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High-Grade, High-Protein 2018 HRS Crop Offers Many Positives End-Use Traits

Growing conditions over most of the U.S. hard red spring (HRS) wheat production area helped produce a 2018 crop with many positive features for buyers. There is greater supply of high-grade HRS with above average protein levels and very good dough and bake qualities. In general, many quality features are balanced across the region with some variation in grade factors, DON and dough strength.

At an estimated 16.0 million metric tons (MMT), this is the largest HRS crop in 22 years and up significantly from 2017 with higher planted area and a record national average yield.

Here is a summary of the season and test results, with full data available online soon and in upcoming USW Crop Quality Seminars. As always, U.S. Wheat Associates (USW) reminds buyers to be diligent with contract specifications to ensure they receive the quality they need.

Weather and Harvest: Planting began in late April, later than normal, and continued to be slow until mid-May. Most of the crop was planted by early June. Then rain established a robust stand and good early growth. Drier conditions later in the season accelerated maturity and harvest started in late July; most of the crop was harvested by mid-September.

Wheat and Grade Data: The average grade is a U.S. No. 1 Dark Northern Spring (DNS), up from U.S. No. 1 Northern Spring (NS) in 2017. The overall average test weight is 62.2 lb/bu (81.7 kg/hl), higher than in 2017 and the 5-year average. Average damage is 0.3 percent, up from 2017, and shrunken and broken kernels average is 1.0 percent, similar to 2017. The crop shows excellent kernel color with average vitreous kernel content (DHV) of 87 percent compared to 71 percent for the 5-year average. Average DHV is 90 percent for Western samples and 84 percent for Eastern.

The average protein is 14.5 percent (12 percent mb), similar to 2017. Western average protein is 14.6 percent, down slightly from 2017, while Eastern average protein held steady at 14.4 percent.

Disease pressures were higher than in 2017. The overall DON average is 0.3 ppm, ranging from 0.0 to 0.2 ppm for Western composites and from 0.5 to 0.7 ppm for Eastern composites. Thousand kernel weight (TKW) is slightly higher than 2017 at 31.1 grams. A dry harvest period supported a high average falling number of 399 sec, indicating sound wheat.

Flour, Dough and Baking Data: Buhler laboratory mill flour yield averages 67.8 percent, down 3.5 percent from 2017, but similar to the 5-year average. Flour ash fell to 0.52 percent, compared to 0.58 percent a year ago. Wet gluten averages 35.3 percent. Amylograph values average 635 BU for 65 g of flour, up notably from 2017 and the 5-year average.

Farinograph dough tests indicate slightly higher absorption than last year with the Western region average at 65.2 percent and Eastern at 63.0 percent. The average farinograph stability is 10.8 min, similar to 2017 and the 5-year average. The Eastern crop has slightly stronger dough properties compared to the Western, but dough strength increases at higher protein levels in both regions.

Alveograph and extensograph analyses show more resistance and less extensibility. The average alveograph P/L ratio is 0.61 compared to 0.72 in 2017, and the W value is 415 (10-4 J) compared to 360 in 2017. The overall extensibility and resistance to extension of the 135 min extensograph are 13.2 cm and 855 BU compared to 2017 crop values of 13.5 and 770.

The average loaf volume is 973 cc, up marginally from 968 in 2017 with Western volumes down slightly but Eastern volumes higher. Average bake absorption is 69.6 percent, up sharply from both last year and the 5-year average. Bread scores are slightly lower in both Western and Eastern crops compared to 2017.

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New Hard White Crop Offers Good Milling, Dough and End Product Performance

In a year when limited exportable quantities of U.S. hard white (HW) wheat are available, the good performance in milling, dough rheological properties and end products, including pan breads, Asian noodles and steamed breads reflect growing conditions and varietal improvements in the 2018 HW crop.

The 2018 crop was grown primarily in Kansas, Colorado, Idaho, California and Nebraska with some production in Montana, North Dakota and South Dakota. U.S. Wheat Associates (USW) estimates 2018 HW production at 894 metric tons (MT), up slightly from 2017’s 883 MT reported by USDA.

