Wheat Letter Blog Archive - Page 22 of 104

Springtime Refresher: How USW Keeps U.S. Wheat Producers, Customers Informed

Early spring – before the harvest of winter wheat and the planting of spring wheat – is a perfect time to highlight tools U.S. Wheat Associates (USW) provides to inform U.S. wheat farmers and their customers around the world.

It’s also a good time to remind readers of this blog how to access those USW tools.

USW Price Report

USW gathers information from market sources to compile timely reports on prices and export sales of U.S. wheat. The USW Price Report, which is sent to subscribers each Friday, also includes updates on market conditions and input from people involved in each step of the wheat trading process.

Monitoring the Chicago Board of Trade (CBOT), Kansas City Board of Trade (KCBOT) and Minneapolis Grain Exchange (MGEX) wheat futures is only part of the process.

“A huge component is talking with the grain trade, farmers and other industry representatives to get a firsthand account of what is going on in the market and how it is impacting wheat prices,” explained USW Market Analysis Tyllor Ledford, who is responsible for the USW Price Report. “By reaching out to each segment of the trade process, I try to get as balanced view as I can of what is going on in the wheat marketplace and really understand what is driving movements.”

Click HERE to sign up to receive USW’s Price Report.

Whether it's harvest season, planting season or the brief windows of time in between, USW provides several vehicles and platforms to keep wheat farmers and customers informed.

Whether it’s harvest season, planting season – or the brief windows of time in between – USW provides several products and platforms to keep wheat farmers and customers informed. All you need to do is sign up.

USW Commercial Sales Report

While the USW Price Report includes an update on commercial sales of U.S. wheat, more detailed information is available in the USW Commercial Sales Report, published each Thursday on the USW website and also compiled by Ledford.

Using data sourced from the USDA Foreign Agricultural Service Weekly Export Sales Report, the Commercial Sales Report contains wheat export sales-to-date by country and class for the current marketing year compared to the previous marketing year on the same date. The report also includes a 10-year commercial sales history by class and country.

USW Supply and Demand Report

USW’s Supply and Demand Report is published monthly on the USW website. Based on USDA’s World Agricultural Supply and Demand Estimates (WASDE), it includes U.S. wheat supply and demand summaries by class, as well as market factors and country- and region-specific export history.

Harvest Reports

Beginning in May and running through mid-October, USW and partner organizations compile updates on crop quality, harvest progress and crop conditions for hard red winter (HRW), soft red winter (SRW), hard red spring (HRS), soft white (SW) and durum wheat.

Each week, the USW Harvest Report is emailed to those who have signed up to receive it.

“The weekly harvest report is an example of how we keep everyone in the industry regularly updated on the wheat crop and current market conditions,” said USW Vice President of Programs Erica Oakley, who handles compilation of the Harvest Report. “We gather information about each class and each state that is in the process of harvest. It’s a very helpful way to monitor production throughout the harvest season.”

Click HERE to sign up to receive USW’s Harvest Report.

Wheat Letter

If you are reading this, you likely already subscribe to USW’s Wheat Letter, a blog and news source that focuses on issues facing U.S. wheat farmers – trade policy, crop quality and other pertinent wheat industry news.

The blog is updated regularly throughout the week, with a newsletter-style collection of those blog posts emailed to subscribers every other Thursday.

Click HERE to sign up to receive USW’s Wheat Letter. You can also pass this link along to someone who would be interested in subscribing.

Articles of Interest

Early each morning, USW Director of Programs Catherine Miller compiles Articles of Interest, a daily news report by conducting web searches to identify industry-related news articles. The goal is to help keep everyone updated on issues and events that may affect the U.S. wheat industry.

“It’s a news brief that highlights a variety of topics, including trade policy issues, supply and demand situations, wheat research and breeding crop conditions and news that involves the people who work in the industry,” said Miller. “We see it as a food way to start the day with the latest news and serves as a platform to share important stories an articles from all over the world.”

To be considered for the USW Articles of Interest mailing list, email [email protected].

Social Media

The newest platform in USW’s social media offerings is the USW YouTube Channel, which holds a growing number of USW-produced videos featuring USW staff, activities and partners.

USW is also has its own Facebook page, Twitter Account and Linked-In profile, each used to share information and quickly and efficiently.

March 29, 2023/by Ralph Loos

Market and Crop Analysis, Wheat Prices, Wheat Production and Harvest

Changing Weather Patterns Could Favor U.S. Wheat Production

Over the last few weeks, we have analyzed several factors that are shifting or have the potential to shift U.S. wheat value toward wheat importers. A combination of lower futures prices, a break in dry bulk freight prices, an increase in planted area, and the potential for a weaker dollar all point to a wheat market that has turned to favor buyers after two years of price risk. Though it is the most unpredictable of all the factors influencing U.S. wheat prices, the weather is arguably the most critical component in determining U.S. wheat production and price.

