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Most Exportable Supplies Moved by Rail with Significant Effect on Basis

As we continue a series of articles on U.S. supply chain logistics, rail is arguably the most important mode of transporting wheat for export.

According to a recent USDA Modal Share Analysis Study, rail accounted for an average of 59% of inland transportation for wheat exports between 2016 and 2020, or an average annual total of 17.0 million metric tons. This article will focus on the importance of rail freight in wheat exports and address current trends in rail performance.

Two vertical bar charts showing the volume of U.S. wheat shipped domestically and to export locations by truck, rail and barge between 2004 and 2020.

Rail and barging are the main modes of transportation for wheat exports, as they can handle large volumes of grain over long distances. Together, they transport 89% of the total wheat export shipments. Source: USDA Modal Share Analysis Study.

An Interesting Year

In 2022, increased demand for railcars and performance issues sent U.S. rail rates soaring, with Secondary Railcar Auction Market Bids hitting their highest since 2014. Since then, rail rates have eased drastically. From March 2023 to July 2023 secondary bids for railcars have been negative, indicating that the current supply of railcars is sufficient for meeting the needs of shippers.

Decreased volumes and the subsequent decrease in rail tariff rates and Secondary Railcar Market Auction Bids have added additional pressure to already low basis levels, helping boost the competitiveness of U.S. wheat to importers. However, as the 2023 soy and corn harvest progresses, we can expect rail rates to rise due to increased demand and a higher volume of grain moving via rail.

This vertical bar and line chart show a comparison of grain carloads average from previous years to the current 4 week period up to 8/25/23.

According to the latest Grain Transportation Report, grain carloads (corn, soybeans, and wheat) moved by Class I railroads were down 3% from the previous week and are sitting 22% below the three-year average. The current decreased volume alleviates pressure on basis as rail companies have a sufficient supply of cars to meet the current demand. Source: September 3, 2023 USDA Grain Transportation Report.

Even so, the outlook for fall logistics appears positive. In a recent interview with “Freightwaves,” transportation export Jay O’Neil indicated that “Weather is always a question mark that makes it [performance] impossible to predict. But overall, I think the railroads… have some excess capacity because of [reduced grain export volumes]. I think [railroads] are very much looking forward to the harvest season … So, I don’t see any particular influences right now that should get in their way and prevent them from providing a decent service for harvest.”

Part of a Reliable System

U.S. Wheat Associates (USW) is committed to sharing transparent and pertinent information to customers about inland logistics issues. It is beneficial for U.S. wheat importers to be aware of transportation trends, as seasonal shifts and potential issues have a direct influence on export basis and the Free-on-Board export price.

Encompassing the largest share of inland logistics, the railroads are a critical component for moving U.S. wheat to export. After last years’ service disruptions, steps have been taken to help address the root issues such as hiring additional crew and investing in infrastructure. U.S. railroads are committed to moving U.S.-grown commodities. With diverse origination options and numerous modes of transportation, regardless of the class or export point, rail helps U.S. wheat remain the most reliable choice for world importers.

This article is part of a series outlining the inland logistics for U.S. wheat, highlighting barge freight, the railroads, infrastructure investments, and maritime transportation trends.

By USW Market Analyst Tyllor Ledford

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Wheat Industry News

News and Information from Around the Wheat Industry

Speaking of Wheat

“When we went to ethanol production, we had to have significantly more acres of corn and soybeans to a certain degree with biodiesel. You go back to 2006 and 2007, I remember traveling around the states telling Oklahoma wheat producers, ‘You have got a $1.25 to $1.50 free increase in your price simply because of the corn industry and bean industry.’ The corn industry has to increase their acreage dramatically, and soybeans have got to come in there and protect their acres.” – Oklahoma State University Extension Grain Market Economist Dr. Kim Anderson discussing a decline in wheat acreage in an interview with Oklahoma Farm Report’s Ron Hays.

Grain Deal Talks Expected to Resume in Sochi

As reported by several news outlets this week, the much-anticipated meeting between Turkish and Russian presidents over the fate of the grain initiative will be held on Sept. 4 in the Russian resort city of Sochi. The top issue will be the resumption of the grain deal that allowed the export of more than 33 million tons of wheat, corn and other food products from Ukraine to the world markets through Turkish straits. Russia canceled it on July 17 as it could not transport its own products due to the sanctions. Red more here.