Wheat and Grade Data: All six composites graded U.S. No. 1 with test weight ranging from 60.5 to 64.2 lb/bu (79.6 to 84.4 kg/hl). The value ranges of composites are: dockage from 0.0 to 0.6%; wheat moisture from 8.4% to 11.2%; wheat protein from 11.1% to 13.3% (12% mb); wheat ash from 1.37% to 1.59% (14% mb); kernel hardness from 53.3 to 78.2; and kernel diameters from 2.61 to 2.99 mm. The thousand kernel weights (TKW) of Pacific Northwest (PNW) and California low- and high-protein composites are greater than 31.8 g. The TKW values of Southern Plains medium- and high-protein composites are 34.7 and 29.7 g, respectively. Falling number values of 360 sec or higher for all composites indicate all samples are sound.

Flour, Dough and Baking Data: Buhler laboratory mill straight-grade flour extractions range from 71.1% to 74.4%; L* values (whiteness) from 90.4 to 91.9; flour protein from 10.3% to 13.0% (14% mb); and flour ash from 0.42% to 0.48% (14% mb). These values are within the historical ranges of HW flour.

Flour wet gluten contents range from 27.2% to 35.2% depending on flour protein content. Amylograph peak viscosities are between 873 BU and 946 BU, which show good starch pasting properties suitable for Asian noodle applications for all samples. Starch damage values are in the range of 3.6% to 7.8%. Lactic acid SRC values are 139% to 160%, indicating medium to strong gluten strength.

Farinograph water absorptions range from 56.9% to 63.3% and stability times from 9.3 min to 19.5 min, exhibiting the typical HW medium to strong dough characteristics. HW farinograph water absorption is usually similar to that of HRW, but longer stability time indicates more tolerance to over-mixing. The ranges of alveograph values are: P values 64 mm to 98 mm; L values 76 mm to 109 mm; and W values 220 to 317 (10-4 J). Extensograph data at 135-min resting show maximum resistance in the range of 741 BU to 1237 BU, extensibility from 14.5 cm to 22.7 cm and area from 147 cm2 to 218 cm2.

Most samples show good baking performance relative to protein content, with bake absorptions in the range of 61.8% to 68.5%, loaf volumes of 754 cc to 883 cc and crumb grain and texture scores of 6.8 points to 7.0 points.

Noodle Evaluation: HW flours and a control flour were evaluated for both Chinese raw noodles (white salted) and Chinese wet noodles (yellow alkaline). For Chinese raw noodles, the L* values at 0 hr of production and after 24 hr of storage at room temperature are acceptable for all samples except for the PNW, California and Southern Plains high-protein composites, which have L* 24-hr values of 71.9, 70.5, and 71.5, respectively (72 is the minimum value at 24 hr). The sensory color stability scores of all samples are lower than the control noodle score of 7.0. Cooked noodle texture is softer for PNW and California low-protein composites due to the protein content. For Chinese wet noodles, sensory color stability scores are acceptable except for the California low- and high-protein composites and Southern Plains high-protein composites. The cooked noodle texture values of all Chinese wet noodles are acceptable. Overall, this year’s HW samples will produce noodles with more acceptable color if low ash patent flour is used.

Steamed Bread Evaluation: HW flours were evaluated for Asian steamed breads in comparison with a control flour. Results show most samples are acceptable for steamed breads except for the PNW low- and high-protein composites, the total scores of which are low. Blending a small percentage of SW flour with high protein HW flour would improve overall steamed bread quality.

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USDA Leaves U.S. Wheat Exports Unchanged, Supported By Decreasing Global Wheat Production

By Stephanie Bryant-Erdmann, USW Market Analyst

USDA updated its monthly World Agricultural Supply and Demand Estimates (WASDE) on Oct. 11, showing the United States to have the largest exportable supply of wheat in the world in 2018/19 following devastating losses in the European Union (EU) and Australia, and decreased production in Russia. Due to the decreasing exportable wheat supplies in these three countries (production plus beginning stocks minus domestic consumption), USDA expects the United States to have the largest exportable supply of wheat in the world in 2018/19 at 50.1 million metric tons (MMT).

Decreased production in half of the major exporting countries — Australia, the EU, Russia and Ukraine —   will result in global wheat production decreasing to 731 MMT, down 4 percent year over year and the lowest level since 2014/15, if realized. While global wheat production will fall for the first time in 5 years, USDA noted that global wheat consumption will reach a new record high of 746 MMT, 4 percent above the 5-year average.

