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Recent news and highlights from around the wheat industry.

Speaking of Wheat.The wheat industry told me that they wanted better quality varieties. They needed better milling and baking properties, so we spent a lot of time working on those improvements.” – Dr. Scott Haley, Retired Project Leader, Wheat Breeding and Genetics Program, College of Agricultural Sciences, Colorado State University. Full Story.

National Pasta Association Consumer Program Relaunches to Share the Pasta.
The National Pasta Association (NPA) has re-branded consumer communications to “Share the Pasta” to “celebrate the joys of pasta and increase consumption.” NPA’s previous public outreach called “Pasta Fits” emphasized health benefits, versatility and value, attributes that will still be promoted as part of the new communications theme.

Press Release: NAWG Shares Wheat Priorities with the Biden-Harris Transition Team. The National Association of Wheat Growers (NAWG) recently sent a letter to the Biden-Harris transition team to introduce NAWG, outline pending policy issues needing immediate attention from the upcoming Administration and provided a primer on the wheat industry. Read NAWG’s release highlighting the letter here.

Sincere Sympathies to Mark Fowler, U.S. Wheat Associates (USW) Vice President of Global Technical Services, and his family on the passing of Mark’s father, Thomas Fowler, on Jan. 4, 2021.

IGP Institute Flour Milling and Grain Processing Course Schedule. The IGP Institute at Kansas State University in Manhattan, Kan., has several flour milling and grain processing courses planned in 2021, covering all aspects of managing the flour milling process from grain selection to finished products. Courses will explore many areas including; technical milling, mill management practices, quality control, food safety, flowsheet design, process automation and controls, process efficiencies, hard and soft wheat milling, maintenance, and much more. View the full course schedule and register here.

The January Cereal Grain Sciences Event Calendar is available online and for subscription. The calendar is compiled and updated monthly by cereal scientist and editor Dr. M. Hikmet Boyacioglu.

Subscribe to USW Reports. USW publishes a variety of reports and content that are available to subscribe to, including a bi-weekly newsletter highlighting recent Wheat Letter blog posts, the weekly Price Report and the weekly Harvest Report (available May to October). Subscribe here.

Follow USW Online. Visit our Facebook page at 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 more on LinkedIn.

 

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By Claire Hutchins, USW Market Analyst  

Seven months into marketing year 2020/21, USDA currently forecasts total U.S. wheat export sales will reach 26.8 million metric tons (MMT), which, if realized, would be 2% more than 2019/20 and 7% more than the 5-year average. As of Dec. 24, U.S. wheat commercial sales are 9% ahead of last year’s pace at 20.6 MMT, led by hard red winter (HRW), hard red spring (HRS) and white wheat (soft and hard).

U.S. hard red winter wheatHard Red Winter

Total HRW sales of 7.10 MMT are 3% ahead of last year and are 7% ahead of the 5-year average as significantly increased exports to Nigeria and China more than offset reduced sales to Mexico, the largest market for HRW.

Current sales to Nigeria of 758,000 metric tons (MT) are up 30% on the year due to greater export elevation capacity out of the Texas Gulf compared to other U.S. export terminals. While exporters in the Center Gulf and Pacific Northwest (PNW) have to balance massive commodity export programs, which makes it comparatively more expensive to elevate wheat, exporters in the Texas Gulf have fewer commodities and lower volumes to balance, making it easier and less expensive to elevate and ship HRW.

As of Dec. 24, China has purchased 1.12 MMT of HRW after no purchases in 2019/20. Strong HRW export sales so far in 2020/21 can be attributed to the Phase One agreement between the United States and China. So far in MY 2020/21, China is the second-largest market for HRW behind Mexico.

Export sales to Mexico are down 8% on the year at 1.65 MMT due to volatility in the value of the peso and significantly reduced restaurant demand following the COVID-19 outbreak.

U.S. hard red spring wheatHard Red Spring

Total HRS export sales of 5.78 MMT are 9% ahead of this time last year and are 4% ahead of the 5-year average. Sales to the Philippines and Japan, the top two markets for HRS, are up 5% and 6% respectively on competitive prices and increased focus on food stability following the COVID-19 outbreak, says the trade.

Export sales to China, now the third largest market for HRS, are up more than 700% on the year at 518,000 MT following the Phase One trade agreement.