USDA: Weather Slows U.S. Spring Wheat Harvest

World-Grain.com cited a USDA report that noted the winter wheat crop was “largely in the bin” but the spring crop was just more than half harvested and progressing slowly due to weather delays. The 2023 US winter wheat harvest was 96% complete by Aug. 20, USDA said in the final aggregate winter wheat harvest update in its weekly Crop Progress report. That compared with 94% a year earlier and matched the five-year average for the date. States with winter wheat remaining in fields at that time included California (97% complete), Colorado (99%), Idaho (70%), Michigan (95%), Montana (78%), Nebraska (99%), South Dakota (97%) and Washington (87%). Read more here.

High Pasta Prices Could Set in As Canada’s Durum Crop Suffers

An Aug. 30 report by Reuters suggests pasta lovers must brace to pay even higher prices for their favorite dish, as drought in Canada and bad weather in Europe damages crops of durum wheat and reduces supplies available to flour millers and food companies. Some estimates released prior to the report release pointed to production falling below 4 MMT. Two upcoming estimates will lead to potential revisions to this data, with Statistics Canada to report official estimates for 2022-23 ending stocks on Sept. 8, followed by an updated production estimate on Sept. 14. Read more here.

Quality Survey Shows Reduced French Wheat Protein Levels

Updated quality results from the 2023 French soft wheat harvest showed the percentage of the crop meeting protein requirements for milling had dropped to 91% from an 93%, but remained above a five-year average of 87%, farm office FranceAgriMer said. The survey by was based on data representing 92% of the harvest, compared with 80% the previous week. It also showed that 69% of the crop had test weights above 76 kg per hectolitre (kg/hl), down from 74% the previous week and a five-year average of 79%. Read more here.

Breeding Wheat Plants with Better Starch

A team of UK researchers has figured out how low-quality starch grows in wheat. The discovery, published in The Plant Cell, could help breed plants with more control over their starch. As well as being an important nutritional source of carbohydrates, starch is a valuable ingredient in brewing, glue, paper, textiles, and construction materials. “We discovered that the ubiquitous enzyme, (PHS1) is crucial for the formation of B-type granules in wheat,” says lead author Dr Nitin Uttam Kamble, a postdoctoral scientist at the John Innes Centre, UK. “This is a scientific breakthrough … it shows that the A- and B-type granules of wheat form via different biochemical mechanisms. We can now use this knowledge to create variations in starch for different food and industrial applications.” Read more here.

Subscribe to USW Reports

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

Follow USW Online

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

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Wheat Industry News

News and Information from Around the Wheat Industry

Speaking of Wheat

“The team had a chance to visit all aspects of the supply chain, from farm to export elevator, and learn about the FGIS inspection process, giving them a sense of how US wheat quality is ensured throughout the way. These visits provide reassurance to overseas buyers that they are getting the quality they want, and face-to-face visits go a long way in providing trust and confidence in our buyers and establishing long-term relationships.” Chad Weigand, USW Regional Director, Sub-Saharan Africa, discussing a trade team from Nigeria and Kenya visiting the U.S. wheat industry in August 2023.

Map of Canada showing significant drought in western Canadian provinces. Map Source Canadian Drought Monitor.

Canadian Durum and Wheat Crop Watch

An Aug. 10 Western Producer article said Canadian market analyst Bruce Burnett on July 19 forecasted a national average durum yield of 26 bu. per acre, down from afive-year average of 37.3 bu. per acre. Burnett forecasted total Canadian production of 4.09 million metric tons (MMT), down 25% from last year. The article included a Saskatchewan Wheat Development Commission officer saying the crop has further deteriorated since Burnett’s presentation. He thinks the production number “will start with a three, although it will likely be higher than the 3.2 MMT produced in 2021.” Read more here.

Durum Foods Online Course

North Dakota State University and the Northern Crops Institute recently launched an online course titled “Developing Innovations with Durum: More than Just Pasta.” The course costs $250 and will the knowledge on how durum can be beneficial in other facets than just pasta. It will touch on the many unique traits of durum, nutrition components, an overview on procession, as well as sourcing the material. Participants can work at their own pace and will enjoy lectures from milling experts, understand how to utilize this product, and will know exactly where they can buy durum flour for cooking and baking. The course can be completed at the participant’s on pace. Register online at: http://durumfoods.com/.

