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Meet the USW Technical Experts: Gerry Mendoza – Born to Teach and Share His Love for Baking

Name: Gerardo “Gerry” S. Mendoza

Title: Baking Consultant

Office: USW South Asian Regional Office, Manila

Providing Service to: Republic of the Philippines and Korea

Regional Profile: Southeast Asia, particularly the Philippines, has become one of the most important export markets in the world for U.S. wheat. The Philippines is the second-largest market for all classes of U.S. wheat and has been the largest importer of soft white (SW) and hard red spring (HRS) wheat since 2013. A robust population and income growth are driving increased demand for wheat-based foods. The growing middle class has an increased ability to pay for high-quality products, while end-product manufacturers and consumer preferences give U.S. wheat classes a strong advantage. U.S. wheat farmers have invested for nearly six decades in training Philippines millers and end-product manufacturers, helping the wheat foods industry achieve world-class sophistication and expertise. Given the quality and diversity of U.S. wheat supplies, USW’s focus on increased technical service and assistance is paying dividends as the region’s demand for wheat continues to grow.

There is one thing that everyone who crosses paths with Gerry Mendoza agrees on: he is just a really positive, nice guy.

“One of Gerry’s greatest assets is a positive attitude and sincere willingness to do whatever it takes to carry a project to completion,” said Joe Sowers, USW Regional Vice President for the Philippines and Korea, of his Filipino colleague.

While his attitude may come naturally, Mendoza’s interest in baking started in high school when his family got an oven with a gas range.

“I started messing around with the equipment by baking simple cakes (batter type) that were manually mixed,” said Mendoza. “Eventually, I moved on to kneading dough to make pizza and apple strudel.”

Gerry Mendoza was born into a large family in Baliuag, Bulacan, an agricultural town 50 kilometers north of Manila, known for growing rice, corn, and other vegetables. The town is also famous for its baked product “Pandesal,” a traditional Filipino breakfast bread typically consumed after rice. Once at Adamson University in Manila, he received a bachelor’s degree in industrial engineering.

“My decision to take up industrial engineering was highly influenced by my peers rather than a first choice,” said Mendoza. “I became quite interested in the food processing industry to the point that my final engineering feasibility study was about a chicken processing plant.”

A Love for Baking

Upon finishing school in 1982, Mendoza started in real estate housing development and then as a medical sales representative for a pharmaceutical company, where he says is where he gained his sales and account servicing skills. For a short time, during economic unrest in the Philippines under martial law, Mendoza spent a few years with a small craft bakery that produced traditional Filipino breads and cakes. A few years later, Mendoza returned to the bakery industry and never looked back.

For the next 25 years, Mendoza used his baking, engineering, and sales backgrounds in the bakery industry to sell and promote baking ingredients, supplies, and equipment used to produce bakery goods. During his tenures with Bakels Philippines Inc. and AB Mauri Philippines, he identified new markets, helped expand product portfolios, and developed and executed technical services that included product development programs, baking seminars, product demonstrations, recipe application development, and technical sales training.

Ultimately, one could say his combined interest in playing badminton and baking led Mendoza to U.S. Wheat Associates (USW). Sowers first met him in 2012, when he (Gerry) was running a World Bread Day badminton tournament fundraiser for the Philippine Society of Baking.

“His enthusiastic personality, strong character, and high esteem within the baking community and other industry partners led us to invite Gerry to join USW in 2016, and ever since, he has been an absolute pleasure to work with,” said Sowers. “He came to USW with more than 30 years of experience in baking and allied industries, a background that gives him a profound ability to provide relevant advice and actionable solutions to Philippine mills and end-product manufacturers.”

Committed to Customers

As a USW Baking Consultant, Mendoza’s primary responsibility is providing technical assistance and training to commercial bakeries.

“I saw this (USW) as an opportunity for me to share my baking knowledge and skills that I have nurtured and developed for most of my professional life,” said Mendoza. “Ultimately, I saw it as an opportunity to continue my passion for baking.”

That passion and Mendoza’s wealth of knowledge are what resonates with customers.

“It has always been great working with ‘Sir Gerry,’ as part of our common goal of sharing baking knowledge,” said a bakery owner in the Philippines. “By sharing his expertise with our fellow bakers in the Philippines, we are now more equipped to face the different challenges of a more globalized and competitive baking industry.”

“He guided us through our SRC (solvent retention capacity) project,” said a milling quality control manager. “From the first time we did the streaming, he joined us, collecting flour samples from each stream in the mill. It’s a very tiring process, but he was there with us until we finished collecting almost 50 samples.”

Meant to Teach

After spending many years as a regular resource speaker at the Asian Baking Institute and Philippine Foremost Milling Corporation’s Basic Commercial Baking Course, conducting lectures on different ingredients such as yeast, bread improvers, and chemical leaveners; as well as continuing to regularly conduct baking science short courses for the Philippine Society of Baking—where he serves as an officer and instructor—Mendoza has developed his natural affinity for teaching and mentoring. 

“He teaches and discusses baking in a manner that even a newcomer can easily grasp. He answers all questions [precisely], showing patience and even baking his signature ‘Madeleine’ bread for us,” said a chief operating officer for a large mill in the Philippines. “When we were organizing a baking seminar together, I found Gerry’s coordination and attention to detail excellent.”