Drought devastated wheat areas in the EU earlier this year and has now spread south to Australia.  USDA expects Australian total wheat production to fall to 18.5 MMT, 13 percent below last year and 26 percent below the 5-year average. Smaller Australian wheat production is also expected to result in 2018/19 Australian wheat exports falling to 13.0 MMT. If realized, that would be the lowest level of Australian exports since 2007/08, 26 percent below the 5-year average.

With Australian wheat exports decreasing sharply year-over-year, USDA expects U.S. white wheat exports to increase 11 percent from 2018/19 to 5.85 MMT, the highest level since 2011/12.

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. Exports of five of the six U.S. wheat classes are expected to increase year-over-year, and hard red winter (HRW) exports are expected to remain above the 5-year average. 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 11.6 MMT or 42 percent of USDA’s anticipated total.

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Top Grade PNW White Wheat Available for a Variety of High Quality Finished Foods

Timely and adequate moisture through the soft white (SW) and white club (WC) growing season and a transition to a warm, dry harvest helped Pacific Northwest (PNW) farmers produce high-quality crops that will provide an excellent range of flour for finished products. The high-protein segment of the SW crop also provides opportunities in blends for Asian noodles, steamed breads, flat breads and pan breads.

USDA estimates total 2018 PNW SW production at 6.03 million metric tons (MMT), up slightly from 2017’s 5.64 MMT. Of that, the Washington Grain Commission estimates white club (WC) accounts for 370 metric tons (MT).

Here is a summary of the season and test results, with full data available online soon and in upcoming USW Crop Quality Seminars.

Wheat and Grade Data: The overall average grade of the 2018 SW and WC crops is U.S. No. 1. The average SW test weight of 61.7 lb/bu (81.1 kg/hl) is higher than last year’s 60.9 lb/bu (80.1 kg/hl); WC test weight of 60.4 lb/bu (79.5 kg/hl) is slightly higher than 2017’s 60.2 lb/bu (79.2 kg/hl). With slight variation, SW and WC grade factors are similar to last year and the 5-year averages. Wheat moisture for both SW and WC is below last year and the 5-year averages, reflecting the dry harvest conditions.

The overall SW and WC wheat protein content (12 percent mb) of 9.3 percent and 9.0 percent, respectively, are 0.3 and 0.4 percentage points below the respective 2017 values and well below the wheat protein 5-year averages. SW wheat ash content (14 percent mb) is slightly higher than last year and the 5-year average; WC wheat ash is higher than last year and the 5-year average. Thousand kernel weights for SW and WC are slightly above 2017 and 5-year average levels. Both SW and WC kernel diameters are slightly larger than last year and the 5-year averages. Falling number values are 315 seconds for SW and 316 seconds for WC are both below last year and the 5-year averages.

Flour and Dough Data: The 2018 SW crop Buhler Laboratory Mill flour extraction average of 72.5 percent is lower than last year and the 5-year average; the WC average of 76.9 percent is higher than last year and the 5-year average. Flour protein content (14 percent mb) is 8.3 percent and 8.0 percent for SW and WC, respectively. Flour ash content (14 percent mb) for both SW and WC is slightly higher than last year, but lower than the 5-year averages. Amylograph peak viscosity value for SW is 497 BU, slightly higher than last year and for WC is 415 BU, lower than last year. Starch damage values are slightly higher for SW and WC than last year, but lower than the 5-year averages. SW and WC solvent retention capacity (SRC) water values are similar to last year and the 5-year averages. SW sucrose and sodium carbonate values are similar to last year, but lower than the 5-year average. SW and WC lactic acid values are higher than last year, but lower than the 5-year averages. SW gluten performance index (GPI) is higher than last year and the 5-year average, and WC GPI is slightly lower than last year and the 5-year average. SW and WC farinograph peak and stability times are close to last year’s and the 5-year averages, while water absorption is higher than last year for SW and the same as last year for WC. The SW and WC alveograph L values are considerably longer than last year and the 5-year averages. SW and WC extensograph resistance is similar to last year and higher than the 5-year averages. SW extensibility value is longer than last year and the 5-year average and WC extensibility is similar to last year and shorter than the 5-year average.