Wheat’s Influence on World History

Recently Kansas Public Radio reported on the surprising role of wheat in world history from ancient Greece to modern-day Ukraine and Kansas. The non-profit network conducted an interview with Scott Reynolds Nelson, the author of “Oceans of Grain: How American Wheat Remade the World.” Listen to the interview here.

The Journey of Wheat

Oregon Wheat has created an “infographic” that depicts the journey Oregon wheat takes to from the farm to its end destination for a domestic or overseas customer. Here is a link to “Follow the Wheat.” To view the U.S. Wheat Associates program “Wholesome: The Journey of U.S. Wheat,” visit our Vimeo page here.

South Dakota Wheat to Move Its Office

The South Dakota Wheat Commission has made the decision to relocate its office from Pierre to Brookings, South Dakota. The new location, on the campus of the South Dakota State University Research Park, will allow for increased dialog and collaboration with the SDSU research team.  The move is expected to be complete by Oct.1. The Commission’s new mailing address is:

South Dakota Wheat Commission

2301 Research Park Way, Suite 253

Brookings SD 57006

Subscribe to USW Reports

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

Follow USW Online

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

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Latin American Markets Take Advantage of Soft Red Winter Wheat Value

Mexico, Central America, the Caribbean, and South America represent a substantial portion of U.S. wheat sales, accounting for around 33% of all U.S. wheat exports. Due to proximity and sophisticated, quality-focused markets, Latin America and the Caribbean see competitive advantages in U.S. wheat supplies. In fact, while total demand for U.S. wheat slowed the last two years, sales to Latin American countries increased.

This trend signifies the value of U.S. wheat to customers throughout the region. This article will analyze the recent trends in Latin American markets and highlight current opportunities for U.S. wheat importers based on their patterns.

Looking Back

In the marketing year (MY) 2022/23, South American wheat imports were 1.6 MMT, up 29% from MY 2021/22, while U.S. wheat exports decreased by 2% from the prior year and were 17% below the five-year average. On a country level, significant sales increases were observed in Chile, Ecuador, and Brazil, among others.

Despite high prices, customers in Latin America and the Caribbean continued seeing the value in U.S. wheat classes, particularly soft red winter wheat (SRW). SRW sales were up 28% from the year prior and 31% above the five-year average regionwide.

This is a bar chart showing sales of U.S. SRW wheat to Latin American countries for 2022 and 2023 showing increased demand.

SRW exports increased in several Latin American countries in MY 2022/23. Sales were up 361% in Ecuador, 128% in the Dominican Republic, 99% in Honduras, 50% in Nicaragua, and 130% in Venezuela. Source: USDA FGIS Export Data.

Emphasis On Value

Moving into MY 2023/24, SRW remains an excellent value. The latest U.S. Wheat Associates (USW) Price Report put U.S. SRW at $249/MT FOB, competitively priced with other origins. Despite the recent volatility in wheat markets, SRW prices remain at their lowest level since the summer of 2021, and wheat futures have just breached the $6.00/bu threshold.

This line chart shows how U.S. SRW and soft white wheat export prices have declined of the past year.

SRW prices have hovered at their lowest level since July 2021. Harvest pressure and the above-average production weighs on the export basis and CBOT futures. Source: U.S. Wheat Associates Price Report.

Sales of SRW are tracking above last year’s pace. The most recent commercial sales put SRW commitments at 1.6 MMT, and the majority of this increase can be attributed to purchases from Latin American and Caribbean customers. In South America, SRW purchases are up 37%, while total U.S. wheat sales are down 34% in the region.

The August World Agricultural Supply and Demand Estimates put SRW exports at 3.7 MMT, up 26% from the year prior and up 37% from the five-year average.

This line chart compares the export price of U.S. soft red winter (SRW) wheat to competing supplies from Russia, Australis, Canada and France.

SRW has become competitive with other world suppliers. As of August 15, SRW was near parity with 12.5% (dry matter basis) Russian wheat. Source: AgriCensus Price Data and the U.S. Wheat Associates Price Report.

Risk Management is Vital

As mentioned in previous articles, the war in the Black Sea is a continued risk in the world wheat market. Though risk premiums have been eroded and the market appears to have reached some level of “comfort” with the war, prices can spike in an instant, especially as fighting has intensified in the weeks since the dissolution of the Black Sea Grain Agreement.