El Niño Southern Oscillation

In a cycle called El Niño Southern Oscillation (ENSO), meteorologists study the air and water conditions in the equatorial Pacific and the subsequent impact on global weather patterns.

This image shows a map of the world and the expected rainfall patterns in different regions in a La Nina weather pattern.

Three consecutive La Niña weather events have brought increased moisture to Australia, boosting their wheat production. Meanwhile, drought conditions have persisted in Argentina and the U.S., severely affecting production and yields. Source: International Research Institute for Climate and Society.

“Triple Dip” La Niña

Usually lasting nine to 12 months, the most recent La Niña event persisted for three cycles, marking the first “Triple Dip” La Niña since 2001.

The three consecutive La Niña events have brought above normal rains to Australia during their wheat growing season. As a result, Australia has boasted three years of record wheat production. The average production from 2020-2023 is 66% higher than the previous five-year average.

Simultaneously, the La Niña weather event brought dry conditions to the U.S. and Argentina. U.S. Hard Red Winter wheat (HRW) production, the largest class of U.S. wheat grown primarily in the U.S. Southern Plains, decreased by 29% on the year to 14.5 MMT due to severe drought in the region. Likewise, USDA estimates put Argentine wheat production at 12.9 MMT, down 41% from the year prior and 33% from the five-year average, with persistent drought also acting as the primary cause.

Chart shows Australian wheat production, domestic use and exports over the past 10 years to show the effects of La Nina.

Australia has produced three consecutive record wheat crops as increased moisture benefitted its growing regions. As a result of increased production and stocks, Australian wheat exports have also reached record highs. Source: March USDA World Agricultural Supply and Demand Estimates.

Chart shows Argentinian wheat production, domestic use and exports over the past 10 years to show the effects of La Nina.

Drought severely impacted 2022/23 wheat production in Argentina. Source: March USDA World Agricultural Supply and Demand Estimates

A Break in The Cycle

In recent weeks, climate experts have predicted the end of La Niña, with an increased likelihood of an El Niño weather event forming. As the La Niña dissipates, there is potential for increased moisture in the U.S. Southern Plains and Argentina, while Australia will likely see drier conditions.

This map of the world shows rainfall patterns in regions from an El Nino patters, relative to La Nina patterns.

An El Niño weather event could bring dryness to Australia and increased precipitation to Argentina and the U.S., potentially favoring western hemisphere wheat production regions. Source: International Research Institute for Climate and Society.

What Does This Mean?

The market has already begun to weigh the impact of the shifting weather patterns. The Australian Bureau of Agricultural and Resource Economics and Statistics has already lowered 2023/24 wheat production estimates by 28% to 28.2 MMT in response to the new weather data.

As the weather changes and the potential for moisture increases in the U.S. Southern Plains, the production outlook in the U.S. may improve. Increased production would help take pressure off the tight U.S. balance sheet with the potential to bring down relatively high U.S. wheat export prices. Nevertheless, given the unpredictability of the weather, the actual impacts will not be known until well into the 2023/24 marketing year.

By USW Market Analyst Tyllor Ledford

March 28, 2023/by Steve Mercer

Hybrid Wheat, Plant Breeding Innovation, Wheat Quality, Wheat Research

USW Welcomes Syngenta’s Hybrid Wheat Commitment

U.S. Wheat Associates (USW) is encouraged that technology company Syngenta expects to have commercial-scale hard red spring (HRS) and hard red winter (HRW) hybrid wheat seed available for U.S. farmers within the next three years.

Hybrid wheat’s primary value is demonstrated in a productive yield increase. This is needed by farmers around the world to offset the currently limited profitability of growing single-line wheat varieties. It is also needed to continue meeting record-setting use of wheat by a growing global population.

Jon Rich, head of hybrid wheat operations at Syngenta, recently told Successful Farming magazine that hybrid wheat should increase yields by 10% to 12% over current varieties. He said there is also the potential for more stable production across a variety of growing conditions. Hybridization also allows breeders to “stack” native and non-GM traits into wheat seed more precisely and efficiently than other breeding methods.

In addition to disease and insect resistance, and functional quality improvement, Rich said “we’re looking at sustainability traits, such as nitrogen use efficiency and water use efficiency,” something that could be very valuable in the future.