“Working with Mr. Mendoza is really inspiring because of his approach to teaching from years of experience,” said another milling executive. “With his extraordinary way of being organized and systematic, his guidance and encouragement helps deliver excellent results for companies.”

Every customer who shared their experience working with Mendoza—the badminton player who also enjoys bike riding, karaoke, and cooking and baking at home—noted his kindness and love for working with bakers.

“He is very approachable, and you can easily feel his sincerity and general concern with whatever you are discussing,” said a chief operating officer for a large mill in the Philippines. “He displays passion in educating people with what he has mastered in his career.”

Mendoza enjoys being able to provide technical assistance and services to the thriving Philippine baking industry.

“My direct contact with millers, bakery owners, operators, and bakers through technical training and baking workshops gives me the opportunity to highlight the value of using flour made from U.S. wheat,” he said.

Another manager said, “Gerry is very easy to work with. He is very approachable, not hesitant to share his knowledge, and very quick when asked for data. He always assures us that he is always available and will always accommodate our inquiries and request. He has never failed us, and he knows how to deal pleasantly and effortlessly with everyone he meets.”

Sowers added, “Gerry Mendoza has a natural affinity for presenting information in a classroom setting or running a baking workshop in an interesting and engaging fashion. He is very creative in designing training activities and enthusiastically carries them out. I think that is why so many customers here want Gerry to put on workshops – and, of course, because he is such a nice guy.”

By Amanda J. Spoo, USW Director of Communications

Editor’s Note: This is the fourth in a series of posts profiling U.S. Wheat Associates (USW) technical experts in flour milling and wheat foods production. USW Vice President of Global Technical Services Mark Fowler says technical support to overseas customers is an essential part of export market development for U.S. wheat. “Technical support adds differential value to the reliable supply of U.S. wheat,” Fowler says. “Our customers must constantly improve their products in an increasingly competitive environment. We can help them compete by demonstrating the advantages of using the right U.S. wheat class or blend of classes to produce the wide variety of wheat-based foods the world’s consumers demand.”

Meet the other USW Technical Experts in this blog series:

 

Ting Liu – Opening Doors in a Naturally Winning Way
Shin Hak “David” Oh – Expertise Fermented in Korean Food Culture
Tarik Gahi – ‘For a Piece of Bread, Son’
Marcelo Mitre – A Love of Food and Technology that Bakes in Value and Loyalty
Peter Lloyd – International Man of Milling
Ivan Goh – An Energetic Individual Born to the Food Industry
 Adrian Redondo – Inspired to Help by Hard Work and a Hero
Andrés Saturno – A Family Legacy of Milling Innovation
Wei-lin Chou – Finding Harmony in the Wheat Industry

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Some Positive News on Wheat Trade with Japan, Mexico and China

Headlines on the trade front this week have direct bearing on the U.S. wheat industry’s desire to reaffirm our trade relationship with long-standing customers in Japan and Mexico, and to renew our relationship with customers in China. For now, at least, the news is positive.

U.S. Trade Representative (USTR) Ambassador Robert Lighthizer this week told members of Congress that the Trump Administration hopes to “wrap up” an agricultural trade agreement with Japan “later this year.” That is good news for flour millers in Japan, who do not want to continue paying incremental effective tariffs for U.S. soft white (SW), hard red spring (HRS) and hard red winter (HRW) relative to Canadian and Australian wheat under the new TPP-11 agreement. Repairing this potential breach with Japan is essential for wheat farmers who, with their partnership with the USDA Foreign Agricultural Service have invested countless resources for more than 60 years to serve the demanding Japanese flour and wheat foods industries.

Amb. Lighthizer also reached out to members of Congress who have expressed concerns about the new U.S. Mexico Canada Agreement on Trade (USMCA). In a description of his remarks, Agri-Pulse reported that the USTR “bent over backwards to assure Democrats on the Senate Finance Committee that he was hearing and addressing their concerns, both about enforcing labor rules in Mexico and about whether the trade pact would hamstring efforts to lower pharmaceutical prices.” At the U.S. Wheat Associates (USW) 2019 Mexico Wheat Trade Conference early this month, our colleagues and our customers in Mexico identified that supporting the USMCA will be our shared focus. They took another big step today with news that Mexico’s Senate on Wednesday passed the USMCA, making it the first country to ratify the new trade pact. Mexico’s imports are the foundation of farm family incomes throughout the southern and central U.S. Plains. Losing it because of trade policies beyond their control is unthinkable.

On June 18, President Trump raised expectations for some positive trade outcome from his planned meeting with Chinese President Xi Jinping at the upcoming G-20 summit. He said he had a “long talk” with Pres. Xi and, according to news reports, said “China very much wants to discuss the future and so do we.” In this case, “we” definitely includes U.S. wheat farmers who have been all but shut out of exporting wheat to China following the imposition of retaliatory tariffs in March 2018. Before then, Chinese flour millers and their baking customers were demanding more high-quality U.S. wheat to blend with domestic wheat. Now, China has replaced our wheat with competing supplies of Canadian spring wheat.

As Amb. Lighthizer said during his congressional testimony on negotiations with Japan, “I think we are making headway and we’re in a situation where we if we don’t make headway quickly, people will lose market share and never get those customers back.”

USW continues to support the need to enforce commitments made in multi- and bilateral trade agreements and, given this week’s upbeat news, look forward to a speedy resolution of these challenging situations.