As seen in commercial sales to many Latin American customers, SRW demonstrates an excellent value as a high-quality and competitively priced soft wheat. Nevertheless, with the potential for more upside risk than a downward opportunity for SRW and all U.S. wheat classes, importers must watch market conditions closely to maximize SRW’s value in their blends. Your local USW office will be an important partner in this effort.

By Tyllor Ledford, USW Market Analyst

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Wheat Industry News

News and Information from Around the Wheat Industry

Speaking of Wheat

“The abrupt termination of the implementation of the Black Sea Grain Initiative is a matter of grave concern. Global food security should not become a casualty of war. People in poor countries struggling with food and energy price inflation stand to be hit hardest by the termination of the initiative: Prices for future delivery of wheat and corn are already rising. Therefore, I urge all parties to make every effort to come back to the negotiating table.” — World Trade Organization Director-General Ngozi Okonjo-Iweala, from an Inside U.S. Trade article. Read more here.

Political cartoon by Michael de Adder, The Washington Post, of Russian President Putin holding a bag labelled "Grain" hostage with a gun.

Copyright Michael de Adder, The Washington Post

Club Wheat Outlook

Matthew Weaver with Capital Press interviewed Washington Grain Commission Executive Director Casey Chumrau about the 2023 club wheat crop and the outlook for 2014. The region’s wheat industry anticipates lower yields overall this year compared to last. Outlook for club production is unclear at this point, Chumrau said. “A lot of the planted area for club is in regions in Washington where it still is looking promising for production,” she said. “The club acres seem to be in some of those areas with better prospects.” Read more here.

Prepare for Global Drought

In a World-Grain.com article, World Weather, Inc., agricultural meteorologist Drew Lerner writes about the risk of future global drought and the need to prepare for a serious food shortage. “A series of serious droughts occurred in 2007-08 that resulted in reduced food supply in portions of North America, eastern Asia, Southeast Asia, Australia and parts of South America,” he wrote. “Most of the droughts at that time did not impact each of the listed regions of the world at the same time, but enough production cut occurred to lead to the first modern day grain and oilseed supply shortage. The world muddled its way through that event mostly unscathed, but what about the future? Will we be lucky enough to get along with limited food stocks?” Read more here.

South Dakota State University wheat breeder Dunish Sehgal in a wheat field.

Dr. Sunish Sehgal. Photo copyright South Dakota State University.

Honored Wheat Breeder

Sunish Sehgal, associate professor and South Dakota State University (SDSU) winter wheat breeder, was honored by the Wheat Quality Council with the 2023 Millers Choice Best of Show Award for the second consecutive year. The honor annually recognizes the wheat breeder of the variety that is most well-liked by U.S. millers participating in the WQC’s evaluation program. The main goal of the SDSU hard winter wheat breeding group is to develop high-yielding wheat varieties with resilience to biotic and abiotic stress and provide end-use quality for the milling and baking industry. “At SDSU, we lay as much emphasis on wheat quality as on yield,” Sehgal said. Read the full story here.

Grain Sciences Event Calendar

Dr. M. Hikmet Boyacioglu, Applications Development Specialist with KPM, shares a monthly “Cereal & Grain Sciences Events Calendar. The August calendar is now online. See it and upcoming monthly calendars at https://lp.kpmanalytics.com/en-us/cerealgrain-science-event-calendar.

Subscribe to USW Reports

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

Follow USW Online

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

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Historically Low PNW HRS Export Basis Demonstrates Buying Opportunity

As the geopolitical conflict between Russia and Ukraine comes back into focus following the attacks on port infrastructure in the Ukrainian Black Sea ports of Odesa, Chornomorsk, and the terminals along the Danube River, wheat market volatility remains an ever-present risk.

Despite the recent swings, export basis trends can help provide clues to potential buying opportunities for U.S. wheat classes. In recent months, we have seen Pacific Northwest (PNW) hard red spring wheat (HRS) export basis erode from $1.75 per bushel ($64.30 per metric ton) in November 2022 to $0.80 ($29.40) in July 2023. Considering the recent drifts, this article will investigate the PNW HRS basis trend and provide additional context around the weakening basis.

A line chart showing export basis in dollars per bushel of wheat indicates basis has declined $1.75 per bushel since December 2022.