Bake Data: Sponge cake volume for SW at 1066 cc is smaller than last year and the 5-year averages, and the total score is slightly higher than last year and the 5-year average. The sponge cake volume for WC at 1115 cc is smaller than last year and the 5-year average, and total score is higher than last year and the 5-year average. SW and WC cookie diameter values are larger than last year and the 5-year averages. SW and WC cookie spread factors are less than last year and the 5-year averages.

Chinese Southern-Type Steamed Bread: Each flour was made into southern-type steamed bread and compared to a control flour. SW specific volume is the same as last year and the 5-year average. WC specific volume is slightly higher than last year, but slightly lower than the 5-year average. The SW and WC total scores are lower than last year and the 5-year averages.

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USDA Confirms Ample U.S. Wheat Supply in 2018/19, Reassures Customers About Availability

By Stephanie Bryant-Erdmann, USW Market Analyst

On Sept. 28, USDA released its Small Grains Summary noting that 2018/19 U.S. wheat production increased to 51.3 MMT, up 8 percent from last year due to improvements in both average yield and harvested area. While this is still 8 percent below the 5-year average of 55.8 MMT, the 2018/19 production coupled with significant carry-in stocks ensure that the U.S. wheat store will remain open and well-stocked throughout 2018/19. Here is a look at 2018/19 U.S. wheat production by class.

Hard red winter (HRW). Last fall, U.S. farmers increased HRW planting in the U.S. Southern Plains due to favorable moisture conditions. That slight increase was not enough to offset decreased planted area in the U.S. Northern Plains where a long-term drought delayed, and in some cases, prevented winter wheat planting. Planted area in Montana fell 6 percent year over year. USDA reported HRW planted area at 23.2 million acres (9.39 million hectares), down 2 percent from 2017. Unfortunately, most of the Southern Plains received little to no moisture until spring, with some areas going from October to April without measurable precipitation. The poor weather caused Oklahoma wheat farmers to abandon 43 percent of their winter wheat area, up from both the 5-year average and the 2017/18 abandonment rate of 36 percent. The average HRW yield in Kansas and Oklahoma, the top two HRW-producing states, decreased 21 percent and 18 percent from 2017/18, respectively. With the drought causing both harvested area and average yields to fall, USDA estimates total 2018/19 HRW production dropped 12 percent to 662 million bushels (18.0 MMT). Though smaller in volume, 2018 HRW quality i is excellent. Read more here.

Hard red spring (HRS). Wet conditions slowed HRS planting but replenished depleted soil moisture across the drought stressed Northern Plains. USDA says U.S. farmers planted 12.1 million acres (4.90 million hectares) to HRS, up 17 percent from the year prior. The beneficial moisture boosting average HRS yields and harvested area. In North Dakota, the top HRS producing state, the average yield climbed 20 percent year over year to a record high 49.0 bu/acre (3.29 MT per hectare), up 41 percent from 2017/18. Idaho farmers also produced record high HRS yields. USDA now reports HRS production at 587 million bushels (16.0 MMT), up 53 percent from 2017/18.

Soft red winter (SRW). Last fall, U.S. farmers planted 5.85 million acres (2.37 million hectares) of SRW, up 4 percent from the year prior, but still 23 percent below the 5-year average. While planting conditions were generally favorable, depressed prices kept planted area low. In early 2018, several U.S. SRW growing areas received excessive moisture that decreased yield potential and the wet weather continued through harvest. USDA reported SRW production totaled 286 million bushels (7.78 MMT), down 2 percent from 2017/18 and 33 percent below the 5-year average of 429 million bushels (11.7 MMT). Read more here.

White wheat (including soft white, club and hard white). U.S. white wheat planted acres stayed close to the 5-year average at 4.15 million acres (1.68 million hectares) in 2018/19. A wet winter boosted yield potential for both the winter and spring crops. The average spring white wheat yield in Washington increased 20 percent to 54.0 bu/acre (3.63 MT per hectare). The slight increase in harvested area and significant improvement in average yields pushed 2018/19 total white wheat production to 272 million bushels (7.41 MMT), a 5 percent increase year over year, and 8 percent above the 5-year average of 252 million bushels (6.86 MMT).

