thumbnail

News and Information from Around the Wheat Industry

Speaking of Wheat

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

Obscuring Price Discovery

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

Bearish News

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

Canadians to Seed More Wheat

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

Striking Workers Target Canadian Port

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

Rain Arrives; Too Late for Regional HRW Wheat?

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

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

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

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.

thumbnail
USW's . The 2023 South and Southeast Asian Marketing Conference will be held May 9-11 in Phuket, Thailand.

The 2023 South and Southeast Asian Marketing Conference will be held May 9-11 in Phuket, Thailand.

After more than a decade of absence, U.S. Wheat Associates (USW) is restarting an event that brings together customers and partners in an important region of the world. The 2023 South and Southeast Asian Marketing Conference will be held May 9-11 in Phuket, Thailand.

“Building Prosperity Through Partnership” is the theme of the conference, which will focus on the value of U.S. wheat and people who produce, supply and support it in the global marketplace. Asian millers, buyers and importers in the region will have the opportunity to meet with U.S. wheat farmers, state wheat associations, USDA representatives and USW technical and marketing staff. Likewise, those from the U.S. wheat industry will be able to interact with customers and potential customers.

The conference will include input from major flour mills in the region, with a panel discussion focused on the perspective of millers in Thailand, Vietnam, Indonesia, Myanmar and the Philippines.

“We recognized that the time had come to revitalize the conference to engage the trade and visit with our dedicated customers in the region,” said Joe Sowers, USW Regional Vice President for South and Southeast Asia. “At the same time, there are opportunities to make new customers while also tackling challenges and identifying ideas for business growth. We have a top-notch lineup of speakers and presenters, along with a host of panel discussions that address critical issues in 2023 and beyond.”

USW’s Wheat Letter Blog will provide regular updates from the conference. Videos and blog posts will appear on the site throughout the event.

thumbnail
USW Director of Trade Policy Peter Laudeman (left) chats with NAWG Vice President Of Policy And Communications Jake Westlin during the recent NAFB "Washington Watch" event in the nation's capital. Laudeman is currently in Australia to engage grain industry stakeholders in that country and explore ongoing global issues involving trade, plant breeding technologies and World Trade Organization (WTO) commitments.

USW Director of Trade Policy Peter Laudeman (left) chats with NAWG Vice President of Policy and Communications Jake Westlin during the recent “Washington Watch” event in the nation’s capital. Laudeman is currently in Australia to engage grain industry stakeholders in that country and explore ongoing global issues involving trade, plant breeding technologies and World Trade Organization (WTO) commitments.

U.S. Wheat Associates (USW) Director of Trade Policy Peter Laudeman is in Australia this week to engage grain industry stakeholders in that country and explore ongoing global issues involving trade, plant breeding technologies and World Trade Organization (WTO) commitments.

While a major competitor for U.S. wheat, Australia presents many opportunities for collaboration on policy initiatives that mutually impact both U.S. and Australian producers.

Laudeman will interact with researchers, government regulators, producer organizations, and private sector plant breeding and grain handling companies. His discussions will primarily be focused on the regulatory environment guiding plant breeding technologies, including transgenic and gene edited wheat. Both the U.S. and Australia regulators are reviewing applications to deregulate HB4 wheat produced by Argentinian company Bioceres.

HB4 wheat, a drought-tolerant transgenic wheat, received approval for commercialization and cultivation from Brazil in early March. Brazil joined Argentina, which granted commercialization approval to the genetically modified (GM) wheat in 2022. HB4 wheat is also approved for food and feed use in the U.S., Australia, Colombia, New Zealand, South Africa, Nigeria and Indonesia.

Growing global demand for wheat combined with persistent drought conditions that hamper production is leading the push for greater acceptance of new plant breeding technologies. Bioceres said HB4 drought-tolerance technology has been shown to increase wheat yields by an average of 20% in water-limited conditions.

USW and the National Association of Wheat Growers (NAWG) are guided by jointly approved “Wheat Industry Principles for Biotechnology Commercialization,” which lay out specific steps expected from plant breeding companies if they wish to commercialize transgenic wheat in the U.S.