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A Message to Our Customers and Friends

The announcement from the U.S. Animal and Plant Health Inspection Service (APHIS) on June 7 that genetically engineered (GE) wheat plants were discovered growing in an unplanted (fallow) field in Washington State came with many emotions for wheat farmers, their domestic and overseas customers and for those of us who work on behalf of U.S. farmers.

We know there is frustration over why and how this has happened, and not for the first time. There is a sense of helplessness, not knowing how to resolve the situation. And there is plenty of concern about how it will affect your interests. We share the same emotions with farmers, customers and colleagues.

We also hope you find reassurance from an independent resource like APHIS that there is no indication wheat from these plants has entered commercial supplies nor the food system, and that detailed U.S. Food and Drug Administration investigations found no human or animal health risks from the GE wheat that was last tested about 15 years ago.

Respectfully, our customers have a right to take an abundance of caution related in this matter. Korea’s Ministry of Food and Drug Safety and Japan’s Ministry of Agriculture, Forestry and Fisheries are expecting an identification of the specific GE trait, known as an “event,” in the wheat plants identified in Washington State. Our organization requested the same information and urged officials to complete their testing, reach conclusions and provide those results to our customers as quickly as possible.

APHIS had confirmed the plants in this situation have a GE event for resistance to glyphosate but at the time had not yet identified the specific event. Identification is important because Korean and Japanese government agencies have been testing all imported U.S. wheat for two glyphosate resistant events since 2013. That testing had never identified those two traits in about 30 million metric tons of U.S. wheat.

We want to assure you that U.S. Wheat Associates (USW) and every stakeholder in this situation has been and will continue taking all appropriate actions to ensure that U.S. wheat, wheat flour and wheat foods remain safe, wholesome and nutritious for people, and in animal feed, around the world.

Nothing is more important to the U.S. wheat industry than the trust we have earned with customers at home and around the world by providing a reliable supply of high-quality wheat.

We thank you all for your reasonable and patient approach to this unfortunate situation.

 

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U.S. Wheat Exports End Year Close to USDA Estimate

By Claire Hutchins, USW Market Analyst

Despite challenging market factors, U.S. wheat exports for marketing year (MY) 2018/19, which ended May 31, totaled 25.8 million metric tons (MMT) (948 million bushels), in line with USDA’s adjusted export volume estimate. That is 9% ahead of MY 2017/18 and 1% ahead of the 5-year average of 25.5 MMT (937 million bushels). Commercial sales of all classes of wheat in MY 2018/19 exceeded 2017/18 levels due to abundant exportable supplies, excellent harvest qualities, competitive export prices and sustained service from U.S. Wheat Associates (USW) representatives supported by its state commissions and USDA’s Foreign Agricultural Service programs. This offset the bearish factors including a strong U.S. dollar, competitor’s advantages, uncertainty about U.S. trade policies and difficult inland transportation logistics.

Hard Red Winter. USDA reported hard red winter (HRW) 2018/19 sales totaled 9.40 MMT (345 million bushels), 1% above 2017/18 and 1% above the 5-year average of 9.30 MMT (342 million bushels). Customers took advantage of the highest quality HRW crop in several years at attractive export prices compared to 2017/18. Out of the Gulf, between Jan. 1 and May 31, 2019, the average export price of U.S. HRW 12.0 protein (12% moisture basis) cost $227/metric ton (MT) compared to $257/MT over the same period in 2018. Sales to Mexico and Nigeria were up 6% and 36% respectively, while sales to Japan were down 6%. Sales to Mexico totaled 2.15 MMT (79.0 million bushels), 44% above the 5-year average of 1.49 MMT (55.0 million bushels), once again making Mexico the top HRW buyer. Commercial sales to Iraq, now the fourth-largest consumer of U.S. HRW, were in line with 2017/18 levels at 674,000 metric tons (MT) (24.7 million bushels).

Soft Red Winter. 2018/19 soft red winter (SRW) sales increased 33% year-over-year to 3.33 MMT (123 million bushels), still 14% below the 5-year average of 3.92 MMT (144 million bushels) despite difficult inland transportation logistical issues due to major flooding on the Mississippi River and its tributaries. The 2018/19 SRW crop boasted higher protein levels and good extensibility, making it a valuable blending ingredient for cookies and cakes. A steady decline in SRW futures prices between mid-December 2018 and mid-May 2019 encouraged strong commercial sales to top SRW-importing regions. Export sales to three of the top five SRW purchasers increased or remained steady compared to 2017/18. Sales to Mexico, the top importer of U.S. SRW, increased 25% over last year to 917,000 MT (33.6 million bushels) and sales to Peru, the fifth-largest importer of U.S. SRW, increased 13% over last year to 175,000 MT (6.46 million bushels). Export sales to Nigeria held strong at 272,000 MT (9.96 million bushels).

Hard Red Spring. By the end of MY 2018/19, hard red spring (HRS) export sales totaled 7.15 MMT (263 million bushels), 16% ahead of last year’s pace, despite a 94% decrease in commercial sales to China, formerly the fourth-largest importer of U.S. HRS. A 60% year-over-year increase in HRS production, at 16.0 MMT (588 million bushels), higher ending stocks, high protein content and competitive export prices all supported export sales. Gulf exports of HRS 14.0 protein between Jan. 1 and May 31, 2019, cost, on average, $263/MT compared to $305/MT over the same period in 2018. Seven of the country’s top ten HRS-importing partners increased commercial sales year over year. Commercial sales to the Philippines, the top importer of U.S. HRS, jumped to 1.85 MMT (68.0 million bushels) in 2018/19, 39% ahead of last year and 38% ahead of the 5-year average of 1.34 MMT (49.2 million bushels).

