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By Steve Wirsching, USW Vice President and West Coast Office Director

It is U.S. Wheat Associates’ (USW) mission to “develop, maintain, and expand international markets to enhance wheat’s profitability for U.S. wheat producers and its value for their customers.” The overseas market has changed tremendously in the last 25 years. In the 1990s, the United States was a dominant global supplier. Today, it is one of many suppliers in a highly competitive international market. International trade has nearly doubled during that same time, driven by population and income growth. This growth has increased competition, elevating wheat quality as a vital component of value.

Russia now boasts that it exports more wheat than the United States. While Russia exports more tons, the United States continues to lead the world when sales are measured in dollars. In 2018, Russia exported $5.8 billion worth of wheat as compared to $6.1 billion exported by the United States. U.S. wheat commands a higher price in the international market because customers recognize its quality, consistency, and value.

In March, Wirsching participated on the Learning Session panel for “Putting Wheat Quality in the Spotlight ” at the 2019 Commodity Classic. His presentation focused on global markets for wheat, why growers should care about quality and selling their crop abroad.

USW supports the annual National Wheat Yield Contest sponsored by the National Wheat Foundation (NWF). Increasing wheat production is important to the long-term viability and competitive position of wheat as a food grain. However, wheat quality must not be compromised in exchange for higher yields. Growers need both higher yields and better quality. Along with the NWF and the National Association of Wheat Growers, USW recently helped sponsor a learning session, “Putting Quality in the Spotlight,” at the 2019 Commodity Classic in Orlando, Fla. The session focused on enhancing the message that quality is important. Panelists discussed why the top winning varieties should also be subject to minimum end-use functionality tests because some in the industry worry that the United States will adopt more wheat forage varieties to enhance yields, at the expense of quality. Farmers know you cannot sell something the customer does not need or want to buy. That is why quality is important.

Find more information about U.S. wheat quality and related resources here.

 

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By Elizabeth Westendorf, USW Assistant Director of Policy

Every year, U.S. Wheat Associates (USW) invites farmers (selected by state wheat commissions) to visit U.S. wheat customers overseas to learn more about international markets, customer needs, and the role of U.S. wheat in their businesses. This year, USW Assistant Director of Policy Elizabeth Westendorf led a team of three farmers to Spain, Portugal, and Morocco. The team included: Al Klempel, a hard red spring (HRS) and hard red winter (HRW) wheat farmer from Bloomfield, Mont. representing the Montana Wheat and Barley Committee; Kent Lorens, a HRW and hard white (HW) wheat farmer from Stratton, Neb., representing the Nebraska Wheat Board; and Casey Madsen, a HRW and HW wheat farmer from Pine Bluffs, Wyo., representing the Wyoming Wheat Marketing Commission.

They were accompanied by Ian Flagg, USW Regional Vice President for European, Middle Eastern and North African Regions and Rutger Koekoek, USW Regional Marketing Director, from the USW Rotterdam Office, as well as Mina El Hachimi, USW Director of Finance and Administration; Peter Lloyd, USW Regional Technical Director; and Tarik Gahi, USW Milling and Baking Technologist, from the USW Casablanca Office.

The 2019 USW EU-MEENA Board Team and USW staff in Spain during a visit with leadership from Harinas Polo and staff from the U.S. Embassy in front of the Harinas Polo mill.

In Spain, the team visited a pasta factory and several flour mills. They learned the importance of Spain’s growing pasta industry and visited a company capitalizing on health foods trends with innovative seeds and grains blends. The largest pasta producing company in Spain, Grupo Gallo, was the first to introduce semolina-based pasta to Spain in the 1960s when they brought durum wheat into the country. Prior to that, Spain only consumed pasta from common wheat. Today, Spanish millers value stability and consistency in the U.S. wheat they buy, and these qualities become even more important as companies continue to expand into convenience products. In Portugal, this theme of appreciating quality continued, with companies constantly seeking new ways to innovate in the market and distinguish their products from competitors.

After Portugal, the team left the EU to visit USW’s office and customers in Morocco. They met with Moroccan Office of Cereals (ONICL) and spoke about continued progress in implementation of the U.S.-Moroccan Free Trade Agreement, which includes a wheat tariff-rate quota. As in Spain and Portugal, Moroccan mills appreciate U.S. wheat quality, and companies targeting the high-quality niche market know they are well-served with U.S. wheat.

Visiting Kenz Maroc in Morocco. (L to R) Ian Flagg, USW Regional Vice President for European, Middle Eastern and North African Regions; Al Klempel, Montana; Casey Madsen, Wyoming; Kenz Maroc leadership; Kent Lorens, Nebraska; Mina El Hachimi, USW Director of Finance and Administration; Peter Lloyd, Regional Technical Director.

“The Moroccan market is very different from that of Spain or Portugal,” says Westendorf. “But the demand for high-quality wheat is still very evident and will continue to grow. We need to make sure that U.S. wheat maintains its reputation as the world’s most reliable choice by continuing to support our customers through trade and technical service, as well as varietal improvement programs.”

Al Klempel (Montana) and Casey Madsen (Wyoming) speak with Kenz Maroc leadership during a mill tour in Morocco.

In Morocco, the team also visited the Institut de Formation de l’Indstrie Meunière (IFIM), a milling school in Casablanca that USW started in partnership with the Moroccan Millers Federation in 1994. This school trains millers that work all over Africa and the Middle East, and the school is proud to continue partnering with USW to introduce students to the value of high-quality wheat in milling.