PNW HRS basis has drifted down since the start of 2023, recently hitting lows not seen since 2007, hovering 90 cents below last year’s level. Below average basis poses a unique opportunity for those interested in purchasing PNW HRS. Source: U.S. Wheat Associates Price Report.

Slow Demand Meets Seasonal Weakness

Otherwise known as the difference between the free on board (FOB) cash price and the futures price, export basis encompasses transportation costs, storage, and supply and demand at the regional level (e.g., farmer sales, local demand), and can fluctuate based on seasonality. In the pre-harvest months, basis generally weakens as the market looks to the influx of new crop stocks. Though a weaker basis is common for this period, unique to this year, the pace of farmer selling has remained slow. Throughout 2023, exporters noted low farmer sales, and USDA’s June Grain Stocks report noted on-farm stocks increased 34% from the year prior. In the last few weeks, farmer sales increased with the increased volume helping drive down basis.

Meanwhile, demand for U.S. wheat has also been relatively light. In 2022/23, commercial U.S. wheat sales were 20.7 MMT, down 4% from the year prior. So far in 2023/24, the U.S. export pace remains slow, tracking 32% behind last year at the same time.

The combined impact of seasonal weakness, the release of farmer-held stocks, and slow export demand have quickly eroded basis. Last week’s basis level of $0.75 ($27.56) signifies the weakest PNW HRS basis since July 2007. For this time of year, the current basis level is 51% below the ten-year average and down 90 cents per bushel from last year. The historically low basis level presents an opportunity for U.S. wheat importers to make purchases of HRS from the PNW or to lock in a low basis contract.

A line chart showing market volatility related to geopolitical tensions in the U.S. wheat futures markets and prices.

Wheat futures continue to fluctuate based on the global supply and demand situation and the erratic influences of geopolitics, weather. The most recent example is the response to the airstrikes in Ukraine last week. CBOT futures closed limit up at $7.57/bu; however, by the end of the week, CBOT futures were down 53 cents at $7.04/bu. Source: U.S. Wheat Associates Price Charting Tool.

With Proper Risk Management Opportunity Awaits

Despite the historically low basis, volatility presents a risk in the market. On July 24, Chicago Board of Trade (CBOT) wheat futures were limit up in response to the airstrikes in Ukraine, closing at $7.57/bu; however, by the end of the week, CBOT futures were down 53 cents at $7.04/bu.

Every marketing year presents new challenges and opportunities for buyers of U.S. wheat, and this year is no exception. Markets are volatile, but unique buying opportunities continue to arise. With proper risk mitigation, U.S. wheat importers can capitalize on opportunities for purchasing U.S. wheat and maximize the value of U.S. wheat classes, even in unpredictable times. Contact your local U.S. Wheat Associates office for more individualized information on risk mitigation strategies for your business and opportunities for U.S. wheat.

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

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Wheat Industry News

News and Information from Around the Wheat Industry

Speaking of Wheat

“The big news in wheat was the hard red winter number — shock-and-awe for USDA to increase it that much. The average trade guess was 532 million bushels, so the number was way above what anybody anticipated. We had a broad-based increase in yields, including Kansas, Oklahoma, and Texas. Big increases in Colorado and Nebraska with the rainfall. Montana yield up 5 bushels an acre, although that’s not yet certain, and then a little bit of an offset in South Dakota.” — Bill Lapp, founder and president of Advanced Economic Solutions in Omaha, Nebraska, as quoted in the World-Grain article “U.S. Winter Wheat Forecast Surprises Analysts.”  Read the full story here.

Russia Suggests Revival of Black Sea Grain Deal Dependent on ‘Improved Exports’

As Reuters and several other news organizations reported, a deal allowing the safe Black Sea export of Ukraine’s grain expired on July 17 after Russia quit and warned it could not guarantee the safety of ships. Russian officials suggested that if demands to improve exports of its own grain and fertilizer were met it would consider resurrecting the Black Sea agreement. However, U.N. Secretary-General Antonio Guterres said that a U.N. pact that aimed to help facilitate Russia’s shipments over the past year was also terminated. Read the full story here.