India’s oversubsidization of wheat and rice is another topic Laudeman will visit while in Australia, which has been a partner with the U.S. in holding other trading partners accountable to their WTO commitments. Australia recently joined WTO counternotification filed by the U.S. against India.

thumbnail

On April 18, 2023, Kansas City Southern Railway Company (KCS) and Canadian Pacific Railway Limited (CP) officially merged to create a new Class 1 railroad CPKS, the first single-line service across Canada, the U.S., and Mexico (map above from Trains.com).

CPKC railroad logoRail logistics comprise a sizeable portion of U.S. wheat export basis, encompassing the costs of transporting wheat from the vast growing region in the central U.S. to export hubs in the Great Lakes, Gulf of Mexico, and the Pacific Northwest. The acquisition brings the total number of Class 1 railroads in North America from seven to six and may potentially impact wheat exports as the industry restructures in response to the merger.

In this article, we will summarize the importance of domestic rail for U.S. wheat buyers and look at the current trends in bulk rail as we look ahead to the merger’s implications.

Historical Perspective

Since the 1980s, the railroad industry has seen significant consolidation, going from 33 North American Class 1 railroads in 1980 to six in 2023.

In 2022 the four largest rail companies, Burlington Northern Santa Fe (BNSF), Union Pacific (UP), Canadian Pacific (CP), and Canadian National (CN), held 82% of the market share for grain origination in North America, creating an oligopoly in the U.S. rail transportation sector. The increased consolidation decreased the number of firms in the market competing for business, shifting the market power to favor rail service providers.

Pie chart showing the % market share for the 7 Class 1 railroad companies in North America before the merger of CP and KCS.

The top four Class 1 railroads in North America control 82% of the grain market share. The merger of CP and Kansas City Southern brings the total number of Class I railroads from seven to six. Source: U.S. Department of Agriculture, Agricultural Marketing Service. Grain Transportation Report. April 20, 2023. Web: http://dx.doi.org/10.9752/TS056.04-20-2023

A potential consequence of increased concentration in the industry, tariff rates for all grains have steadily increased over the last 20 years; thus, making transportation costs greater for exporters who, in turn, increase basis for customers. A 2020 study by USDA found that from 2000 to 2014, rail rates increased by 30% for wheat, 31% for corn, and 30% for soybeans. Since 2014 wheat rail tariff rates have increased by an additional 18%. As rates rise, it erodes the competitiveness of U.S. wheat classes in the export market and makes U.S.-origin wheat more expensive for importers.

Line graph showing an increase in railroad tariff rates for corn, soybeans, and wheat from 2010 through 2023 to date.

Rail tariff rates have been on the rise for all bulk grains since 2010. Rates continued to increase even as shippers experience what they considered poor performance through most of 2022. Source: USDA AMS Rail Dashboard

Ongoing Issues

Throughout 2022 rail logistics faced considerable challenges that impacted the quality of performance throughout the bulk rail sector, including service interruptions and crew shortages. In October 2022, Secondary Railcar Auction Market Bids hit their highest level since 2014, reflecting massive demand for rail freight and an insufficient supply to meet the demand.

Graph showing historical secondary auction market railroad rates for grain from 2013 through 2023 to date.

Secondary auction market rates move more quickly than tariff rates and better reflect current supply and demand shifts as shippers buy and sell claims for guaranteed service. If demand is high during a particular period, bids increase, meanwhile when supplies are adequate secondary rates will hover near zero or negative if demand hits a low threshold. In the fall of 2022, Secondary Railcar Auction Market Bids hit their highest level since 2014. Source: USDA AMS Rail Dashboard

Performance issues and subsequent demand for rail cars contributed to elevated export basis throughout the fall of 2022. Strong basis levels and elevated wheat futures, a response to the geopolitical tensions brought on by the Russian invasion, created enormous price risk for U.S. wheat importers and further diminished U.S. wheat’s competitiveness in the world market.

Line graph showing changes in the "basis" for hard red spring wheat to Gulf, PNW and Lakes ports from April 2022 to April 2023 to demonstrate a spike attributed to railroad rates for shipping wheat.