U.S. soft white wheatWhite Wheat

Total U.S. white wheat sales, represented mainly by soft white (SW) wheat, are 47% ahead of this time in 2019/20 at 5.52 MMT and are 49% ahead of the 5-year average. In the Philippines, the largest market for U.S. SW, export sales are up 5% from this time last year and 29% from the 5-year average on competitive SW prices compared to other classes of U.S. wheat. The increased demand by Philippine millers is also partially due to early customer buying in response to tight export elevation capacity in the PNW. Strong U.S. Wheat Associates (USW) educational programs in the Philippines helped customers stay informed and make timely buying decisions in the first half of MY 2020/21.

SW sales to key Southeast Asian markets like Vietnam, Thailand, Malaysia and Indonesia are more than 20% ahead of last year’s pace as customers work to secure inexpensive, high quality supplies for 2020/21 delivery before the large Australian harvest comes to market.

U.S. soft red winter wheatSoft Red Winter

SRW export sales remain sluggish. Total SRW export sales are down 25% on the year at 1.57 MMT, down 28% from the 5-year average. SRW export sales to 7 of the country’s top 10 overseas markets are behind last year’s pace.

“SRW prices are just too high right now,” said one grain trader, “the United States is priced out of the world market, especially to our buyers in Latin America and Nigeria.” Limited exportable supplies of SRW along the Mississippi River due to lower planted area in key states and extremely tight export elevation capacity in the Center Gulf due to increased export demand for soybeans and corn supported SRW export prices in the first half of MY 2020/21.

Between early June and late December 2020, the average SRW free on board (FOB) price was $247/MT, 12% higher than the same period last year. According to AgriCensus, over that period, the average SRW FOB price was 11% higher than Russian 11.5% protein wheat (on a dry matter basis), a key competitor into Latin America and Nigeria.

To date, sales to Mexico and Colombia, the two largest markets for SRW, are down 10% and 26% from this time last year, respectively. Though SRW sales to Mexico are down on the year, sales of SW to Mexico are up 289% from last year at 92,000 MT as customers take advantage of the significant price difference between the two classes.

As of Dec. 24, there are no SRW export sales to Nigeria compared to last year’s volume of 171,000 MT.

U.S. durum wheatDurum

Year-to-date durum sales in 2020/21 are 25% behind last year’s pace at 590,000 MT but are 20% ahead of the 5-year average. Total sales to Italy, the largest market for U.S. durum, are only 6% behind last year’s pace at 433,000 MT, which is 63% more than the 5-year average.

 

U.S. Wheat Associates (USW) publishes a commercial sales report every week on Thursdays on it’s website.

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Throughout 2021, the U.S. Wheat Associates (USW) Wheat Letter is featuring the many stories of the people, processes and passions that go into producing and delivering high quality U.S. wheat to the world. Our focus will be on quality that starts with dedicated public and private wheat breeders and researchers, is fostered by hard-working farm families, is maintained by grain handlers and observed in hundreds of wholesome, nutritious wheat foods.


By Linc Thomas, Staff Writer, Colorado State University. Reprinted with Permission

Plant breeders are Promethean individuals, oftentimes sacrificing their blood, sweat, tears, money, and time for their craft. This bridge between the chasm of art and science is a task humans have participated in since the dawn of agrarian societies.

Since 1999, Scott Haley has served as the Project Leader of the Wheat Breeding and Genetics Program in the College of Agricultural Sciences at Colorado State University (CSU). In December, Haley will embark from CSU into the next chapter of his life, retirement. But not before one last accolade: Haley was recently awarded the Crop Science Research Award from the Crop Science Society of America. Only one other person from CSU has ever received it.

Haley’s work to improve Colorado wheat

Improving the performance and reputation of Colorado wheat has been a through-line for Haley since he began his work at CSU in 1999. At the time, the major insect pest in wheat production was the Russian Wheat Aphid, which he set out to combat while also addressing the general quality of the state’s wheat.

Although the significance of the Russian Wheat Aphid has declined, Scott Haley’s work to create better-quality, disease-resistant wheat varieties continued.

“The wheat industry told me that they wanted better quality varieties,” said Haley. “They needed better milling and baking properties, so we spent a lot of time working on those improvements.”

When Scott Haley arrived at CSU, 40-percent of Colorado’s wheat crop was planted with a variety called TAM 107, which had notoriously low-quality.