Climate and Violence Hobble Nigeria’s Push to Rely on its Own Wheat

The Associated Press published a story July 19 from Abuja, Nigeria revisiting the fact that Nigeria is trying to become self-sufficient. The government has launched programs to provide loans to farmers and boost domestic grain production. But extreme weather and violence from both gangs and farmers and cattle herders clashing over resources have hindered those efforts. It’s left Nigeria unable to produce enough wheat to bridge a gap in supply of more than 5 million metric tons. Read the full story here.

Nestle Investing in Wheat Supply Chain

In a July 19 article, World-Grain.com reported that Nestle USA, Inc. is investing in regenerative agriculture practices across its DiGiorno pizza brand supply chain in an effort to reduce the company’s overall carbon footprint.  The company’s investment will impact more than 100,000 acres of wheat-producing farmland. Nestle has partnerships with ADM and Ardent Mills, the two primary wheat flour suppliers for DiGiorno products, to support wheat farms in Kansas, Missouri, North Dakota, and Indiana.  Read the full story here.

Peters: Educational Efforts Build Relationships

In a July 17 interview with farm broadcaster Lorrie Boyer, U.S. Wheat Associates Board Chairman Michael Peters discussed U.S. Wheat’s upcoming work building export markets for wheat. He pointed out that, not surprisingly, one of the biggest challenges has been Russia. “Russia has still been shipping out a lot of wheat over this past year when they’ve shipped it out at a lot cheaper price than what we’re able to grow and produce it here in the U.S. So that has created some issues for us, with our overseas customers.” Listen to the Ag Information Network Report here.

Subscribe to USW Reports

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

Follow USW Online

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

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Wheat Industry News

News and Information from Around the Wheat Industry

Speaking of Wheat

“The international [grain] price in Ukraine will be on the level of the cost of production. Harvested grains and oilseeds will be level of 62 million (tonnes), exports about 40 million. We have only three seaports operating at capacity and [under the ‘fragile agreement’ to ship grains and other commodities via the Black Sea] Russia uses every possibility… to complicate these exports. [Ukraine’s] intention is to ensure freedom of navigation to and from Ukrainian seaports.” — Taras Kachka, deputy minister for Development of Economy, Trade and Agriculture of Ukraine, Trade Representative of Ukraine, from an article about the 2023 International Grains Council Conference by Chris Lyddon, World Grain.com. Read more here.

Russian Government Seeks Wheat Export Control

Bloomberg included an article June 29 suggesting “The Kremlin” is looking to exert greater control of Russian wheat production and trade. Reporter Aine Quinn wrote: “Russia’s growing market power is part of a broader effort. International traders such as Cargill Inc., left after facing pressure to clear the way for domestic companies. The changes put more control in domestic hands and could potentially make it easier for local companies to ship grains grown in occupied Ukrainian territory — and for Moscow to influence prices.” The article also suggested more government control of wheat would help it keep “the Global South on their side.” Read the article here.

Challenge from China on Black Sea Deal?

Agri-Pulse trade reporter Bill Tomson reported this week that China’s deputy permanent representative to the United Nations has stated that the Black Sea Grain Initiative needs to be renewed this month. The article indicates that China is most concerned about supplies of corn to feed its massive swine herd according to Collin Watters, director of exports and logistics for the Illinois Corn Marketing Board. Read more about the politics of war and grain here. Russian officials on July 5 said a final decision on whether to extend the grain deal has not been made.

National Wheat Foundation Tour for Government Staff

On June 27, 2023, the National Wheat Foundation and Maryland wheat grower Eric Spates, hosted a wheat farm tour for congressional staff and USDA employees. The attendees had the opportunity to explore the farm, witness the wheat harvesting process, and listen to speakers who specialize in the agriculture industry. The discussions centered around crucial topics such as risk management, conservation, pesticide programs, and environmental issues. Read more about the tour here.

Welcoming New NAWG Government Relations Representative

The National Association of Wheat Growers (NAWG) has hired Jack Long as the new Government Relations Representative. Long is a recent graduate from Oklahoma State University, where he received a Master’s in Agribusiness. Long is originally from Cole Camp, MO, and comes from a multigenerational farming operation. He has worked for Cornerstone Government Affairs and the Oklahoma State Senate, which provided him with a fundamental understanding of policy and current issues within the wheat industry. Read more here.