Spring Wheat Hybrids First

USW member state commissions in the norther plains have confirmed that several farmers worked with Syngenta to plant hybrid HRS wheat in 2022. Additional hybrid “proof of performance” testing will continue this year on an estimated 1,000 acres according to the company’s head of North American cereals, Paul Morano. He told Successful Farming he expects two hybrid HRS lines will be available for a full launch in 2025.

Morano said similar testing with HRW hybrid lines will take place with the 2023/24 and 2024/25 crops with a full commercial launch expected in 2026 in two Syngenta AgriPro^® hybrid lines.

Aerial photos of a wheat production research facility with fields, buildings and people at Junction City, Kansas, operated by Syngenta.

Syngenta’s hybrid development work in North America is coordinated by the Syngenta Wheat Research Center of Excellence in Junction City, Kan. Photo courtesy of Syngenta and Lance Visser.

Challenging Research

There is no doubt that hybrid wheat development has had its challenges. With a complex plant like wheat with three whole genomes in each cell and often six copies of each gene, that process is quite complex. The work requires many years and collaboration with a wide range of scientific disciplines, including wheat quality specialists who test the wheat for grade and functional milling, baking, and processing standards.

In 2018, USW was encouraged by hybrid research by Bayer Crop Science that was later transferred to BASF. Unfortunately, on March 1, 2023, BASF announced it was abandoning its North American hybrid wheat research, and the scientists who were conducting the work.

While hybrid wheat will have to prove itself in widespread, commercial use, it is good news for farmers and their customers that Syngenta is making a proper start.

“As we start to learn about this technology – and what else it can deliver to the farmer above and beyond yield, and how can we leverage the other inputs they put onto their crop – that’s a really big deal,” Rich said.

Photo at top of this page courtesy of Syngenta

March 28, 2023/by Steve Mercer

Foreign Agricultural Service, Soft White, Wheat Foods

Aspiring Chefs in Hong Kong Explore the ‘Science of Souffle’ With Assist From U.S. Wheat

Flour from U.S. soft white wheat was an ingredient in the ‘Science of Souffle’ course at the Technological and Higher Education Institute of Hong Kong.

U.S. wheat shared the spotlight with U.S. eggs, U.S. dairy and a Netflix celebrity at a Hong Kong event designed to help student chefs understand some of the science behind baking.

A special course titled the “Science of Souffle” was presented March 14 by the Agricultural Trade Office (ATO) and the U.S. Consulate’s Public Affairs Section (PAS). Student chefs at the Technological and Higher Education Institute of Hong Kong (THEi) participated in the course, which featured visiting speaker Dr. Hakeem Oluseyi, a U.S. astrophysicist and co-host of the Netflix series “Baking Impossible.”

Oluseyi spoke about the science of baking, along with his own personal story. Local chef Phyllis Lam led students in preparing their own souffles using U.S. wheat flour, milk and cheese – in combination with local flavors like citrus and black sesame.

U.S. Wheat Associates (USW) Regional Vice President Jeff Coey said USW’s Hong Kong Office contributed U.S. soft white (SW) flour for the course and shared information about the classes of U.S. wheat and how the quality of U.S. wheat benefits bakers and other end users.

“It was a small but fun event that served as an opportunity to create awareness for U.S. wheat among future bakers and chefs in the market,” said Coey.

Along with USW, the U.S. Poultry and Egg Export Council and the U.S. Dairy Export Council contributed to the “Science of Souffle” event.

March 24, 2023/by Ralph Loos

Wheat Industry News

News and Information from Around the U.S. Wheat Industry

Speaking of Wheat

“Overall, U.S. producers export more than 20 percent of what they produce, with numerous commodities exporting more than 70 percent of U.S. production. This underscores the importance of trade promotion programs contained in the farm bill … For U.S. producers to remain competitive in international markets in the face of high and rising foreign subsidies, tariffs, and non-tariff trade barriers of countries such as China, further investments in these [export market development] programs may well be required.” – U.S. House Committee on Agriculture “Fiscal Year 2024 Budget Views and Estimates Letter to the House Budget Committee.”

Reuters: Global Commodity Markets Remain Tentative

Reuters journalist Karl Plume on March 13 wrote that a patchwork of fixes and increased crop plantings around the world to counter the impact of war in Ukraine on global grain supplies are not enough to ward off further risks of disruption. “The world has had some time to patch some holes,” said Dan Basse, president of AgResource Co in Chicago, in the article. He cited larger-than-anticipated Russian wheat exports and the grain export corridor deal that allowed grain to be exported from Ukraine’s Black Sea ports. “If we don’t have another supply shock somewhere, the world can get by on the diminishment of Ukrainian grain,” said Basse. “But it’s tenuous. Things have to go right.” Read the entire story here.

