Wheat Letter Blog Archive - Page 17 of 104

Export Basis, Exports, Futures, Hard Red Spring, Market and Crop Analysis

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.

August 2, 2023/by Steve Mercer

Hard White, Kansas Wheat

Kansas Wheat Industry Looks at 2023 Hard White Wheat Production and Quality

This article on the hard white (HW) wheat crop in Kansas was sponsored by the Kansas Wheat Commission, Kansas Association of Wheat Growers, Kansas Grain and Feed Association and the Kansas Cooperative Council.

Hard white (HW) winter wheat varieties continue to be popular among some western Kansas farmers for their high yields, disease resistance and quality. As U.S. wheat importers understand, the biggest challenge for hard white is market liquidity and continuity of trade into the marketplace.

Kansas Wheat continues to work with the grain handling industry and Federal Grain Inspection Service to revise the grain standards to facilitate HW movement in domestic and international markets and lessen the burden on grain handlers. For additional information on Kansas Wheat’s comments submitted to FGIS, visit https://www.federalregister.gov/documents/2022/10/12/2022-22113/united-states-standards-for-wheat.

HW winter wheat is very similar to hard red winter (HRW) wheat apart from a gene impacting the color of the outer bran coat. It can be used for stand-alone whole wheat products with a lighter color or can be used interchangeably by mills with HRW, depending on protein and extraction needs.

Hard white wheat had been growing in export demand, primarily to Nigeria out of the Texas Gulf, but the past two years of drought-stricken production shortfalls have impacted that business.

A close up photo of hard white wheat kernels against a white background.

Hard white wheat has a hard endosperm, white bran and a medium- to high-protein content of 10.0% to 14.0% (12% mb). HW includes winter and spring varieties increasing the protein range and functionality within the class.

A Regular Joe

A HW variety named “Joe” is the top seeded variety in west central Kansas, making up 14.3% of planted acres. Hard white wheat varieties also make up 11.4% of acres in southwest Kansas. Overall, HW was seeded on 4.7% of Kansas’ 8.1 million acres, accounting for 380,700 acres seeded to HW in fall 2022. In these areas, the multi-year drought caused many seeded acres to be abandoned, including an estimated 60% of Kansas’ dryland hard white wheat acres.

HW winter and spring wheat is also grown in Colorado, Nebraska, Idaho, and California. The U.S. Wheat Associates (USW) Hard White Wheat Committee estimates U.S. total hard white wheat production to be just about 463,000 metric tons.

Overall, the quality of this year’s HW crop is excellent. While southwest Kansas had to abandon many acres, HW production increased in areas to the north.

More than Expected

Eric Sperber from Cornerstone Ag, an up-country elevator in Colby, Kan., said they have received four times the HW they got last year. At this point, HW makes up about 40% of their bushels.

“It’s a lot more than I was anticipating,” said Sperber. “It has been a number of years since we [received] this much white wheat.”

Overall, the quality of this year’s HW crop in the Colby area is comparable with the HRW wheat, with test weights ranging from 57 to 60 pounds per bushel, with the average ending up on the lower end with the delayed harvest. Earlier-harvested HWhad higher test weights, which has decreased after last week’s rain. Proteins consistently averaged 12.5% (12% moisture basis).

Results from the 2023 Hard White Wheat Quality Survey will be available from U.S. Wheat Associates and other sources online in October.

July 31, 2023/by Steve Mercer

Hard Red Winter, Sustainability

Stories of Stewardship: Generations of Care in Central Kansas

As a 5th generation farmer and father of three working alongside his own father and brother, Justin Knopf (above) recognizes his responsibility as a steward of the land for the next generation both on and off the farm. On the farm in central Kansas near the town of Gypsum, the Knopf family grows hard red winter (HRW) wheat, alfalfa, grain sorghum, soybeans, and corn on the same land the family originally homesteaded in the 1860’s.

Justin is passionate about being involved in the industry and says outreach is an important part of agricultural sustainability.

“What I do impacts consumers, so it is important to take time and energy to be transparent with them and share the bigger story of what is happening in our landscape,” he says. “I have been given a gift to be able to work with the land and that comes with responsibility.”