“When we’d have foreign buyers come in from around the world, they would ask how much TAM 107 was growing in Colorado,” said Darrell Hanavan, former executive director of the Colorado Wheat Administrative Committee (a member of U.S. Wheat Associates) and Colorado Wheat Research Foundation. “I had to tell them, and they wanted to exclude purchasing wheat from Colorado entirely. The same was true in the domestic market. The flour millers didn’t want to buy Colorado wheat because TAM 107 quality was so bad.”

TAM 107 was such a low-quality wheat variety because it was bred to be high-yielding, largely disregarding quality. Haley and his team worked diligently in his early years at CSU to identify wheat varieties that were both high-yielding and higher-quality, dispelling the commonly held perception that quality and yield cannot be put into the same variety. The release of Hatcher in 2004 was a landmark variety in this regard, as it showed significantly improved quality and roughly 10% higher yield than TAM 107.

Haley also bred a variety of wheat called Snowmass, which is a unique hard white (HW) wheat variety that is used exclusively in Ardent Mills Ultragrain High Performance Flour. Ardent Mills has praised this wheat variety, calling the wheat, “unprecedented.”

Haley was also one of four co-inventors who developed a patented non-GMO herbicide-tolerant wheat trait that is the basis of the CoAXium Wheat Production System, which is an alternative to Clearfield wheat. Currently patented in 53 countries, CoAXium wheat varieties are projected to return up to $5-million annually in royalties to further support the CSU wheat research program.

Most recently, Haley turned his attention to the Wheat Stem Sawfly, which has now become increasingly prominent in wheat production, as the presence of Wheat Stem Sawfly larvae can decrease yields up to 50%. Most wheat varieties have hollow stems, so to resist damages by the Wheat Stem Sawfly, Haley and his team developed a solid-stem wheat variety that hinders the ability of the larvae to damage wheat in the same way as if they were hollow-stemmed. The first variety of its kind released in Colorado was released in 2019 under the name “Fortify SF.”

“I think about what I do in terms of helping the farmer,” said Haley. “The farmers in these rural communities have to stay profitable, for one because our population needs the food, but if they aren’t profitable then they’ll stop farming. If we develop wheat that’s resistant to rust, then the farmer doesn’t have to apply a fungicide – because farmers don’t want to use fungicides. Let’s say fungicide costs $10 an acre, and a farm is 10,000 acres – you think the farmer wants to spend $100,000? That’s what we do as breeders: we lower the cost of production by enhancing yield and improving insect and disease resistance so the farmer can stay on the land and keep producing food.”

Scott Haley

“That’s what we do as breeders: we lower the cost of production by enhancing yield and improving insect and disease resistance so the farmer can stay on the land and keep producing food.” Dr. Scott Haley. Photo Copyright Colorado State University.

Relationship with the Colorado Wheat Industry

The Colorado wheat industry, comprised of the Colorado Wheat Administrative Committee and Colorado Wheat Research Foundation, has a strategic priority of ensuring a best-in-class wheat research program at CSU to provide Colorado producers with the best varieties designed specifically for local conditions. This unique public-private partnership between CSU and the Colorado wheat industry provides collaboration and funding for this world-class program from a combination of state and federal funds provided by the Colorado Agricultural Experiment Station (CSU AES), the Colorado Wheat Administrative Committee (CWAC), the Colorado Wheat Research Foundation (CWRF) and Ardent Mills. CWAC funding comes from a producer-approved assessment on each bushel of wheat sold, and CWRF funding comes from royalties collected on the CSU-developed wheat varieties and novel traits (i.e. non-GMO herbicide tolerance trait) which are owned and commercialized by CWRF; royalties are returned to CSU to further enhance wheat breeding and wheat-related research.

“Scott Haley has turned the Colorado wheat market from a poor-quality market into a high-quality market,” said Hanavan. “All of the varieties that are released are phenomenal quality and recognized by the domestic milling industry and the export market buyers.”

When Scott Haley took his position at CSU, the College of Agricultural Sciences was releasing one wheat variety to CWRF every two or three years. Today, 22 years later, they often release multiple new varieties each year, as the scope of the wheat breeding program has evolved. CSU-developed wheat varieties make up 80 to 90% of all wheat varieties grown in Colorado. This high level of adoption of publicly-developed wheat varieties is not seen anywhere else in the U.S.

“I feel that over the last 22 years, one of the things that I’m most proud of is the way that we’ve strengthened the relationship between CSU and the wheat industry in Colorado – and this relationship is second to none,” Haley said. “It hasn’t been only about the numbers of varieties or their adoption in Colorado, but the fact that together we built a national brand called “PlainsGold.” I was involved with the CWRF in the development of the PlainsGold brand going back over 10 years, and it was built to market the CWRF varieties which are now available from Texas to Washington and everywhere in between.”