White wheat. Total commercial sales of soft white (SW) and hard white (HW) wheat climbed to 5.45 MMT (200 million bushels) in 2018/19, which includes about 165,000 MT of HW sales to Nigeria. That is slightly ahead of last year’s pace and 21% ahead of the 5-year average of 4.51 MMT (166 million bushels) due to increased production, increased exportable supplies and below-average protein levels compared to years prior. Sales to the Philippines and Japan, the top two importers of U.S. SW, respectively, increased 13% and 7% over 2017/18 levels. The Philippines purchased 1.32 MMT (48.9 million bushels) of SW compared to 1.17 MMT (43.0 million bushels) in 2017/18. White wheat sales to Japan increased to 889,000 MT (32.7 million bushels) compared to 829,000 MT (30.4 million bushels) in 2017/18.

Durum. USDA reported 2018/19 durum sales at 504,000 MT (19.8 million bushels), up 24% from the year prior, but 12% below the 5-year average of 573,000 MT (21.0 million bushels). Increased production, high protein content, excellent kernel characteristics and competitive prices throughout the marketing year all supported northern durum export levels. Increased sales to four of the five top markets for U.S. durum boosted export figures. The European Union (EU) purchased 290,000 MT (10.7 million bushels) of U.S. durum in 2018/19, up 71% year-over-year following a drought that cut production in many EU countries.

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Blockchain in Agricultural Commodity Trading: Dream or Reality?

By Tanner Ehmke, Manager, Knowledge Exchange, CoBank; Reprinted with permission;
View the original report here.

Key Points:

  • Blockchain innovations in agriculture are numerous but have been slow to gain industry-wide acceptance, particularly in global agriculture commodity trading.
  • Previous attempts to digitize trade finance with tools like bank payment obligation (BPO) have been slow to take hold, raising doubts among market participants of new digitalization efforts like blockchain.
  • Commodity agricultural trade faces unique challenges, including the blending of grain along the supply route, and the lack of digital documentation within sections of the supply chain.
  • Digital solutions are quickly evolving, creating an environment where blockchain technologies may be more viable in ag commodity trading in the near future.
  • Investment in storage, transportation, and sensors to segregate and track commodities through the supply chain is necessary to give buyers visibility, with high-value or value-added commodities like non-GMO and organic grain where provenance and tracking are desired.

Introduction

Blockchain, the distributed ledger technology behind cryptocurrencies like Bitcoin where identical records of transactions are stored on multiple computers, is still in its infancy but has seen a flood of pilot programs and proof-of-concepts from companies around the world as they race to harness its power of transparency. The agriculture and finance industries in particular have captured the spotlight as ripe for disruption by blockchain technologies. Adoption of most blockchain technologies across agriculture, however, has been limited to date. Banks and agribusinesses nonetheless remain keen on finding distributed ledger solutions to deploy industry-wide and potentially achieve efficiencies from faster transaction speeds, less cumbersome documentation, and simpler and faster payments between buyers and sellers around the world.

EXHIBIT 1: Process of Domestic Supply Chain for U.S. Soybean Export via Barge; Graphic Source: CoBank

Other digital solutions that promised to transform the commodity trading sector, such as bank payment obligation (BPO), are recent reminders that change can be hard work without industry-wide acceptance. Until numerous roadblocks to blockchain solutions are resolved, such as a lack of a digital ecosystem for paperwork like bills of lading and letters of credit for parts of the supply chain; improvement in global industry protocols in quality; standards in language; investment in storage and transportation for segregation; and technological advancements in sensors to monitor movement of commodities along complex trade routes, industry-wide adoption of blockchain in agricultural commodity trading will struggle to grow beyond proof of-concept. But, if successful, blockchain could be transformative across the sector, bringing value across the supply chain from producers to consumers.

Complex Supply Chains

Blockchain applications for agriculture abound. Ripe.io, GrainChain, AgriDigital, OriginTrail, and IBM Food Trust are just a few of the blockchain-based technologies created for commerce in agriculture. Yet in the complex global agricultural commodity space where crops like corn, soybeans, and wheat are blended from numerous farms and pass through multiple hands before reaching the final destination, a blockchain solution that links the supply chain and creates transparency of transactions from beginning to end remains in idea phase. The biggest challenge for the widespread adoption of blockchain technologies in agricultural commodity trading is the complexity within the chain of custody (Exhibit 1). Grain leaving the farm is often comingled at a country elevator, then blended again at a rail or barge loading facility, then comingled again at the export facility where it is loaded on an ocean vessel for export. At the receiving port overseas, grain will likely be blended even more after off-loading the vessel.

EXHIBIT 2: Grain Ocean Vessels Loaded, by Port Region; Graphic Source: CoBank

Digitizing even portions of the supply chain could create huge cost savings for grain handlers. The physical delivery of documents like bills of lading, letters of credit, contracts, letters of intent, and invoices is cumbersome. While costs of shipping documents are negligible and could be eliminated with a blockchain platform, the cost and risk of important documentation arriving late could be far greater. If documents to the receiver of the grain do not arrive on time, the shipper must pay the cost of demurrage for every day the barge, rail car, or vessel sits idle. Cost of demurrage per barge, for instance, can run about $300/day. Demurrage is a charge for failure to load or unload barges, rail cars, or ocean vessels within the time allowed.