Cover Crops

Justin is always learning new farm management skills and how he can apply the latest technology. After attending a no-tillage farming conference, he learned that an evolving no-till system includes having a crop always growing in the soil. After experimenting with cover crops in his rotation, the results show this boosted biological diversity in his soil and at times allowed him to reduce the use of weed, disease, or insect control products where cover crops are grown.

Improving the Soil

Quality soils are crucial for crops to reach their full potential, but abuse can quickly lead to nutrient loss, erosion, and reduced productivity. Farmers on the Plains witnessed the cost of over-plowing their soil in the Dust Bowl of the 1930s and since then have fought hard to protect their most precious resource.

The Knopf family has invested in soil health through cover crops, no-till farming, and crop rotations. The changes have improved soil health. The soil is better able to retain moisture and is more fertile, which helped reduce inputs like fertilizer and fuel and increased yields. But these changes did not happen easily or overnight. Adding these new management practices required a financial investment, continued education and dedication from Justin and his family.

Panaramic image of the Knopf family farm in central Kansas including a farm stead, green fields and ripe wheat field in the background on a cloudy day.

The Knopf family grows hard red winter wheat, alfalfa, grain sorghum, soybeans, and corn on the same central Kansas land the family homesteaded in the 1860’s. Photo courtesy of Kansas Wheat.

Keeping the Soil

There is no irrigation or tillage on the entire Knopf family farm. Since the family transitioned to no-till farming in the early 2000s, Justin says he has seen a physical change in their soil. The soil is darker, richer and has more organic matter than before. These rejuvenated soils are more productive and resilient, making it easier to grow crops with fewer inputs and less rain (something that has been even more important given the recent long drought in the region), and are less likely to erode.

“The land will go on for much longer than I will be here, and it’s a much bigger story outside of myself,” Knopf says. “So I feel a responsibility to share that bigger story of what is happening with other people as a part of our stewardship.”

Knopf participated in the U.S. Wheat Associates (USW) film “Wholesome: The Journey of U.S. Wheat” discussing the care he takes in his wheat crop with sustainable practices.

U.S. Wheat Associates (USW) is reaching out to wheat farmers across the United States to learn how they strive to improve their land and manage resources. Each is committed to adapting to the many challenges they face and making choices that are best for the environment, their individual farms, and their customers. We are proud to share their “Stories of Stewardship.”

July 31, 2023/by Steve Mercer

durum, Hard Red Spring, Northern Durum

Spring Wheat and Durum Tour Provides Insight, Interaction for U.S. Wheat Industry Stakeholders

USW Director of Trade Policy Peter Laudeman during one of the many stops on the 2023 Spring Wheat and Durum Tour across North Dakota.

Participating in the Wheat Quality Council’s Spring and Durum Wheat Tour for the first time, U.S. Wheat Associates’ (USW) Peter Laudeman was eager to discover what he could learn about the 2023 crop across an important section of the Northern Plains.

He wasn’t disappointed.

The tour, which included examination of more than 300 spring wheat and durum fields in North Dakota and western Minnesota, was supplemented by information about the timing of the current crop, along with the weather patterns that affect it.

“Overall, we saw a wide variety of crop conditions, with the conditions and maturity largely depending on planting dates,” reported Laudeman, USW’s Director of Trade Policy. “In general, the later planted wheat looked like it may have better potential as long as it has enough time to mature.”

Production. Process and People

Not only did Laudeman experience differing field conditions on the Wheat Quality Council’s Spring Wheat Tour, he was also able to participate in the analytics: those on the tour were asked to write down details and measurements from each field, with those measurements used to help formulate yield estimates.

Importantly, he was also able to interact with a sizeable cross-section of the U.S. wheat industry.

“There was a diverse variety of people from across the wheat value chain, many who were getting into wheat fields for the first time,” Laudeman explained. “It was especially great to see so many participants from the USDA, including representatives from the Foreign Agricultural Service (FAS) who will be able to use their experience with the tour as a concrete proof point in their work with overseas customers for U.S. commodity exports.”