Looking back at a legacy, and moving forward

Looking back on his time at CSU, Haley is proud of what he and his team have accomplished over the years.

“I grew up in the suburbs, far away from agriculture, and initially wanted to work in international agriculture helping subsistence farmers in developing countries. Various things changed in my personal life, and I responded by channeling my energies into trying to help wheat farmers in Colorado. I took my responsibilities very seriously, sometimes too seriously, and feel good that I gave 110% effort throughout my tenure at CSU. Together we have accomplished great things, and in that regard, I feel very proud of what we have accomplished. The other thing I’m most proud of is what I’ve done to try to help develop people, be them students or full-time researchers, that are working in the department or in the breeding program. Being a fair, supportive, and understanding project leader and mentor was very important to me, and in fact, it was just as important to me as doing right by the growers.”

The wheat breeding program at CSU will continue under the direction of Dr. Esten Mason, Associate Professor of Plant Breeding and Genetics, but the legacy of Scott Haley will live on through the relationships built with Colorado wheat growers, students, and the North American agricultural community at large.

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The U.S. Grain Chain, a farm to fork coalition of stakeholders in the grain industry chaired by the American Bakers Association (ABA), is celebrating the recommendation published Dec. 29, 2020, in the 2020-2025 Dietary Guidelines for Americans (DGAs) to “consume half of your grains from whole grain sources” and the remainder from enriched grains. A foundational piece of the DGAs, the guidelines recognize whole grains are “one of the three food groups that are fundamental constituents of a healthy dietary pattern.”

The United States Department of Agriculture (USDA) and Health and Human Services (HHS) oversee and publish the Dietary Guidelines, the cornerstone of all Federal nutrition policy and nutrition education guidelines. The guidelines shape consumer health decisions and doctor recommendations.

Of importance, the DGAs maintained the existing recommendation for the average healthy American adult to consume six one-ounce (28.4 gram) servings of grain foods daily, with half of those servings coming from whole grains.

For the first time, the DGAs included recommendations for birth to two years. The Grain Chain applauded the recognition of grains as one of the traditional, nutritious first foods for infants. Numerous research studies have demonstrated significant, positive effects of nutrient absorption, improved nutrition quality, and overall wellness from enriched grains at various life stages.

Source: www.gograins.org.

The key takeaways from the 2020-2025 Dietary Guidelines for Americans for the grains-based foods industry:

  • Grains, both enriched and whole, play a key role in healthy dietary patterns and diet quality;
  • Grains are a significant contributor of dietary fiber, a generally under-consumed nutrient for Americans;
  • Grains contribute to overall diet quality through key essential nutrients;
  • Grains are a delicious, versatile, affordable, and sustainable plant-based food;
  • Enrichment and fortification of grains are key contributors to positive public health impacts.

Since folic acid fortification of enriched grain foods became required in 1998, the prevalence of babies born with neural tube defects (NTDs) has decreased by 35% in the United States, leading the Centers for Disease Control & Prevention (CDC) to name folic acid fortification of enriched grains one of the top 10 public health achievements of the first decade of the 21st century.

The DGAs included guidance on enriched grains, maintaining the existing recommendation of three one-ounce servings of enriched grains daily. While the guidelines cite science-backed evidence of positive health outcomes from the inclusion of enriched grains, the Grain Chain is extremely concerned to see the DGAs include contradictory language linking “refined grains” with poor dietary patterns and health outcomes.

Published scientific research clearly and unequivocally illustrates the key roles of grains – both enriched and whole – in healthy dietary patterns and their significant contributions to diet quality. To clarify and correct potential consumer confusion resulting from this contradictory language, the members of the Grain Chain look forward to partnering with the USDA and HHS to help educate the public on the value of both enriched and whole grains.

Source: www.gograins.org.

More information about grains can be found at GoGrains.org.

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By Michael Anderson, USW Assistant Director, West Coast Office

On Nov. 13, 1991, the Chicago Tribune ran this headline: “Soviet Bread Prices Skyrocket By 600%.” Bread was already in short supply and if you bought it that morning, you would have paid 60 kopeks, by that afternoon it was 3.60 rubles.