A non-blockchain based digital solution currently is being evaluated by a consortium of agribusinesses for barge freight on the Mississippi River for the purpose of reducing paperwork and creating seamlessness in transactions between companies. Paperwork such as bills of lading and letters of credit have digital forms for ocean vessels, but are in paper form for barge traffic on the Mississippi River, which is an important logistical leg of the global agricultural commodity supply chain. Digitizing paperwork on the Mississippi River export route offers the greatest potential for blockchain solutions in global agricultural commodity trading. The majority of U.S. ocean-going vessels loaded with grain depart from the New Orleans region (Exhibit 2).Barge traffic for grain on the Mississippi River regularly exceeds 15,000 barges/year (Exhibit 3). The plethora of documents in the grain trade that must be digitized for seamlessness across the supply chain includes but is not limited to:

  • Letters of credit
  • Bills of lading
  • Trading slips
  • Certificates on weights, grades, phytosanitary
    specifications, fumigation, and origin.

Additionally, the industry would need agreement on where in the supply chain the data would be committed to the blockchain, such as at the barge or rail car loading facility, or at the farmer’s field. The data on a blockchain for grain traded on the inland river system would then also have to be integrated with systems for ocean-going vessels heading to international markets, thereby requiring international standards for data and governance.

EXHIBIT 3: Grain Barges Unloaded in New Orleans; Graphic Source: CoBank

Disillusionment

Previous attempts to digitalize trade finance were heralded as transformative but have yet to change the status quo in global trade. In recent years, the bank payment obligation (BPO) was created with significant investment and promised faster handling of goods, payment at due date, and faster receipt of trade documents. The lack of wide-spread adoption of BPO has raised doubts among market participants of new digitalization efforts like blockchain. A blockchain platform may not be adopted industry-wide despite significant investment and coordination, particularly in emerging markets where there is frequently a lack of consistency in technology. Or, if successfully adopted, a blockchain platform could itself be disrupted by yet another new technology. Questions about ownership of data on a distributed ledger have also raised concerns. Trading firms want information to be private. If chain of custody information is visible for anyone on the supply chain to see on a distributed ledger where each market participant or node would have access to all documentation, merchandisers will be reluctant to use
a blockchain platform. Who will gain access as a node in the blockchain will require governance and rules, thereby requiring a governing body trusted by all parties of the supply chain to host nodes and validate transactions. Blockchain would not reduce or eliminate the need for regulators. Maintaining the quality of information that is inputted into the blockchain would require a licensed inspector who might need access to the blockchain to see documents and integrate their certification information on grading. A regulator or third party would also still be needed to define responsibilities, rules, and regulations of supply chain participants despite blockchain widely thought of as a technology that would replace trusted intermediaries. With the huge volume of shipments moving outside of the U.S., cooperation from international buyers is required to create the protocols necessary for blockchain in agricultural commodity trading to flourish. However, the current geo-political climate – especially with the U.S. and important trading partners like China – raises doubts about achieving a globalized trading system on a blockchain.

Blockchain’s application in the ag commodity trade may also be limited to only portions of the supply chain. If farmers and country elevators are not incentivized either through cost savings or gain in value, adoption of blockchain will be limited to segments further down the supply chain.

Evolution

Despite major challenges impeding blockchain’s use in the global grain trade, the potential opportunities achieved through a distributed ledger system could be significant. Blockchain could potentially expedite borderless clearing, help facilitate digitally validated chains of custody through choke points like barge and train loading facilities, allow buyers and sellers to follow a shipment through various chains of custody, lower the cost for clearance of goods, eliminate duplicated inspections at ports, lower risk of demurrage, assist with payment, mitigate counter-party risk, and greatly reduce the risk of errors and fraud. Corn, which has the simplest trade specifications under the Federal Grain Inspections Service (FGIS) would be the easiest commodity to adopt into a distributed ledger platform, followed by soybeans and wheat. If provenance is important, sharing knowledge of the entire chain of custody will be necessary for commodities like non-GMO and certified organic. Through investment in grain storage and transportation for segregation, greater transparency in the supply chain to segregate other attributes, including but not limited to:

a. High-oleic oil content for soybeans
b. Protein content
c. Foreign matter
d. Moisture levels

Further investment in electronic sensors to trace, validate, and verify quality attributes, though, would be required to make transparency possible along the complex commodity trading route. With sensors in place, a blockchain platform could evolve to include payment systems within “smart contracts” that automatically execute transactions without human intervention as the product moves through the supply chain. However, a distributed ledger system that shares this information would also need to protect proprietary information held only between buyers and sellers.

Conclusion

The challenges of industry-wide adoption of blockchain technologies for agricultural commodity trading are ample, but so are the potential benefits. Greater visibility in the supply chain will create value for many, but standards will change. The winners in a hypertransparent environment will be those who have the ability to segregate and capture higher value in the commodity chain. Those who struggle to adapt will be those with limited ability to segregate. Experiences with prior efforts to digitize trade have raised the level of caution for blockchain. High investment into blockchain may not result in industry-wide adoption. If successfully adopted, a blockchain platform could crowd out small players. It could also be disrupted by yet another new technology.