The tour included the examination of more than 300 spring wheat and durum fields in North Dakota and western Minnesota. It was supplemented by information about the timing of the current crop, along with the weather patterns that affect it.

2023 Crop Looks ‘Average’

The three-day tour wrapped up July 27 with presentations in Fargo by the Northern Crops Institute (NCI) at North Dakota State University (NDSU). Overall, reports from the tour indicate North Dakota wheat farmers later this summer will be harvesting an average crop with good quality. The tour estimated the average hard red spring wheat yield at 47.4 bushels per acre, a bit below the 2022 tour estimate of 49.1.

Tour is Important Tool

Wheat Quality Council Executive Vice President David Green, who organized the tour, said the event is all about providing insight and education.

“Along with calculating and estimating the crop’s potential, we also aim to educate people who are new to the industry, or even those in the industry who have not experienced this process,” said Green.

July 28, 2023/by Ralph Loos

Market and Crop Analysis, Plant Breeding Innovation, Snake River Dams, Trade Negotiations and Barriers, Wheat Industry News

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.

July 20, 2023/by Ralph Loos

Soft White, Supply and Demand, Tyllor Ledford, Wheat Prices

U.S. Soft White Wheat Production: It’s Dry, But Too Early in Harvest to Determine 2023 Yield

Drought conditions have grown progressively worse in the PNW over the last few months as temperatures increased rapidly and measurable precipitation remained scarce, depleting soil moisture and stressing the planted wheat crop.
Source: NOAA Climate Prediction Center

Amid this year’s volatile markets and relatively slow demand, U.S. soft white wheat (SW) has provided many customers with buying opportunities, positioning itself as one of the most competitive classes of U.S. wheat.

In recent months, dryness in the Pacific Northwest (PNW) this spring dominated market news and discussions about quality. As harvest ramps up across the SW growing region, more information is expected to become available regarding SW production, yield, and quality. In the meantime, this article will recap the current soft white wheat situation and provide background on supply factors as harvest progresses in the PNW.

Production Outlook: A Tri-State Effort

White wheat is typically one of the classes with the most stable planted area. The June 30 USDA acreage estimates showed a slight increase in white wheat acres to 4.28 million acres, up from 4.24 million acres in 2022/23, with a specific increase in the SW producing state of Oregon. Despite the increased area, dry conditions have lingered, and have had a potentially detrimental impact on yield potential and quality. The USDA Crop Production Report released on July 12 forecasts SW production at 6.7 MMT, down from 7.4 MMT the year prior and 600,000 MT below the five-year average of 7.2 MMT. However, the forecast is still above the 2021/22 production levels of 5.47 MMT after severe drought diminished yield potential and increased protein levels.

On a per state basis, production potential differs throughout the growing region. Wheat production is forecast to be down in Washington and Oregon by 15% and 16%, respectively. Meanwhile, in Idaho, all wheat production is forecast at 2.45 MMT, down 2% from the year prior. Though the Idaho crop is behind on development, some growing regions have benefitted from cool weather and scattered showers.

2023/23 SW production is forecast at 6.7 MMT, down 9% from last year and 7% below the five-year average.
Source: USDA ERS Wheat Data

The Current Balance Sheet

Throughout the latter part of the 2022/23 marketing year, industry sources reported slow selling by farmers and increased stocks held on the farm. Due to the increased stocks held by farmers, beginning stocks for the 2023/24 marketing year increased by 500,000 MT to 2 MMT, the first stocks increase since 2020/21. Though protein levels of the 2023 crop are not yet known, the increased old crop wheat stocks can be blended with new crop to help meet customer specifications.

Moreover, SW prices have softened substantially over the past year, weighed down by recovered production in the 2022/23 crop year, decreased export demand, competition from other origins, and seasonal pressures as exporters more aggressively price SW into the global market. Over the last six months, SW prices have decreased from $321/MT in January 2023, to $263/MT in July 2023, their lowest level since November 2020. Furthermore, there has been little to no premium for max 9.5% protein versus max 10.5% protein throughout a majority of the 2022/23 crop year.