Communications Job in Montana

The state of Montana is accepting applications for the position of Marketing & Communications Director with the Montana Wheat and Barley Committee (MWBC), a state wheat commission member of U.S. Wheat Associates (USW). This position is responsible for managing marketing and outreach activities, content development and communications efforts for the MWBC. Primary obligations include planning and implementation of domestic marketing and international trade efforts aimed at increasing purchases of Montana grown wheat and barley. Read more or to apply, visit Montana’s government website here.

Subscribe to USW Reports

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

Follow USW Online

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

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Surprising USDA Reports Top-Off a Volatile Week

The June USDA reports on Acreage and Stocks, released on June 30, 2023, made a significant splash on grain markets after an already volatile week. With no new fundamentals to trade, wheat prices found little insulation from movements in corn and soybean markets. From June 21 to June 30, Chicago Board of Trade corn futures were down $1.14 on the week and CBOT Soft Red Winter wheat (SRW) futures were down $1.06. Minneapolis Grain Exchange (MGEX) Hard Red Spring (HRS) and Kansas City Board of Trade (KBOT) Hard Red Winter (HRW) futures dropped 63 cents and 75 cents, respectively.

Before Friday’s USDA reports, dryness in the U.S. Midwest, particularly in the Corn Belt, wreaked havoc on wheat and corn markets as corn conditions hovered at their lowest rating since 1988. Meanwhile, instability in wheat markets persists with on-going news from the conflict in the Black Sea.

June Acreage Report

The Acreage Report estimated the total U.S. wheat planted area at 49.6 million acres (ma) or 20.1 million hectares (mh), up 9% from 2022 but 300,000 acres less than the March estimates. The 2023/24 planted area still represents the largest planted area since 2016/17. Little changed from the March estimates with the winter wheat area projected at 37.0 ma (14.9 mh), up 11% from last year. The most significant increase occurred in the SRW wheat area as it registered a 17% increase from the year prior.

As discussed in previous articles, high prices in the fall of 2022 incentivized farmers to plant additional acres, and the USDA reports confirms that shift. New to the June report, the HRS area was forecast at 10.5 ma (4.2 mh), which is up 5% from the March estimates and 5% from 2022. Meanwhile, durum is predicted at 1.48 ma (0.6 mh), down 200,000 acres from the March estimates and 9% below 2022/23.

More Corn Than Expected

 

Statistics from USDA shows the volume of corn planted and harvested in the United States and the large increase in 2023.

U.S. corn planted area is expected to take an unusually large jump in 2023 according to a new report from USDA’s National Agricultural Statistics Service (NASS).

Corn and soybeans were arguably the largest surprise and the most significant contributor to Friday’s volatility. USDA forecast corn area at 94.1 ma (38.1 mh), which would be the third highest area on record, and is up from 88.6 ma (35.9 mh). The USDA NASS map at the top of this page shows an estimate of how many acres of corn are planted in each state and the percentage change from 2022. Soybean area was down 5% on the year and below trade estimates, coming in at 83.5 ma (33.8 mh).

The USDA estimates for the soybean area were nearly 5.0 MMT below the average trade estimates, sending a shockwave through commodity markets. The market reacts relative to how much the estimates deviate from the trade expectations. Source: Acreage, Grain Stocks, and Rice Stocks – Agricultural Statistics Board Briefing.

The impact of the USDA Acreage report released June 30 was bullish for soybeans, bearish for corn, and varied for wheat. That day, July 2023 CBOT SRW futures closed down 97 cents on the week at $6.36/bu. KCBT HRW futures were down 58 cents, at $8.01/bu. MGEX HRS futures were down 63 cents at $8.02/bu. CBOT corn futures were down 76 cents at $5.55/bu. CBOT soybean futures were up 63 cents, at $15.57/bu.

Quarterly Grains Stocks Report

The June Grain Stocks Report, published on June 30, USDA estimates that old crop wheat stocks are down 17% from 2022 at 15.8 MMT. On-farm stocks are 3.4 MMT, up 34% from 2022 but 22% below the five-year average. The larger on-farm stocks indicate that farmers hold a larger share of the wheat crop than years prior. Meanwhile, off-farm wheat stocks are down 25% at 12.4 MMT.

Key Takeaways

The week’s volatility and the impact of the reports demonstrate persistent risks in the current wheat market and the ever-present influence of the weather. As the crop year progresses, it is crucial to keep a watchful eye on corn and soybean markets, as fundamentals in these markets can have consequences on the wheat market. Likewise, as the harvest pace ramps up and more information about the new crop becomes available, markets will begin to price in the availability of the supply, anticipated demand, and quality of the year’s crop.