To be successful, a blockchain platform bringing transparency to an entire supply chain would need to be private and secure from outside parties. Only invited parties or nodes would be allowed to view the data on transactions for traders to be confident that proprietary information is not made public. This would require a governing body to determine who is allowed to participate on the blockchain.

Global standards and protocols will also need to be established. Given the current geo-political and global trade environments, such an evolution in international cooperation will likely be years in the making.

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Renewing a Partnership of Affection and Action with Mexico’s Flour Millers

By Steve Mercer, USW Vice President of Communications

When U.S. Wheat Associates (USW) was planning to hold its 2019 Mexico Wheat Trade Conference June 2 to 4, 2019, no one anticipated that the threat of new tariffs on Mexican imports would come just two days before the meeting started.

“What we thought was an unfortunate coincidence turned out to be a fortunate opportunity to address the trade policy concerns face to face with our Mexican customers,” said USW President Vince Peterson. “Talking through the potential concerns that way allowed us to move on to talk about how we can work together to navigate the policy issues and increase the efficiency and value of Mexico’s U.S. wheat purchases. We found that our shared challenges bring us closer together.”

2019 Mexico Wheat Trade Conference Cancún

 

In the just ended marketing year 2018/19, Mexican flour millers imported more U.S. wheat than any other country. The flour millers that attended the conference in Cancún represented about 80% of the 3.3 million metric tons (MMT) total 2018/19 commercial sales to Mexico reported by USDA as of May 30. USW Chairman Chris Kolstad, a wheat farmer from Ledger, Mont., thanked the millers for this and past business, and assured them that “USW and the National Association of Wheat Growers will do everything in our power to ensure that the USMCA Agreement on Trade is approved.”

Kolstad said the North American Free Trade Agreement (NAFTA) served both countries well and the United States-Mexico-Canada Agreement (USMCA) will continue to benefit the three countries with increased trade and new economic opportunity. His focus set the stage for insight from other conference speakers into why approval of USMCA is so important. They all agreed that the agreement will be implemented — but they do not know when it will happen.

Interviewing conference attendee, Francisco Salas Romero, Harinas.

Interviewing conference attendee, Francisco Salas Romero, Harinas.

“NAFTA has integrated the U.S. and Mexican economies steadily over 30 years,” said speaker Juan Carlos Baker, who served on the Mexican government’s USMCA negotiating team and now is a private trade consultant in Mexico. “But recently, the negative voices about NAFTA and USMCA have been the loudest. We must tell the positive stories about our trade benefits and the USMCA. I believe we will have a new agreement and will be able to continue trade, but how open it will be is up to us to determine.”

José Luis Fuente, President of Camara Nacional de LA Industria Molinera de Trigo (CANIMOLT), offered an inspired appeal to work together to tell officials in both countries that export opportunities must be improved, not restricted.

José Luis Fuente, President of Camara Nacional de LA Industria Molinera de Trigo (CANIMOLT)

José Luis Fuente, President of Camara Nacional de LA Industria Molinera de Trigo (CANIMOLT)

“We know that U.S. wheat farmers and U.S. Wheat Associates have done many things to tell this story,” Mr. Fuente said. “We have a partnership based on affection that is backed by actions. But actions are more needed now in this unusual trade environment.”

A large portion of the conference focused on other actions that can help facilitate U.S. wheat trade between Mexico and the United States. Two speakers focused on how millers can manage price risk. Christopher Lawrence, Senior Market Strategist with Rabobank, covered how best to hedge exchange rate exposure between U.S. dollars and Mexican pesos. Austin Damiani, an independent wheat futures trader from Minneapolis, Minn., provided valuable insight into hedging price risk.

<em>Austin Damiani, independent trader, Minneapolis Grain Exchange</em>

Austin Damiani, independent trader, Minneapolis Grain Exchange

“It is very important to consider locking in prices with futures,” Damiani said. “I am a speculator who bets on how the market will move. That is a risky activity. But I believe that as wheat buyers, if you are not hedging you are speculating.”

Panel discussion speakers: Justin Gilpin, CEO, Kansas Wheat; and Luis Olivera, Executive Vice President Sales, Ferromex, Mexico City.

Panel discussion speakers: Justin Gilpin, CEO, Kansas Wheat; and Luis Olivera, Executive Vice President Sales, Ferromex, Mexico City.

With so many logistical options for delivering wheat to Mexico, USW Regional Vice President Mitch Skalicky and his colleagues based in Mexico City who planned the conference emphasized commercial rail issues and opportunities in the program. A panel discussion on optimizing rail shipments and minimizing additional expenses included the President of Kansas City Southern Railroad-Mexico, and the Executive Vice President of Sales for Ferromex (Mexico’s national rail system). These two private sector companies are the principal railroads who operate Mexico’s rail lines through long term concessions that they have with the Government of Mexico. Representatives from the Mexican government and U.S. wheat grower organizations were also included on the panel. Gabriel Letona of Advan Sea in Panama City, Panama, also discussed the comparative advantages of FOB and CIF ocean freight contracting.

Presentations on contracting to receive U.S. wheat of superior value and how the U.S. farmer co-operative system has evolved as a major source of efficiently delivered wheat and grain exports rounded out what participants deemed as a very welcome and successful conference.