Durum. Farmers planted less durum area this year in response to lower prices and large carry-out stocks during spring planting. USDA estimates 2.00 million acres (810,000 hectares) were planted to durum, down 13 percent from 2017/18 but still 9 percent above the 5-year average of 1.84 million acres (745,000 hectares). USDA estimated total 2018/19 U.S. durum production at 77.3 million bushels (2.10 MMT), up 41 percent from last year. Generally favorable weather boosted yields in the U.S. Northern Plains, with average durum yields increasing to 39.3 bu/acre (2.64 MT per hectare), up 13.3 bu/acre from last year when drought severely impacted the crop. Desert Durum® production fell 8 percent year over year to 10.5 million bushels (385,000 MT) due to sharply lower planted area in both Arizona and California.

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U.S. Farmers in 2018 Produced One of the Best Hard Red Winter Crops in Years

The conscientious husbandry of U.S. farmers and the distinct influence of growing conditions across the Plains and into the Pacific Northwest helped produce a 2018 U.S. hard red winter (HRW) crop that has above average kernel characteristics and, in most cases, higher protein than the previous two crops. Annual crop quality testing sponsored by U.S. Wheat Associates (USW) and its partners from Plains Grains and USDA indicates the 2018 HRW quality attributes significantly exceed the last two years and many of the 5-year averages.

Most people and organizations in the industry consider this one of the highest quality crops in several years and will make high quality end products. This crop meets or exceeds typical HRW contract specifications and should provide high value to our customers.

Here is a summary of the season and test results, with full data soon available online and in USW’s annual Crop Quality Seminars.

Weather and Harvest

The 2018 hard red winter (HRW) planted area was 2.5 percent below the historical low planted area of the 2017 crop. With reduced yields and reduced area, 2018 HRW production is estimated to be 18.0 million metric tons [(MMT) (662 mil bu)], down 12 percent from 2017’s 20.4 MMT and 20 percent below the 5-year average production. Large beginning stocks offset the reduced production so the total HRW supply available for the 2018/19 marketing year is larger than three of the previous 5 years.

Conditions varied across the HRW growing regions. Texas, Oklahoma and Kansas were extremely dry during most of the growing season. By the time harvest started in early June, USDA rated 85 percent of HRW in these three states to be in fair, poor or very poor condition. Late season precipitation helped to establish good kernel characteristics even though rains were too late and insufficient to improve yield. In contrast, 75 percent to 90 percent of the crop rated fair, good or excellent in the remaining states north to eastern Montana. Because of dry conditions, disease and insect pressure was low.

Washington, Oregon, Idaho and central/north central Montana had adequate moisture throughout the year that helped maximize production. More than 90 percent of the HRW grown in these three states was rated fair, good or excellent in late June.

Wheat and Grade Data

Despite challenging growing conditions in many areas, the 2018 crop has generally good kernel characteristics. Overall 93 percent of Composite, 91 percent of Gulf-Tributary and 98 percent of PNW-Tributary samples graded U.S. No. 2 or better. Test weight averages 60.9 lb/bu (80.2 kg/hl), above the 5-year average of 60.3 lb/bu (79.3 kg/hl) and above last year’s average of 60.5 lb/bu (79.6 lb/bu). The total defects average of 1.4 percent is above last year’s average of 1.2 percent, but below the 5-year average of 1.6 percent. Foreign material is 0.2 percent, slightly above last year’s 0.1 percent, while shrunken and broken at 1.1 percent is above last year’s 0.9 percent and equal to the 5-year average. Average thousand kernel weight of 30.9 g exceeds the 5-year average of 29.8 g. The average wheat falling number is 373 seconds, which is comparable to the 2017 and 5-year averages and indicates sound wheat.

The average protein of 12.4 percent (12 percent moisture basis or mb) is significantly higher than last year and equal to the 5-year average. Protein content distribution varies by growing region; the Gulf-Tributary average is 12.7 percent and the PNW-Tributary average is 11.7 percent. Approximately 12 percent of the samples tested were less than 11.5 percent protein, 29 percent between 11.5 percent to 12.5 percent and 60 percent greater than 12.5 percent.

