-year average. Of the samples tested for DON, 75 percent of the Gulf Port results and 65 percent of the East Coast results were less than 1.0 ppm.

Flour and Baking Data

The composite, East Coast and Gulf Port Buhler laboratory mill flour extraction averages are below 2017 and the 5-year averages. The farinograph peak values are similar to 5-year averages, but the stability and absorption values are all below last year and the 5-year averages. The SRC values generally indicate acceptable quality for crackers; some Gulf Port areas also have acceptable SRC values for cookies. The composite and Gulf Port alveograph L averages of 97 and 98 are higher than last year and the respective 5-year average of 89 for both, indicating good extensibility.

All other alveograph averages are similar to the respective 5-year averages given the variability of alveograph analysis. The Gulf amylograph average of 614 BU indicates good quality for cakes. The composite and Gulf Port cookie spread ratios are all higher than last year and similar to the 5-year averages, again indicating good extensibility. Average loaf volumes are also all higher than last year and the 5-year averages.

USW will share complete data for all classes of U.S. wheat with hundreds of overseas customers at several upcoming events, including USW’s annual Crop Quality Seminars, and in its annual Crop Quality Report. Buyers are encouraged to review their quality specifications to ensure that their purchases meet their expectations.

View the 2018 Soft Red Winter Crop Quality Report here. 

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Shrinking Global Wheat Production Could Be Bullish for Farmers

By Stephanie Bryant-Erdmann, USW Market Analyst

USDA updated its monthly World Agricultural Supply and Demand Estimates (WASDE) on August 10 and expects the global wheat supply and demand situation to be more favorable for U.S. farmers this year due to shrinking global wheat production. USDA lowered its global wheat production estimate by 6.63 million metric tons (MMT) to 730 MMT, down 4 percent year over year and the lowest level since 2014/15, if realized.

Widespread drought across Germany and northern Europe is one reason why USDA dropped its production forecast. USDA expects European Union total wheat production to fall to 138 MMT, 9 percent below both the 5-year average and 2017/18 production. With smaller EU wheat production, USDA lowered marketing year 2018/19 (June 1 to May 31) EU wheat exports to 23.0 MMT. If realized, that would be 2 percent below the year prior, and 25 percent below the 5-year average.

At the same time, USDA also expects Russian wheat production to fall 20 percent year over year to 68.0 MMT due to unfavorable winter wheat planting and growing conditions. With Russian wheat supplies shrinking, the 2018/19 Russian wheat export forecast is down 7.00 MMT from 2017/18 to 35.0 MMT.

With lower exportable wheat supplies (production plus beginning stocks minus domestic consumption) in Russia and the EU, USDA expects the United States to have the largest exportable supply of wheat in the world in 2018/19 at 49.7 MMT.

Consequently, USDA expects 2018/19 U.S. wheat exports to reach 27.9 MMT, up 14 percent from 2017/18 and 7 percent above the 5-year average, if realized. Still, U.S. wheat export sales pace will need to increase to meet this goal, as year-to-date U.S. wheat export sales total just 7.53 MMT or 27 percent of USDA’s anticipated total.

The shrinking global wheat supply, increasing global wheat consumption and large U.S. wheat supply have all lead to U.S. wheat futures rallies over the past month. Since the last WASDE update on July 12, U.S. HRW futures are up 72 cents per bushel ($26 per MT), SRW futures grew 54 cents per bushel ($20 per MT) and HRS climbed 67 cents per bushel ($25 per MT).

Each month, U.S. Wheat Associates (USW) updates a graphic summary of USDA’s WASDE (World Agricultural Supply and Demand Estimates) report. View the August summary here.

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