Chuck Conner, CEO, National Council of Farmer Cooperatives

Chuck Conner, CEO, National Council of Farmer Cooperatives

“We have 14 farmers here from 13 different states and U.S. Wheat Associates staff from 3 offices to show you that we take your business seriously,” Chris Kolstad told the millers. Those farmers, state commission members and USW, he added, “are all united in our desire and goal to earn your full trust in the United States as your primary source of imported wheat.”

*Header Photo Caption: Panel on “Optimizing Rail Operations of U.S. Wheat Shipments and Minimizing Additional Expenses for Mexican Importers.

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Wheat food products to illustrate Wheat Industry News

State Wheat Commission Members Support Wheat Farmers and Engage with Consumers

U.S. Wheat Associates (USW) is supported by a highly successful public-private partnership that includes 17 state wheat commissions. Wheat producers contribute a portion of their wheat sales (either by bushel or by production value and known as a “checkoff” program) to their state wheat commission and contribute a portion of the checkoff to join USW. On average, U.S. wheat farmers contribute about one third of a penny per bushel ($0.0032) to USW. In return, USW’s works closely with its state wheat commission members to carry out its mission “to develop, maintain, and expand international markets to enhance the profitability of U.S. wheat producers and its value for their customers.”

On the state level, these commissions invest funds in various educational projects and ongoing communications efforts to support wheat farmers and engage with consumers, domestically and overseas. We thank USW state commission members’ commitment to building demand for U.S. wheat and highlight some of their activities and resources here.

  • Find more information about the Arizona Grain Research & Promotion Council’s news and activities here.

 

 

  • The Colorado Wheat Administrative Committee posts weekly crop progress reports on its website and other news and activities on Facebook and Twitter.

 

  • By using the registered tagline ‘Quality wheat simply grown’ and a new, more modern logo, Idaho wheat farmers are connecting on a more personal level with consumers who want to know their food is grown naturally on family farms. Visit the Idaho Wheat website here and follow its news and activities on Instagram, Facebook and Twitter.

 

 

 

 

 

 

 

 

  • The Oklahoma Wheat Commission recently partnered with the Oklahoma State University Food & Agricultural Products Center for a day-long event called All You Knead to Know – An Artisan and Grain Workshop. The new, annual event walked participants through the journey wheat goes on from field to fork. Read more about this event here and stay up to date with the commission’s other news and activities on Facebook.

 

  • The Oregon Wheat Commission is showcasing wheat growers and Oregon State University (OSU) researchers through videos to help connect consumers to agriculture. The first video features Dr. Hagerty from the Columbia Basin Agricultural Research Center (CBARC) in Pendleton, Ore. View the video here and follow along with the commission’s other new and activities on Facebook and Twitter.

 

 

 

  • The “Wheat All About It” weekly podcast, hosted by the Washington Grain Commission, features guests from all over the U.S. wheat industry discussing important current issues. Listen to the podcast here. The commission also shares its news and activities on Facebook and Twitter.

 

  • Find more information about the Wyoming Wheat Marketing Commission’s news and activities here.
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Wheat Industry News

Recent news and highlights from around the wheat industry.

Quote of the Week: “Storms are always very concerning for those of us in agriculture. It was very unfortunate, especially for our wheat producers here in Oklahoma, to have this much rain this close to harvest.” – Blayne Arthur, Oklahoma Secretary of Agriculture, on the effects of constant rain and severe flooding that may significantly reduce final wheat yield potential in Oklahoma and many other states this year.

Best Wishes to Ben Conner who is leaving his position as U.S. Wheat Associates (USW) Vice President of Policy on June 7, 2019, to become a partner at DTB Associates, Washington, D.C. Continuing the legacy of his predecessors at USW, Ben’s work the past five years has focused on reducing barriers to international trade for U.S. wheat farmers. Notable examples include Ben’s successful stewardship of USW’s positions on: WTO cases against China’s non-compliant domestic wheat support and its imported wheat tariff rate quota (TRQ); Brazil’s agreement to implement its WTO obligation to import 750,000 metric tons of wheat duty-free from non-Mercosur countries; potential long-term consequences from using a Section 232 national security exemption to implement tariffs on steel and aluminum imports; and unfair restrictions on U.S. farmers when selling their wheat across the border to nearby Canadian elevators compared to Canadian farmers who sell their wheat to U.S. elevators. We thank you, Ben, for all you’ve done for U.S. wheat producers, and for being such a dedicated and supportive colleague.

Spring Wheat Planting Progress. North Dakota Wheat Commission reported that farmers make some progress planting hard red spring (HRS) wheat since last week. Percent of the U.S. spring wheat crop planted has now reached 84 percent, compared to 91 percent on average. However, some acres will not get planted due to overly wet conditions in South Dakota and southern North Dakota. Read more here.

U.S.–Colombia FTA Pays Dividends. From USDA’s Foreign Agricultural Service, since the U.S.-Colombia Trade Promotion Agreement (CTPA) entered into force May 15, 2012, U.S. agricultural exports to Colombia nearly tripled to $2.9 billion in 2018. Colombia, the third-largest economy in South America, now purchases half its agricultural imports from the United States. Preferential access from CTPA and a strong and changing Colombian economy will keep demand for high-quality U.S. wheat and other products strong. Please click here to read more.

Borlaug Dialogue. Amb. Kenneth M. Quinn, president of the World Food Prize Foundation, recently announced the opening of registration for the 2019 Borlaug Dialogue International Symposium, Pax Agricultura: Peace Through Agriculture, Oct. 16 to18, 2019, in Des Moines, Iowa. Through the Borlaug Dialogue, the World Food Prize Foundation helps build alliances in the struggle against world hunger and malnutrition. Read the release here.