Analyst: Wheat Prices Do Not Match Market Factors

Todd Hultman, lead analyst with DTN/Progressive Farmer, is perplexed by wheat prices relative to the very tight global supply situation and disruptive nature of the Russia/Ukraine conflict. In a recent article he compared the market situation today to 2013 when supply concerns pushed U.S. wheat prices to a level that, after factoring in inflation, would be higher than current prices. “You probably won’t be surprised to hear that, among the big three crops over the past 23 years, wheat prices have the least correlation to their supply situations,” Hultman wrote. “It pains me to say I don’t have a better explanation of why wheat prices are this low [relative to prices in 2013] …” Read Hultman’s entire analysis here.

Best Wishes to Terry Herman

USW Chief Technology Officer Terry Herman retired from U.S. Wheat Associates (USW) March 10 after 30 years of service. Over those years, Terry led USW’s evolution to digital communications and management systems. He built data base infrastructure essential for our work with USDA’s Foreign Agricultural Service and reporting annual U.S. crop quality data. Terry created and maintained USW’s website www.uswheat.org for many years. And as our company’s “computer guy,” he kept his colleagues updated with the latest hardware and software. Most recently, he transitioned data management to “the cloud” and, in a very timely effort, introduced “Microsoft Teams” collaboration software to USW just weeks before the pandemic started. Everyone at USW thanks Terry for his service and friendship and wishes him well in retirement!

Wheat Growers Play Role in Climate Policy Debate

Red River Farm Network recently reported on the implications of what it called the changing dynamics surrounding climate change and farming. Ada, Minn., farmer Tate Petry, a member of the National Association of Wheat Growers (NAWG) Environment Subcommittee, told the network that the wheat industry is challenged because it is so varied. “We have growers in Washington, Idaho and Oklahoma with practices that are so much different than what works for us, so that’s what we work on in NAWG, determining the implications of certain policy decisions growers and different classes of wheat.” Petry said the focus on climate-smart agriculture brings to the forefront the positive things already happening on the farm. Listen to the interview.

New NAWG Officers Elected

Brent Cheyne was elected NAWG President for 2023/24. Brent farms with his son Rodney near Klamath Falls, Ore., where they raise wheat, barley, oats, alfalfa, and cattle. In 2011, Cheyne served as president of the Oregon Wheat Growers League before accepting the position of NAWG Secretary in 2015. The newly elected slate of officers include: Keeff Felty from Oklahoma, Vice President; Pat Clements from Kentucky, Treasurer; Jamie Kress from Idaho, Secretary; and Nicole Berg from Washington state, Past President. Congratulations to these wheat farmer national leaders. 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.

March 16, 2023/by Steve Mercer

Market and Crop Analysis

Markets Look for Weaker Dollar as Purchasing Conditions Improve

With recent breaks in U.S. and global wheat futures and lower freight rates, the wheat market seems to have turned a corner to favor buyers after two years of volatility and risk.

Despite the improved general outlook, inflationary pressures persist, influencing macroeconomic conditions both in the U.S. and for our customers overseas. For example, major runups in the U.S. dollar in the second and third quarter of 2022 impeded wheat trade. Yet even with recent strengthening, the U.S. dollar index has decreased 7% from the highs hit in September 2022, providing some relief for wheat importers.

As world wheat importers are keenly aware, a strong dollar erodes the purchasing power of foreign currencies, making U.S. commodities more expensive to customers.

While the U.S. dollar index has decreased 7% from the highs hit in September 2022, though it remains elevated from pre-war levels, continued strength and fluctuations remain a concern for wheat importers. The U.S. dollar index measures the dollar’s strength against a basket of six major currencies, including the Euro, Pound, Yen, Canadian Dollar, Swedish Kroner, and Swiss Franc. Source: DTN ProphetX

The factors driving currency markets are often complex, but the recent dollar strength can be primarily attributed to the U.S. Federal Reserve’s reaction to the rising inflation triggered by Russia’s unprovoked invasion of Ukraine and the lingering impacts of the COVID-19 pandemic.

Federal Reserve Policy

The U.S. has faced inflation not seen since the 1980s, at an annualized inflation rate of 8.0% for 2022. To combat the inflationary pressures, the U.S. Federal Reserve (Fed) began an aggressive series of interest rate increases, bringing Federal Fund Rates from 0.2% per year in March 2022 to 4.57% annually by February 2023. The hawkish policy added strength to the dollar as investors earned higher returns, making the currency more attractive.

As interest rates have risen, U.S. inflation has since slipped to 6.0%, signaling that inflation may be easing. Current market sentiment and comments from Federal Reserve leadership indicate that though interest rates may still increase, a slower pace could also ease the strength of the U.S. dollar.