Though wheat basis levels often increase during the fourth quarter of the calendar year as exporters focus on corn and soybean export programs, in the fall of 2022 basis levels skyrocketed. Basis levels jumped to $0.50/bu ($18.40/MT) over the previous five-year average, combined with historically high futures prices. Source: U.S. Wheat Associates Price Report

A Look Ahead

The Surface Transportation Board approved the merger on the grounds of efficiency, positive environmental impacts, improved rail performance, and increased employment; still, the STB necessitated additional oversight to ensure the preservation of competition. Despite the approval, the U.S. wheat industry remains skeptical of the merger’s effects on wheat export competitiveness, taking into account performance issues from major railroads, basis and logistics costs, and the oligopoly of the U.S. railroads.

On the other hand, CPKCS could help increase competition in some regions, due to increased access routes previously unserved by individual companies. Nevertheless, U.S. Wheat Associates will continue to support oversight from the STB and policies such as reciprocal switching that help preserve competition and contribute to our dependable, reliable supply chain.

By USW Market Analyst Tyllor Ledford

thumbnail

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

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

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

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

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

A Crazy, Common Theme

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

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

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

Dry as Death Valley

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

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

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

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

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

Colorado, Nebraska and South Dakota

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

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

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

Rain Too Late for Wheat

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

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

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

 

thumbnail

A new paper on food security submitted by the United States at the World Trade Organization (WTO) has to date received little attention but it could signify a meaningful shift in dealing with agriculture issues at the WTO. That paper, entitled “The World Trade Organization’s Role in Enhancing Food Security” suggests that facilitating rules- and science-based trade should be the basis for building global food security. The concept sets up a new approach to discussing food security issues that will span multiple areas of jurisdiction. Taking a new approach is critical as the current agenda is driven by countries set on only weakening existing WTO rules, which creates a breeding ground for trade distortions.

WTO logo and words: World Trade Organization.

Those who support an effective and predictable legal architecture for agricultural trade should want to see a WTO that is able to facilitate trade liberalization. This “reset” of the negotiating agenda starts small – the only next steps identified are additional submissions and discussions – but it will take time and sustained effort to overcome the inertia of the current agenda and reestablish the WTO as a useful negotiating tool.

Core Elements of Food Security

The paper focuses on food security, which is understandable since it is a major agenda item at the WTO. The war in Ukraine has put the issue in the spotlight; meanwhile, India continues to use a façade of food security to insist that WTO rules shouldn’t apply to them. That dynamic creates pressure to do something but action for its own sake can lead to poor outcomes for the trading system, especially if India is able to get the WTO to endorse its vision of food security. Unfortunately, there is no consensus on the time-tested ideas identified by the U.S. paper, namely that trade is critical to these core elements of food security:

  • Movement of Food – An open trading system is more resilient because it allows countries to adapt quickly to supply chain shocks. An open system also provides access to a more varied and nutritious diet, which is another important component of food security.
  • Innovation – Legal frameworks need to incentivize innovation while recognizing that one-size-fits-all practices are not possible and should not be imposed on trading partners.
  • Development – Support for trade facilitative infrastructure coupled with access to markets and innovations can reduce poverty and enhance food security.
  • Sustainability – Producers need policies that empower them to transition to more sustainable production practices and adapt to shocks. Well-intentioned but badly structured policies can have negative effects on the environment and trading partners.

Multiple WTO Jurisdictions

Those issues cut across WTO committee jurisdictions, which is why the paper was submitted to seven separate committees, not only the Committee on Agriculture. It also identifies in general terms how the WTO can enhance food security in work under these four categories.

Time will tell if this submission by the United States will be a soon-forgotten document with nice ideas leading nowhere, or if it is the beginning of a thoughtful, creative, and proactive approach to the cross-cutting issues facing agriculture and global food security. Private sector involvement and sustained leadership by like-minded governments will be critical in determining its future.