Line chart from USDA reports show the relationships between U.S. wheat, corn, and soybeans planted area over time.

USDA forecast corn area at 94.1 ma (38.1 mh), the third highest area on record, while the soybean area was down 5% on the year and below trade estimates, coming in at 83.5 ma (33.8 mh). The soybean area declined for the first time in three years. Corn and soybeans compete directly for space, so the sharp increase in corn plantings cut into the soybean area. Source: USDA Grains Stocks Report.

Stay current on the 2023 wheat harvest via the U.S. Wheat Associates Harvest Reports and market moving factors in the weekly Price Report.

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Wheat Industry News

News and Information from Around the Wheat Industry

Speaking of Wheat

“Without a trade agenda that also advances U.S. economic interests by addressing barriers to U.S. exports through free trade agreements, the United States will lose influence globally. Other countries welcome U.S. products and benefit from the two-way relationship that free trade agreements promote. The U.S. government’s trade policy should be comprehensive … strengthening our global economic presence through proactive policies that support our export competitive industries such as U.S. food and agriculture.” – Sharon Bomer Lauritsen, founder of AgTrade Strategies and former assistant USTR for agricultural affairs and commodity policy, in a story by Agri-Pulse Trade Reporter Bill Tomson.

President Peterson Looks at Wheat Export Opportunities

U.S. Wheat Associates (USW) President Vince Peterson was in Montana this week for a meeting of the Montana Wheat and Barley Committee. He was interviewed by local media about the current challenges to U.S. wheat exports and future opportunities. “We’re trying to work in that environment where we’re facing a lot of competition globally,” Peterson said. “But at the same time, the carrot is out there … We’re going to have nearly 10 billion people by 2050, we’re going to consume a billion tons of wheat globally, and we’re going to have to trade 350 million tons of that globally.” Read more here.

Drought Expansion

University of Illinois FarmDoc says as of middle June, much of the U.S. corn production region is either dry or in drought according to the U.S. Drought Monitor, raising the prospects of a serious drought like that which occurred in 2012. Typically, prices continue to rise in drought years and, as an alternative to corn as a feed grain, winter wheat’s weather market appears to have momentum. European analyst Strategie Grains mentioned wheat production is confirmed at low levels in Spain and North Africa, and drought is starting to take hold across northern Europe, affecting yield potentials.

This illustration shows a U.S. map with corn production and drought indicating 65% of corn production area is in drought as of June 20, 2023.

This illustration from government sources shows a U.S. map with corn production and drought indicating 64% of corn production area is in drought as of June 20, 2023.

EU Softening Toward Gene Editing?

Agri-Pulse reported this week that a European Commission draft proposal could lead to a loosening of regulations on new genetic engineering techniques like gene editing. A draft regulatory document leaked and posted online by advocacy group ARC2020 proposes a streamlined path for certain new genomic techniques, or NGTs. An official proposal is expected early next month. “To see the European Commission edging toward welcoming gene editing is just a great thing,” Matthias Berninger, Bayer Crop Protection’s senior vice president of public affairs, science and sustainability, told Agri-Pulse at the company’s Crop Science Innovation Summit in New York City. Read more here.

NAWG: Dam Removal Endangers U.S. Wheat Export Competitiveness

At a at a Congressional Western Caucus Forum on the Importance of Hydropower to Rural Communities, National Association of Wheat Growers Chandler Goule provided a wheat perspective on the importance of the river system and barging play in helping feed the world. “The Lower Snake River Dams are a critical infrastructure system required to move U.S.-grown wheat to high-value markets around the world,” said Chandler Goule. “More than 55 percent of all U.S. wheat exports move through the Snake River system by barge or rail. Specifically, 10 percent of wheat that is exported from the United States passes through the four locks and dams along the Lower Snake River. This corridor is the third-largest grain export corridor in the world and is the single largest corridor for U.S. wheat exports.” NAWG remains opposed to breaching the dams as the agricultural, clean energy, and transportation benefits from the lock and dam system are irreplaceable and will continue to advocate on behalf of wheat growers to maintain this vital infrastructure. Read more here.

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

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

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