Global Reaction

In uncertain times, global investors often turn to the U.S. dollar as a haven currency, generating greater demand for a currency already supported by the Federal Reserve’s hawkish policy. As fears regarding a global recession began to mount following the onset of Putin’s war, many major central banks had to weigh their economic outlook against inflation risk, generally maintaining a looser monetary policy than their U.S. counterpart. These policy decisions allowed the dollar to strengthen more quickly than other world currencies.

As recession fears have slowed and the global economy has normalized, central banks have become increasingly hawkish, moving their monetary policy in line with Federal Reserve. As interest rates rise around the world, future gains in the dollar will be curbed.

The dollar has weakened against many other currencies in the last few months, potentially signaling a more hawkish stance in other major central banks. Source: Bloomberg

Bears or Bulls, What’s Next for the Dollar?

As the global economy stabilizes, many investors are increasingly bearish for the dollar, though the path will be far from straightforward. Analysts believe the recent dollar strength is temporary, and the currency could weaken if the Federal Reserve tapers its interest rate increases. Nevertheless, the underlying geopolitical risk of Putin’s war will continue to prop up the dollar as it remains the haven currency in times of volatility. Likewise, the resilience of the U.S. economy will continue to drive dollar strength as robust jobs data, and stubborn increases in consumer and producer prices, underpin the need for hawkish policy and elevated interest rates.

By USW Market Analyst Tyllor Ledford

March 15, 2023/by Steve Mercer

Market and Crop Analysis, Ukraine

Wheat Export and Production Issues in Focus, as Black Sea Grain Deal Discussions Continue

By Keith Good, Farm Policy News, Reprinted with Permission

Late last week, Bloomberg writers Aine Quinn and Megan Durisin reported that, “After a slow start to the season, Russia’s grain exports are booming as buyers load up on its attractive bumper supplies.

“The country’s shipments of wheat — its main crop — almost doubled in January and February from a year earlier, Logistic OS data show. Buyers shunned cargoes earlier in the season when prices weren’t as appealing, but are now returning as last year’s massive harvest helps Russian grain to rank among the cheapest globally.

Chart of Russian wheat prices over time demonstrating reduction in cost based on huge annual production.

Chart Source: “Russia Wheat Exports Nearly Double What They Were Before War,” by Aine Quinn and Megan Durisin. Bloomberg News (March 3, 2023).

“The recent boom shows shippers have overcome some of the financing and insurance problems fueled by sanctions on Russia. The outlook for exports from the Black Sea is also coming into sharper focus as a deal allowing Ukrainian cargoes to sail through a safe corridor comes up for renewal in about two weeks. Supplies from both nations are helping to stop global food inflation worsening.”

The Bloomberg article also noted that, “While Ukraine’s volumes remain significant, they’re below peaks set late last year. The amount carried out of the Black Sea in February totaled 3.35 million tons and the number of vessels cleared for inspection — a part of the deal — fell for a fourth month.

chart from the Black Sea Grain Initiative showing a slow down in the number of Ukrainian grain ships being inspected under the agreement.

Chart Source: “Russia Wheat Exports Nearly Double What They Were Before War,” by Aine Quinn and Megan Durisin. Bloomberg News (March 3, 2023).

Sluggish Inspectors

“Kyiv has blamed a slowdown in its exports since late last year on sluggish work by Russian ship inspectors, who are one of the parties tasked with checking all vessels sailing under the deal.”

On Monday, Bloomberg writer Keira Wright reported that, “Australia, the world’s second-largest wheat exporting country, is likely to see shipments slump 20% from record levels in the coming financial year as production tumbles because of a shift to a drier climate pattern.

“Exports will probably fall to 22.5 million tons in 2023-24 from an all-time high of 28 million tons a year earlier, while output is set to decrease to 28.2 million tons from 39.2 million tons, government forecaster Abares said. The figure for the harvest just completed is up from 36.6 million tons estimated in December. Planting for the coming crop only gets under way in April.

U.S. SRW wheat futures price chart since March 2022 showing the decline in prices since the Russian invasion of Ukraine.

Chart Source: “Australia Sees Wheat Exports Plunging 20% on Drier Climate,” by Keira Wright. Bloomberg News (March 6, 2023).

Aussie Production Price Cap

“Supplies of the food staple from Australia have helped to cap global prices in the past year after Russia’s invasion of Ukraine choked shipments and sent the grain to a record.”

More broadly on global wheat production, Bloomberg writer Aine Quinn reported late last week that, “Global wheat output is expected to drop slightly next season from a record high as the war in Ukraine and dry weather in Russia takes a toll on crops, the United Nations said.