Apparently, the memory of such an event nearly three decades ago is still fresh in the mind of Russia’s President Putin. After he criticized the high price of flour and bread recently, the government quickly announced plans for wheat export taxes and an export quota, even though Russian farmers produced a massive wheat crop for this marketing year.

U.S. Wheat Associates (USW) is not surprised. Despite making up a quarter of the worldwide wheat market, Russia continually insists on controlling exports to keep domestic food prices under control.

Over the last 13 years, Russia has placed some form of restriction on wheat exports six times, including twice in the last year. And, as a result, that choice always led to unnecessary disruptions to wheat buyers from the run up in world wheat prices and uncertainly over supplies.

In 2007, for example, Russia had one of its best crops ever to that point, harvesting just under 50.0 million metric tons (MMT) of wheat. Despite the steady increase in Russian production, a steep rise in the domestic price of wheat was remedied by a 10 percent export tax followed by a 40 percent export tax in January 2008, that continued until July of that year.

Drought and record high temperatures caused severe damage to the 2010 Russian harvest. While global wheat prices tripled, Russia enacted a complete ban on Russian wheat exports that lasted from Aug. 15, 2010, through July 1, 2011.

In early 2015, a depreciation in the Russian ruble led to attractive Black Sea wheat prices. Traders exported a record amount that season. To slow down exports, Russia once again applied an export duty. The tax was lifted in May but implemented again in July (the Russian trade calendar runs from July 1 to June 30).

When uncertainty over the impact of COVID-19 erupted in the spring of 2020 a Russian export quota of 7.0 MMT was applied to the April 1 to June 30, 2020, shipping window. By the end of April, that quota was exhausted and put a stop to all Russian wheat exports until July 1, 2020, the beginning of the new export calendar.

Which brings us to today. Russia has once again announced plans for an export quota that will run between Feb. 15 and June 30, 2021. The plan calls for a €25 per metric ton (MT) export tax on wheat ($30.40/MT) until a 17.5 MMT quota is met – at which point wheat exports will be stopped.

Aside from export taxes and outright bans, the Russian grain industry has also seen rail shipments slow the movement of wheat to export terminals, increased scrutiny on approval paperwork on exporting vessels and a slowdown in receiving phytosanitary certificates to as many as six days.

In fact, grain traders have told news services that they are already experiencing delays in obtaining export documents from Russia’s customs service.

Fortunately, the U.S. wheat industry offers reassurance in the fact that our doors are open for business 365 days per year. In our collective efforts to efficiently supply the widest range of the highest quality wheat in the world, we live up to our claim as the world’s most reliable supplier.

The U.S. government by law cannot block exports except in the cases of a declared national emergency. Further, export taxes are expressly forbidden by the U.S. Constitution.

 

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During this season, all of us at U.S. Wheat Associates (USW) take time to reflect upon the good things we have … like our partnership with our friends at home and abroad. We appreciate working with you and hope that the holidays and the coming year will bring you happiness and success.

USW Headquarters and West Coast Offices will be closed on Dec. 24 and 25 and on Dec. 31 and Jan. 1. The USW Commercial Sales Report will be not be published December 24th or 31st. This report will resume its normal weekly schedule on January 7, 2021. The USW Price Report will not be published December 25th or January 1st. This report will resume its normal weekly schedule on January 8, 2021. USW Wheat Letter email updates will resume its bi-weekly schedule on January 7, 2021.

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Recent news and highlights from around the wheat industry.

Speaking of Wheat.It’s like finding the missing pieces for your favorite puzzle that you have been working on for decades. By having many complete gene assemblies available, we can now help solve the huge puzzle that is the massive wheat pan-genome and usher in a new era for wheat discovery and breeding.” — Dr. Curtis Pozniak, wheat breeder and director of the University of Saskatchewan Crop Development Centre, describing collaborative work with Kansas State University that completed genome sequencing of 15 wheat varieties representing breeding programs around the world.

Biden Nominates Former USDA Secretary Tom Vilsack to serve in the same position in the new administration. The National Association of Wheat Growers (NAWG) congratulated Vilsack for being nominated. “We look forward to working again with former Secretary Vilsack and are ready to engage with any new staff at USDA,” said NAWG President Dave Milligan, a wheat farmer from Cass City, Mich.

Bake to the Future,” a podcast produced by the American Bakers Association (ABA) recently featured a discussion about the future of the U.S. wheat foods supply chain between NAWG CEO Chandler Goule, North American Millers’ Association Jane DeMarchi and ABA President and CEO Robb MacKie. The industry executives weigh in on a range of topics and discuss the imperative of demystifying the farm-to-fork system for consumers. Listen to the podcast here: https://baketothefuture.org/.