By Ben Conner, Partner, DTB AgriTrade, LLP

thumbnail

News and Information from Around the Wheat Industry

 

Speaking of Wheat

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

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

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

Winter Wheat Conditions Still Lower

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

The Passing of Joe Kejr

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

China to Lead 2022/23 Wheat Import Volume

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

2023 Hard Winter Wheat Quality Tour Registration Ends May 1

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

thumbnail

Roy Chung has been teaching U.S. wheat’s international customers about the value of frozen dough for more than 30 years.  During the COVID pandemic, many of his points about frozen dough’s importance in the marketplace were confirmed, as bakeries that were using it were able to continue operations despite staffing shortages. Chung, a U.S. Wheat Associates (USW) bakery consultant, predicts that frozen dough demand around the world will continue to grow, which is good news for U.S. hard red spring (HRS), hard red winter (HRW) and soft white (SW) wheat. In this short video, Chung provides an overview of frozen dough and its importance to businesses and bakeries that purchase U.S. wheat.

thumbnail

Educators describe internal training sessions as “learning so we can teach.” The U.S. Wheat Associates (USW) version for its staff dives a few rungs deeper than that.

“The goal is to learn and do so we can, in turn, teach our customers around the world,” is how Miguel Galdos, Regional Director of the USW South American Region Office, puts it.

USW recently hosted – and participated in – the 2023 Core Competency Training, held this year in Santiago, Chile. Much more than a simple training session, the USW workshop brought together USW technical staff, board members and partners for a series of reviews and refreshers on wheat research, product development, market updates and strategy building. Meeting the needs of U.S. wheat buyers, end-users and consumers around the globe was the mission.

USW staff, board members and partners recently participated in the 2023 Core Competency Training in Santiago, Chile. The training sessions were designed to provide participants with tools to help share information and work with customers of U.S. wheat around the world.

USW staff, board members and partners recently participated in the 2023 Core Competency Training in Santiago, Chile. The training sessions were designed to provide participants with tools to help share information and work with U.S. wheat customers around the world.

At this year’s Core Competency Training,  USW was able to take advantage of the new flour milling, cereal chemistry and baking laboratory it opened two years ago in partnership with Universidad Mayor.  Built on the university’s Santiago campus, the lab is equipped with a test flour mill, wheat and flour analysis instruments and bread ovens.

“It was an unbeatable opportunity to bring together USW colleagues and be able to review relevant issues regarding many things, including our U.S. wheat crop quality analysis methods,” said Galdos. “Participants also had the opportunity to compare baking results with different origins of wheat, as well as share success experiences in each of the international markets. Additionally, we had the opportunity to evaluate future instances of collaboration with partner organizations that provide support to USW.”

USW Past Chair Darin Padget and current Chair work together on a baking assignment during the Core Competency Training in Santiago.

USW Past Chair Darren Padget and current Chair Rhonda Larson work together on a baking assignment during the Core Competency Training in Santiago.

Experiences during the Core Competency Training is fundamental: U.S. wheat is the most reliable choice, and its quality is unmatched. So information provided during the workshop is designed to help USW staff share information about U.S. wheat’s advantages when it comes to end-products, such as noodles, crackers, biscuits, tortillas, breads, and other baked products.

There is also a chance to meet with staff from other offices to share information.

Oregon wheat farmer and USW Past Chairman Darren Padget, Minnesota wheat farmer and USW Chair Rhonda Larson, and North Dakota wheat farmer Jim Pellman participated in this year’s training. The noted that the opportunity for USW colleagues to train together is very valuable.

“The format is very focused and was a great way to make sure the technical and marketing teams are pulling on the same oar in every market,” Padget said.

USW staff took time to memorialize the late Mark Fowler, USW’s Vice President of Global Technical Services, who passed away Feb, 20. Fowler was instrumental in creating the USW Core Competency Training program. He also played a major role in the development of the new laboratory in Santiago where USW has now placed a plaque in his memory.

thumbnail

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

Prospective Plantings Reaction

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

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

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

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

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

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

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

Weather Risk Creates Uncertainty

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

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

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

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

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

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

A Tight U.S. Balance Sheet

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

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

By USW Market Analyst Tyllor Ledford