UN Food and Agriculture Organization chart of global wheat production indicating possible decline in production for 2023/24.

Chart Source: “UN Sees Global Wheat Output Falling for First Time in Five Years,” by Aine Quinn. Bloomberg News (March 3, 2023).

“Production should fall roughly 1% to 784 million tons in the 2023-24 season, the UN’s Food and Agriculture Organization said Friday. That would be the first decline in five years and highlights the risk that global grain supplies still face from Moscow’s invasion of Ukraine.”

Black Sea Corridor Negotiations

In more detailed reporting on the renewal of the Black Sea Grain Deal, Reuters writer Michelle Nichols indicated yesterday that, “United Nations Secretary-General Antonio Guterres will meet Ukrainian President Volodymyr Zelenskiy in Kyiv on Wednesday to discuss extending a deal with Moscow that allows the Black Sea export of Ukraine grains amid Russia’s war in the country.

“‘The Secretary-General has just arrived in Poland on his way to Ukraine,’ U.N. spokesman Stephane Dujarric said on Tuesday, adding that Guterres will discuss the continuation of the deal ‘in all its aspects and other pertinent issues.’”

“The 120-day deal, initially brokered by the United Nations and Turkey in July and extended in November, will be renewed on March 18 if no party objects. Russia has signalled that obstacles to its own agricultural exports need to be removed before it lets the Ukraine’s Black Sea grain deal continue.”

The Reuters article pointed out that, “Turkish Foreign Minister Mevlut Cavusoglu said on Sunday that Ankara was ‘working hard for the smooth implementation and further extension of the Black Sea grain deal.’”

And Reuters writer Pavel Polityuk reported yesterday that, “Ukraine has started online talks with partners on extending the Black Sea Grain Initiative aimed at ensuring Kyiv can keep shipping grain to global markets, a senior Ukrainian government source said on Tuesday.

“The source said Ukraine had not held discussions with Russia, which blockaded Ukrainian Black Sea ports after its invasion last year, but that it was Kyiv’s understanding that its partners were talking to Moscow.

“‘The situation with negotiations is rather complicated. Now a lot depends not on us but on the partners,’ said the source, who spoke to Reuters on condition of anonymity.”

March 10, 2023/by Steve Mercer

Russia, Vince Peterson

Russian Intervention Has Fueled Every Wheat Price Spike Since 2007

Editor’s Note: On March 11, 2022, U.S. Wheat Associates (USW) President Vince Peterson commented on the Russian government’s role as a source of great uncertainty for the world’s wheat producers, sellers and buyers. One year later, the price disruption of Russia’s unprovoked invasion of Ukraine continues. While prices have settled since the invasion started, the market still moves on every scrap of news from the Black Sea region. Reprinted here are Mr. Peterson’s views then, providing perspective today.

Once again, and tragically this time, Russian intervention is the underlying source of dramatic global wheat price volatility.

“…We are closely monitoring prices for the most essential social goods such as food, including bread,” said Russian Prime Minister Mikhail Mishustin this week about its domestic wheat supply. “Russian grain is in good demand from abroad, and its price is increasing. That said, it is necessary to provide the necessary raw materials, first of all, to the domestic baking industry.”

This Al Jazeera English report provides important insight into the situation in Ukraine one year after the invasion ordered by President Putin.

Consistent Protectionism

The Prime Minister made this comment with specific reference to the hyper reaction of global wheat prices to Russia’s invasion of Ukraine and the immediate impacts of the widespread economic sanctions levied on Russia in response. Yet it spotlights the core tenants of Russia’s protectionist and heavy-handed wheat supply and price control policies. Russian intervention has been front and center since the country first entered the global wheat export trade.

Anyone who does not take the Prime Minister at his word on this sets themselves up for a very disappointing and expensive lesson. Defending Russian domestic supplies and keeping domestic prices low by withholding supplies from the world will always be their primary wheat policy weapon. And they deploy it without regard for the harm and expense it creates for anyone.

Underscoring this point, the Russian Ministry of Economy confirmed on Mar. 11, 2022, that they are banning wheat exports through Aug. 31, 2022, to their fellow Eurasian Economic Union member states, including its Ukraine invasion staging partner Belarus, along with Armenia, Kazakhstan and Kyrgyzstan.

Every Spike Reveals Russian Intervention

In six documented situations since 2007, when the global wheat market showed any sign of stress, the government of Russia stepped in to impose an export ban, export tax or export quota to isolate their home market. These actions intentionally limited world wheat importers’ access to Russian wheat supplies. This Russian intervention further magnified any supply shortage and accelerated the rise in wheat prices.