Subscribe to USW Reports. USW publishes a variety of reports and content that are available to subscribe to, including a bi-weekly newsletter highlighting recent Wheat Letter blog posts, the weekly Price Report and the weekly Harvest Report (available May to October). Subscribe here.

Follow USW Online. Visit our Facebook page at 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 more on LinkedIn.

 

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By Steve Mercer, USW Vice President of Communications

Throughout 2020, U.S. Wheat Associates (USW) marked its 40th year by recognizing and celebrating the people who produce the wheat and their enduring partnerships with the U.S. Department of Agriculture and the world’s wheat buyers and wheat food processors.

Our communications effort this year has focused on re-telling the USW story—that behind the world’s most reliable supply of wheat are the world’s most dependable people. That despite the different roles or distances, all the people in our story share an unspoken connection through USW and through our shared values of growth, hard work and family. We invite you to revisit our “Stories from the Wheat Farm” featured this year:

The Next Generation in Kansas
Loving the Work in Ohio
Committed to Stewardship in Washington
Living with Purpose in North Dakota
A Passion for the Land in Oklahoma
Committed to Wheat Quality in Oregon
Embracing the Agricultural Lifestyle in Montana

Throughout the year, we gathered historical information about how previous generations of U.S. farm families organized, invested their time, talent and treasure and reached out to the federal government to build overseas markets for their wheat. Those stories are now archived on our website at:

Western Wheat Associates Develops Asian Markets
Great Plains Wheat Focused on Improving Quality and HRW Markets
Evolution of a Public-Private Partnership
The U.S. Wheat Export Public-Private Partnership Today
NAWG – USW Lead the Way Through Issues Affecting Wheat Farmers
Federal Agency Helps Keep the Wheat Moving

We have emphasized past and present connections between our farmers and customers through our Wheat Letter blog and in Facebook and Twitter posts.

Celebrating Farmer Commitment and Global Partnerships in USW’s 40th Year
U.S. Wheat Farmers and Their Overseas Customers Share Unique Connections
Taiwan Flour Millers Share a Long History with U.S. Wheat Farmers – Part One
Taiwan Flour Millers Share a Long History with U.S. Wheat Farmers – Part Two
National Milling Federations Congratulates U.S. Wheat Associates on 40 Years
Retired Washington Wheat Farmer Reflects on Traveling with U.S. Wheat Associates as Chairman
Nisshin Flour Milling, Inc., Congratulates U.S. Wheat Associates on 40 Years
U.S. Wheat Customers Share History, Values and More with U.S. Wheat Farmers
U.S. Wheat Farmers and Former Staff Have Formed Strong Bonds with U.S. Wheat Customers

In this anniversary year, USW put a spotlight on USW’s 17 state wheat commission members that work closely with our organization and USDA’s Foreign Agricultural Service. Those organizations and the rest of the efficient U.S. supply chain share in the challenges and rewards of wheat trade. You can read more by searching “Dependable People” at www.uswheat.org.

The legacy and these partnerships provide advantages USW believes no other wheat exporting country can provide. In many ways, the stories we shared this year built and sustain the culture of the USW organization. They underpin what the U.S. wheat “brand” stands for in the world wheat marketplace: Dependable People, Reliable Wheat.

As we look back on this special year for our organization, we hope that it will serve as a resource and inspiration as USW colleagues continue working in the new year, and for many more years, to help create even greater success for U.S. farmers and their overseas customers.

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By Claire Hutchins, USW Market Analyst

Since June, U.S. Wheat Associates (USW) has carefully tracked the relationship between limited export elevation capacity and high U.S. wheat export basis values. Significantly greater Chinese demand for U.S. agricultural products has limited export elevation availability, causing an increase in wheat export basis values for October 2020 through February 2021 deliveries. However, the anticipation of seasonally reduced Chinese demand for U.S. agricultural goods could pressure U.S. wheat export basis levels for March 2021 and forward delivery periods.

The United States has sold historic levels of soybeans, corn and wheat to China for delivery in 2020/21 following the Phase 1 Trade agreement between both countries. As of Nov. 26, soybean sales to China at 29.7 million metric tons (MMT) are more than three times greater than this time last year and are nearly double the 5-year average. Corn sales to China at 11.2 MMT are magnitudes greater than late November last year and the 5-year average. Total wheat sales to China at 2.06 MMT are more than ten times greater than this time last year and are nearly five times greater than the 5-year average.