Despite the 9% decrease in SW production for 2023/24, total supply is down only 2% due to increased carryover stocks from the year prior.
Source: USDA World Agricultural Supply and Demand Estimates

Looking Ahead

As of July 17, the USDA crop progress report put winter wheat in Washington, Oregon, and Idaho at 6%, 15%, and 5% harvested, respectively. With little harvest progress and no quality data collected, no definitive information is yet available regarding SW production yield, and quality characteristics. Keep in mind that anecdotal evidence generally indicates that dryland areas and regions with shallow soil are harvested first. Thus, higher protein is expected to be registered early in the season.

U.S. Wheat Associates recommends closely monitoring the SW harvest and maintaining regular communication with your supplier regarding protein availability and premiums. For weekly updates to harvest and price information subscribe to the U.S. Wheat Associates Harvest Report and Price Report.

SW prices have softened substantially over the last six months, decreasing from $321/MT in January 2023, to $263/MT in July 2023. SW prices hover at their lowest level since November 2020, pressured by low demand, competition from other origins, and seasonal pressures.
Source: U.S. Wheat Associates Price Report

July 19, 2023/by Ralph Loos

Crop Quality Report, Erica Oakley, Grain Science

Kernel Photography Project: Images Designed to Help Educate Customers About U.S. Wheat’s Quality

Building a kernel photo library with new and updated images from each of the six classes of U.S. wheat requires the single steady hand of a skilled photographer.

And hundreds of hands of support from everyone else.

The wheat kernel photo library project, which U.S. Wheat Associates (USW) began planning earlier this year, took a major leap forward in June, when the Department of Plant Sciences at North Dakota State University hosted a photo crew from Middle, USW’s creative agency in Manhattan, Kansas. Over two days, a Middle photographer captured images of a dozen different varieties of U.S. wheat – the six classes and several subclasses – from fields across the country.

Therein lies the referenced “hundreds of hands of support” – wheat kernels photographed for the USW project were sent to the NDSU campus in boxes and buckets from Idaho, Kansas, Maryland, Ohio, Oregon, Texas and, of course, North Dakota.

Clair Keene, an Assistant Professor and Agronomist at North Dakota State University, and North Dakota Wheat Commission Policy and Marketing Director Jim Peterson watch as a photographer captures images as part of the photography project. NDSU hosted the photo shoot to build the new library of wheat kernel images.

Photos in the wheat kernel photo library project include magnified up-close shots of individual kernels, as well as cross-cut shots that show an internal view of the kernel. There are photos of small piles of the grains that depict uniformity and color.

The library is still “under construction,” but once it is complete, photos will be used across USW departments for a variety of projects. Having access to clear and accurate kernel images allows USW to educate and inform both internal and external audiences, explained USW Vice President of Programs Erica Oakley.

“There are many important uses for these images – everything from our Crop Quality programs to presentations our staff and partners give around the world to buyers and potential buyers of U.S. wheat,” explained Oakley. “We really appreciate the people at North Dakota State University for hosting this project, and we must thank producers and state wheat associations for sharing samples of their wheat to photograph. It’s a worthwhile project that will benefit us all.”

July 19, 2023/by Ralph Loos

USW Staff, Wheat Producers Learn About Export Logistics on NCI’s Minneapolis Port Tour

U.S. Wheat Associates (USW) Market Analyst Tyllor Ledford and Director of Communications Ralph Loos participated in an event organized by the Northern Crops Institute (NCI) that helps both U.S. producers and international customers better understand logistics required to move wheat and other commodities. The Minneapolis Port Tour, which included stops at CHS facilities and a BNSF Intermodal Yard – as well as a ride on the Mississippi River – took place immediately following the USW 2023 Summer Board Meeting in the Twin Cities. Farmers and state wheat association staffers from Oklahoma, Minnesota, Montana and Washington took part. Scenes from the two-day tour can be seen in this video . . .

July 14, 2023/by Ralph Loos

Market and Crop Analysis, Plant Breeding Innovation, Snake River Dams, Trade Negotiations and Barriers, Wheat Industry News