Twice in this time frame, Russian military aggression against Ukraine directly caused world wheat prices to spike sharply. The world is reeling viscerally and economically from the shock of that situation right now.

Chart shows correlation between HRW futures price spikes and Russian intervention.

Correlations. Russian intervention is associated with the upward spike in hard red winter wheat futures prices. Factors include export restrictions, taxes, and, sadly, two invasions of its sovereign nation neighbor Ukraine. Copyright 2022 U.S. Wheat Associates.

Rampant Uncertainty

The COVID-19 pandemic lifted the tide of global inflation by disrupting global supply chains. Now, Russia’s war on Ukraine has blocked nearly 30% of the expected wheat export supply from governments and people that depend on it the most. Uncertainty runs rampant. And it is almost impossible to know how this war will be prosecuted. How long it will persist? What will the physical and economic situation of Ukraine and Russia be at the end?

Market analysts everywhere are trying to assess the many implications of this latest Russian intervention. Who will be most severely impacted? What will be the magnitude of the shortage created in the global wheat supply chain? And how will the world’s remaining supplies be apportioned, priced and relocated to the most severely affected countries?

Extreme Volatility

The extreme wheat price volatility seen in the past two weeks sits witness to this uncertainty.

Such high prices and volatility create challenges for the world’s wheat buyers and farmers and grain traders, who must also use the futures market to manage price risk. It is important to note that the U.S. wheat market remains fully open to importers and users everywhere. Dependable U.S. wheat producers and our reliable export system stand in the gap. They are ready and able to supply wheat as broadly to the world as our own supplies, and logistical capacity can accommodate.

Supplies Available

In addition to the wheat price inflation attributed to Russian intervention, U.S. wheat prices reflect that last year’s drought in the Northern Plains and Pacific Northwest limited current U.S. supplies. However, this year’s original export expectations and calculations do not include all U.S. supplies available. And wheat farmers will harvest a new crop starting in June.

U.S. Wheat Associates (USW) also creates additional value for U.S. wheat through the services it offers its customers. As they navigate this extreme market situation to secure the wheat necessary to feed people worldwide, USW remains ready to provide any information, tools and assistance within our means that may be helpful.

By USW President Vince Peterson

March 9, 2023/by Steve Mercer

Exports, Japan, Korea, Marketing and Trade Conferences, Philippines, Trade Delegation

USW’s North Asia Board Team Wrapping Up Visit to Three Vital Markets

Taeyoung Grain Terminal’s CEO took time from his busy schedule March 8, 2023, to meet with U.S. farmers from Idaho, Montana and Nebraska and explain what happens when a shipment of imported U.S. wheat arrives in South Korea (photo above).

It was a fitting way for the U.S. Wheat Associates’ (USW) 2023 North Asia Board Team to wrap up its 10-day exploration of top Asian markets.

“We’ve been able to see every step, where demand for our wheat is created at the consumer level, to the baking process where flour is used as the ingredient, to the milling process where flour is made with our wheat, and now to the import process, which is how our wheat gets to the market in the first place,” explained Bob Delsing, a Nebraska wheat producer and Nebraska Wheat Board member.

Delsing took note of another important detail, too.

“The other farmers and I on the trip really noticed the respect people have shown us,” Delsing added. “The end of the Korea visit was a perfect example. Tae Hyun Yeo, who leads grain terminal as CEO, seemed happy to spend time with us and get to know us. We saw that over and over on this trip.”

Along with Delsing, team members are Bill Flory, of the Idaho Wheat Commission (IWC); Keven Bradley, of the Montana Wheat and Barley Committee (MWBC); Kent Kupfner, Executive Vice President of MWBC; and USW Director of Communications Ralph Loos.

USW Country Director Rick Nakano discusses Japan's milling and baking industry to members of the 2023 USW North Asia Board Team.

USW Country Director Rick Nakano discusses Japan’s milling and baking industry with 2023 USW North Asia Board Team members (l to r) Bob Delsing, Keven Bradley, Bill Flory and Kent Kupfner.

Representing the USW Board of Directors, the team arrived in the Philippines on Feb. 28, then made stops in Japan and South Korea to meet customers of U.S. wheat. A return to the U.S. is scheduled for March 10.

“It was exciting to have the Board Team in Tokyo, and in fact it is the first team we’ve hosted since before the pandemic,” said USW Japan Director Rick Nakano. “The goal was to give the farmers a look at the market and how USW works to create demand for U.S. wheat. Our customers were eager to meet face-to-face with this team and get a perspective from wheat growers. Our customers also wanted to share what they need to help their businesses. We had some exceptionally good discussions.”