Source: USDA FAS Commercial Sales data

 

“January, February and the beginning of March are at capacity; we can’t add a lot more business for those months,” said one industry contact. “If anyone were to sell anything for those delivery periods, it would raise elevation costs substantially more.”

Though wheat export basis levels are projected to remain high through early March 2021 as traders work to execute the large volume of existing commodity sales, industry contacts currently predict a sizeable decrease in U.S. wheat forward export basis values if China’s demand for U.S. corn subsides and if Chinese buyers shift to importing Brazilian soybeans.

According to Trade Data Monitor (TDM), most Chinese soybean imports usually come from the United States between October and February and from Brazil between March and September. On average, soybeans from Brazil jump from 46 to 83 percent of China’s total imports between February and March. Traders anticipate this seasonal trend will continue in 2021, which could increase U.S. wheat export elevation availability in the Pacific Northwest (PNW) and Gulf and could decrease wheat export basis levels from those regions.

Source: Trade Data Monitor, Chinese soybean import data from 2015 to 2019

 

The latest USW Price Report indicates the trade has assumed Chinese demand will slow in the first three months of 2021. The current export basis delivery values for PNW hard red winter (HRW) 11.5 protein show a 5 percent inverse between February and April deliveries.

Source: USW Price Report data as of Dec. 4

 

The report also shows a 10 percent inverse between February and April export basis levels for PNW hard red spring (HRS) 14.0 percent protein.

 

“April forward is when export basis really lightens up and we become more competitive,” said one trader, “there’s strong interest in U.S. spring wheat for that period.”

Source: USW Price Report data as of Dec. 4

 

While Gulf HRW and soft red winter (SRW) export basis values are forecast to remain relatively stable over the first few months of 2021, the Gulf HRS 14.0 percent protein export basis forecast currently shows a 16 percent inverse between February and April deliveries.

Source: USW Price Report data as of Dec. 4

USW does not have a crystal ball, but we do expect downward pressure on most U.S. wheat export basis values between February and April 2021, as long as China’s import demand for U.S. corn and soybeans slows down and inland logistics continue operating smoothly. USW will continue to monitor trade and logistical developments in the coming months and will communicate anticipated basis changes to our customers.

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U.S. Wheat Associates (USW) recently learned that Nelson C. Denlinger, who led trade policy work for USW from 1981 to 2006, passed away in September 2020. A native of Lancaster, Penn., Nelson had an interesting career first as a history teacher at the Choate School in Connecticut. In 1965, he joined the Neighborhood Youth Corps and USAID in Washington, D.C. He eventually joined former Sen. Hubert Humphrey’s staff and later became staff director of the Senate Agriculture Committee before joining USW.

Nelson C. Denlinger

USW asked former President Alan Tracy to share some memories of Nelson and his work.

“Nelson never tried to bring attention to himself, but he knew agricultural policy and was most effective behind the scene, representing farmer interests. He was a friend to all at USW and will be sorely missed.

“With our organization, Nelson did a great service to U.S. wheat farmers. He, along with other USW colleagues, was instrumental in discovering the bribery of Iraq and fraud of the United Nations (U.N.) Oil for Food Program by the Australian Wheat Board (AWB). It was Nelson who acquired AWB wheat contracts registered with the U.N. under that program, and it was his analysis of those contracts that demonstrated to us at USW that AWB gained status as Iraq’s only wheat supplier in return for overcharging the U.N. program and kicking back huge sums to the Saddam Hussein regime, violating program rules and Australian bribery laws.

“While USW was loudly criticized from many quarters for making that accusation public, and AWB denied it for nearly four more years, it eventually led to a U.N. investigation by former Federal Reserve Chairman Paul Volcker that showed AWB made payments over several years that were channeled to the Hussein regime. That in turn led to an Australian Royal Commission investigation that ultimately found AWB payed about 290 million Australian dollars of bogus “transportation fees.” As a result, AWB lost its monopoly over Australian grain marketing and, thus, its ability to administratively set export prices that undercut American farmers in world wheat markets. I don’t think that would have happened without Nelson’s work and the dogged persistence of USW colleagues thereafter.”

All of us at USW extend our sincerest sympathies to Nelson’s widow Ruth and his other family members.