Sincere Sympathies to our colleague Joshua Tonsager​, Vice President of Policy and Communications with the National Association of Wheat Growers, and his family on the passing of his father Dallas Tonsager, chairman of the U.S. Farm Credit Administration since 2016, former Undersecretary for Rural Development at USDA and a South Dakota farmer. Read more here.

Baking with Whole Wheat and Whole Grains Course. The Northern Crops Institute is hosting a course focused on the utilization of whole wheat flour made from hard red spring (HRS) wheat and how to incorporate other whole grain ingredients into wheat-based products. The July 30 to Aug. 2, 2019 course will be at its facilities in Fargo, N.D. Click here to learn more and register by Monday, July 8.

IAOM-KSU Flour and Dough Analysis. The IAOM-KSU Flour and Dough Analysis short course will be held at the IGP Institute in Manhattan, Kan., Sept. 10 to 12, 2019. The course will focus on flour and dough analysis practices and methods and correct interpretation and understanding of the results. Click here to learn more and register.

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 page at https://www.facebook.com/uswheat for the latest updates, photos and discussions of what is going on in the world of wheat. Also, find breaking news on Twitter at www.twitter.com/uswheatassoc and video stories at https://www.youtube.com/uswheatassociates.

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Increasing U.S. Rail Costs Hurt the World’s Wheat Buyers

By Claire Hutchins, USW Market Analyst

Railroad rates and charges paid by customers who ship wheat and other grains make up a large portion of basis and have a direct effect on the price overseas buyers pay for U.S. wheat. Unfortunately, the cost of shipping wheat by domestic rail has been increasing at a rapid pace.

U.S. Wheat Associates (USW) and many of its state wheat commission members are spending more time investigating and commenting on the potentially adverse effects of increasing rail rates and separate charges on our overseas customers, shippers and even local farmers.

U.S. railroads are a crucial part of the most efficient grain supply system in the world. The rail system fulfills an essential logistical function that neither grain handlers nor farmers can perform on their own. Wheat must compete for limited rail capacity with other grains as well.

USW, however, has learned that since June 2014, the cost of wheat shipments has increased substantially, due at times to higher basic rates for shipping wheat and to added “demurrage” and “accessorial” (D&A) charges by Class 1 railroads (those with the largest systems). Demurrage charges occur when shippers do not receive, load or unload freight within a certain time period determined by the railroads. Accessorial charges are added to base transportation charges and can include demurrage, as well as costs to weigh rail cars, diversions from normal routes and other costs.

Recently, USW observed how agriculture is not the only industry negatively affected by these additional charges. USW joined more than 100 representatives across many sectors May 22 to 23, 2019, at a hearing held by the U.S. Surface Transportation Board (STB) to assess the fairness, reciprocity and efficiency of railroad D&A charges. The STB is a federal regulatory board that has broad economic oversight of U.S. railroads, trucking companies, water carriers and other transportation groups.

At the hearing, diverse stakeholder voices united under two common themes: D&A charges heavily favor Class 1 railroads and do little to improve overall service provided by railroad companies to shippers, receivers and intermediaries. Many shippers at the hearing said circumstances often prevent them from meeting what they consider strict railroad loading and unloading schedules, thus incurring the D&A charges. In some cases, stakeholders said they had to invest tens of millions of dollars in new infrastructure to accommodate railroad scheduling to avoid further demurrage costs.

In the case of wheat, as rail costs increase, the grain handlers may try to recover these costs by offering higher grain prices to terminal or export elevators and, some in the industry believe, by offering lower prices to farmers. As basis increases, overseas buyers must pay more for all classes of wheat out of the Gulf and the Pacific Northwest and that affects demand.

As rail costs increase, the grain handlers may try to recover these costs by offering higher grain prices to terminal or export elevators and, some in the industry believe, by offering lower prices to farmers.

Representatives from Class 1 railroads also attended the STB hearing and made the point that efficiency is good for all parties in the supply chain. They unilaterally agreed that D&A charges incentivize shippers to make more efficient loading and unloading decisions, which improves overall efficiency.

USW hopes the STB will carefully consider industry perspectives when assessing the fairness and efficiency of D&A charges because wheat producers and customers alike are adversely affected by increasingly high rail costs. USW believes lower rail costs could help U.S. wheat be even more competitive in a global marketing environment where only a small change in cost can make a big difference for farmers and their customers.

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New Crop HRW Demand is Up Significantly

By Claire Hutchins, USW Market Analyst

As of May 16, total U.S. hard red winter (HRW) commercial sales for delivery in new marketing year 2019/20 reached a record 1.08 million metric tons (MMT). Weekly commercial sales of HRW for delivery in 2019/20 since early March 2019 are, on average, more than four times higher than new marketing year sales in 2017/18 for delivery in 2018/19 and are double each week’s 5-year average. Significant increases in new marketing year HRW exports to Algeria, Iraq, Nigeria, Saudi Arabia and Thailand contribute to the boost in 2019/20 sales.

Analysts attribute higher demand volume to ample exportable supplies and competitive global pricing.

U.S. Wheat Associates (USW) publishes a weekly commercial sales report every Thursday on Facebook, Twitter and here on its website.

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