Compliments on Quality, Questions About Supply

Two overlying themes dominated each meeting between the USW team and flour millers in each of the three Asian markets: quality and supply.

“Our members are always very satisfied with U.S. wheat’s quality – never a question,” Jeong-seop Park, director of the Korea Flour Mills Industrial Association (KOFMIA), offered during a meeting between the team and his organization. “We have come to rely on that quality and we wish to show appreciation for the work U.S. farmers do to assure it in every crop.”

The 2023 USW North Asia Board Team meeting with members of the Korean Flour Millers Industrial Association in Seoul, South Korea

The 2023 USW North Asia Board Team met with members of the Korean Flour Millers Industrial Association at the KOFMIA headquarters in Seoul, South Korea.

Like other customers the USW team met in the Philippines, Japan and Korea, KOFMIA asked each farmer about the status of his current wheat crop and projections for 2023 success come harvest time.

Questions in each market were centered on the supply of wheat from the United States.

“Those are difficult questions to answer this time of year because we won’t know about our winter wheat crop until later in the spring, but I feel they were satisfied with our answers and I feel they understand,” said Bradley, who has roughly 5,400 acres of hard red winter wheat (HRW) wheat in the ground on his Montana farm. “This was my first visit to a foreign market, so I learned a lot about our customers in each of the countries we visited. It’s an eye-opening experience and you see the value of the U.S. Wheat Associates offices in each market. The [USW] staff does a great job interacting with our customers.”

In addition to the Taeyoung Grain Terminal in Pyeongtaek , the South Korea leg of the journey included a tour of the Sajodongaone Dangjin Flour Mill. The day prior was packed with productive meetings in Seoul with Agricultural officials from the U.S. Embassy, the KOFMIA members, Samhwa Flour Mills, Daehan Flour Mills and the CJ Cheiljedang Corporation.

Members of the 2023 USW North Asia Board Team toured the Sajodongaone Dangjin flour mill March 7, 2023. Here, USW Seoul Food/Bakery Technologist Shin Hak “David” Oh translates the mill manager’s explanation of this display of flour streams the mill creates for Korean bakeries.

Japanese Stress ‘Trust and Understanding’

In Japan, the farmers met with the Japan Flour Millers Association (JFMA), as well as Agricultural Affairs and Agricultural Trade Offices of the U.S. Embassy and Japan’s Ministry of Agriculture, Forestry and Fisheries (MAFF). A tour of the Nippn Corporation’s Chiba Flour Mill provided insight into Japan’s use of U.S. wheat.

JFMA members pointed to the long relationship Japanese millers have had with U.S. producers. Recent high prices for U.S. wheat have been a concern, along with future production. However, officials made it clear they understand how weather affects the wheat crop and that they trust U.S. farmers.

JFMA Executive Director Yasuo Sasaki sought input from the USW Team about their farms and the business challenges they face.

In Tokyo, the 2023 USW North Asia Board Team met with members of the Japan Flour Millers Association.

USW Tokyo Country Director Rick Nakano (far right) introduces the the 2023 USW North Asia Board Team to members of the Japan Flour Millers Association.

“High-quality wheat is what we need in Japan to satisfy our customers and consumers and we also need a reliable supply of that high-quality wheat,” said Sasaki. “We know we can count on U.S. farmers to come through.”

Kupfner, a former wheat trader and grain company manager, went into the Japan part of the trip interested in growth opportunities for U.S. wheat.

“What we saw in Japan was a large urban population with an appetite for all kinds of food, but especially top-quality foods,” he said. “It’s a very consistent market and we want to maintain U.S. wheat’s place in it.”

Bakery Fair Connections

Highlights of the Philippines portion of the trip were a tour of the Gardenia Baking Facility and participation on the Filipino-Chinese Bakery Association’s 2023 Bakery Fair in Manila.

While not a “North Asian” market, the Bakery Fair provided a special opportunity for this Board Team. During the Fair’s opening ceremony, Flory was invited to provide remarks on behalf of the U.S. wheat industry. He shared his appreciation for the long relationship between U.S. wheat and the Philippines.

“From our farms to you” is the salutation Flory used to end his address to bakers and industry partners gathered. He shared his appreciation for the long relationship between U.S. wheat and the Philippines.

“We have had a long connection and we have had a long record of success together,” said Flory, a member of the USW Board of Directors and current Chair of the Wheat Marketing Center board. “We know that you rely on us to supply you with the wheat you need and desire. We want you to know that we take pride in that.”

By USW Director of Communications Ralph Loos

March 8, 2023/by Steve Mercer

Wheat Industry News

News and Information From Around the U.S. Wheat Industry