Flour and Baking Data

The Buhler laboratory flour yield average is 75.1 percent, lower than the 2017 average of 78.1 percent and similar to the 5-year average of 75.7 percent. The 2018 flour ash of 0.44 percent (14 percent mb) is significantly lower than last year’s 0.64 percent and the 5-year average of 0.59 percent. Composite sedimentation and wet gluten values, 54.2 cc and 28.1 percent, respectively, are both higher than last year. The W value of 280 (10-4 J) is significantly higher than last year’s average of 199 (10-4 J) and the 5-year average of 228 (10-4 J). average bake absorption is 63.7 percent, above the 62.8 percent value for both 2017 and the 5-year average. Farinograph peak and stability times, 5.2 min and 12.2 min, respectively, are higher than last year’s 4.5 min and 6.1 min. Loaf volume averages 901 cc, above the 2017 and 5-year averages.

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Weather Continues to Affect Global Wheat Production

By Stephanie Bryant-Erdmann, USW Market Analyst

 

USDA expects global wheat production to fall to the lowest level in 5 years at 733 million metric tons (MMT), down 3 percent from the record high of 758 MMT in 2017/18. If realized, it would be slightly below the 5-year average. This downturn is, unfortunately, led by decreasing supplies in historic wheat exporters. At the same time, USDA raised its forecast for global wheat consumption to a record high 746 MMT, up 1 percent from 2017/18. To help buyers stay up to date on this fundamental information, U.S. Wheat Associates (USW) is providing this round-up of current conditions and forecasts for Canada, Argentina and Australia.

 

The estimated wheat production in countries still harvesting adds only a small portion of the 2018/19 supplies in exporting countries, and the total is expected to be down for the second year in a row 

 

Canada. Winter is here, if you farm in Alberta and Saskatchewan that account for roughly 70 percent of Canadian wheat production. Provincial weekly crop reports on Sept. 11 noted harvest delays from early frosts, wet field conditions and, in some areas, snow. We do not yet know the extent of any damage to wheat quality from these conditions, but it raises concern because more than half of the spring wheat in the two provinces was still in the field. Harvest was an estimated at 23 and 46 percent complete in Alberta and Saskatchewan, respectively.

 

Agriculture and Agri-Food Canada (AAFC) had already pegged 2018/19 Canadian wheat production (excluding durum) down 4 percent from 2017/18 at 24.0 MMT. A 10 percent decrease in average wheat yields is partially offset by a 7 percent increase in expected harvested area. AAFC reported average wheat yields of 48.3 bu/acre (3.25 MT/ha) compared to 54.0 bu/acre (3.63 MT/ha) in 2017/18. Canadian durum production is expected up 1 percent from 2017/18 to 5.03 MMT; an expected 17 percent increase in harvested area more than offsets a14 percent reduction in average yields year over year. AAFC expects 2018/19 Canadian total wheat exports (including durum) to total 22.2 MMT, up 3 percent from 2017/18.

 

Argentina. According to the Bolsa de Cereales, the Buenos Aires Grain Exchange, Argentine farmers saw prices staying at profitable levels and planted 7 percent more wheat area for 2018/19. Since planting, the Argentine government announced an export duty of 4 pesos per dollar on wheat exports with its effects to be determined. Bolsa estimated total wheat planted area at 15.1 million acres (6.1 million hectares), up from 14.1 million acres (5.7 million hectares) in 2017/18.

 

On September 13, Bolsa reported beneficial moisture fell on the La Pampa region and areas around Buenos Aires. However, rainfall has been low in northwestern Argentina, which accounts for roughly one-third of wheat planted area. USDA’s September estimate for 2018/19 Argentinian wheat production was 19.5 MMT (716 million bushels), up 8 percent from 2017/18 and 35 percent greater than the 5-year average. Argentina harvest typically occurs in late November through early January.

 

Australia. The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) forecasts 2018/19 wheat production at 19.1 MMT. That is down 10 percent from 2017/18 due to severe drought in New South Wales and Queensland, where Australian Prime Hard (APH) and Australia Hard (AH) production is centralized. Increased wheat production in Western Australia may partially offset the lower production elsewhere. Still, if realized, production volume would be the lowest since 2007/08. Australian wheat harvest typically occurs in December. USDA expects Australian exports to decrease to 14.0 MMT, 21 percent below the 5-year average.

 

With global wheat supplies tightening and global demand on the rise, customers should pay close attention to crop conditions in these countries. Even if early snows or drought cut supplies there, or a government intervenes in the market somewhere else, U.S. farmers remain the most reliable suppliers of high quality wheat in the world.

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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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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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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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