Visiting IFIM and touring the training mill, where the team saw equipment sponsored by U.S. Wheat Associates. (L to R): Al Klempel (Montana), Kent Lorens (Nebraska) and Casey Madsen (Wyoming).

USW board teams provide a valuable experience for U.S. wheat farmers to see the hard work of our foreign offices and the results that work produces. It also allows U.S. wheat customers to meet with the farmers producing their wheat, and to better understand the strong value that farmers place on producing an excellent crop.

The team will report to the USW board of directors later this year. To see pictures from this and other Board Team trips, please visit the USW Facebook Page at https://www.facebook.com/uswheat/.

*Header Photo Caption: The 2019 USW EU-MEENA Board Team with USW and U.S. Embassy staff during a visit with the technical director of Grupo Gallo at its mill and pasta factory in Spain.

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Recent news and highlights from around the wheat industry.

Quote of the Week: “We have a plan, but it is only as good as the weather it is written on.” – Hurdsfield, North Dakota, farmer Jeff Mertz, discussing how he and his neighbors are preparing for what is likely to be a delayed planting season.

U.S. Wheat Exports Up this Week. USDA reported commercial net sales of 704,700 metric tons (MT) were reported for delivery in 2018/2019, up 48% from last week’s 475,000 MT and 70% from the estimated previous 4-week average of 457,000 MT. Sales were well above trade expectations of 300,000 to 600,000 MT. Increases were reported for Iraq (200,000 HRW), Egypt (-491 HRS, 120,000 SRW), Indonesia (80,000 HRS, 35,000 white), the Philippines (41,000 HRS, 29,000 white), and Mexico (37,355 HRW, 10,000 HRS, 15,121 SRW).

Pasta Production and Technology Course. The Northern Crops Institute is hosting a Pasta Production and Technology Course April 30 to May 2, 2019, at its facilities in Fargo, N.D. This course introduces participants to the fundamental and applied aspects of pasta production and quality. Click here to learn more and register by Monday, Apr. 8.

Baking with Hard Red Spring Wheat Flour Course. The Northern Crops Institute is hosting a course focused on hard red spring (HRS) wheat and flour May 14 to 17, 2019, at its facilities in Fargo, N.D. Participants will spend time in the baking laboratory, making pan breads, hamburger buns, hard rolls, bagels, pizza crusts, wheat-flour tortillas and more. Click here to learn more and register by Monday, Apr. 22.

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.

Buhler-KSU Executive Milling Short Courses. IGP Institute offers this executive milling course several times in 2019 at its campus in Manhattan, Kan. The course, focused on the underlying principles of the milling process and operational management, will be offered in English May 20 to 24, 2019, and Nov. 4 to 8, 2019, as well as in Spanish Aug. 26 to 30, 2019. Click here to register to these courses.

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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By Claire Hutchins, USW Market Analyst

(Revised April 5, 2019)

According to the March 29 USDA Prospective Plantings report, U.S. total spring-planted wheat area will fall to an estimated 14.2 million acres (5.75 million hectares), 7% below 2018/19, if realized. The estimate includes 12.4 million acres of hard red spring (HRS), down 2% from last year, if realized. USDA expects U.S. durum planted area to total 1.42 million acres (575,000 hectares), 25% below 2018/19 and 30% below the 5-year average. Farmers in the top four spring wheat producing states of North Dakota, Montana, South Dakota, and Minnesota are expected to decrease total spring wheat planted area year over year on price and weather concerns.

USDA expects a 150,000 acre (61,000 hectare) increase in North Dakota HRS area from 2018 to 6.7 million acres (2.71 million hectares), a 7% increase over the 5-year average, if realized. At the same time, USDA expects the state to decrease its planted durum area by 32% from last year. Currently, HRS commands a premium over durum at local elevators, prompting the decline in North Dakota’s durum planted area from 1.10 million acres (445,000 hectares) in 2018 to 750,000 acres (304,000 hectares) in 2019. Farmer frustration is evident in recent planting trends. In 2019, 11% of North Dakota spring wheat acres will go to durum compared to 23% in 2017.

Dr. Frayne Olson, crop economist and marketing specialist at North Dakota State University, told U.S. Wheat Associates (USW) the increase in HRS over durum planted area in the past few years is driven by the inversion in cash premiums for both classes.

“Four years ago, in 2015, farmers received $1.90 per bushel more for durum than HRS. And three years ago, in 2016, the durum premium over HRS was $1.20 per bushel,” Dr. Olson said. “Now, HRS commands a premium of between $0.12 per bushel to $0.41 per bushel premium over the top durum grade.”

USDA forecast Montana spring wheat planted area at 2.60 million acres (1.05 million hectares), down 10% from 2018/19. According to Cassidy Marn, marketing program manager with the Montana Wheat & Barley Committee, farmers are on track to begin planting by the third week in April, barring an unforeseen weather event, but are seeking more profitable alternatives to spring wheat. However, Marn added, more profitable choices are difficult to find because “the pulse market isn’t strong, and neither is the market for durum.” Mike Krueger, an independent market analyst based in North Dakota, suggests Montana farmers are more likely to leave would-be spring wheat acres fallow than to plant alternative crops like dry peas or barley.

Minnesota HRS planted area is expected to decrease 5% from 2018/19 levels to 1.53 million acres (62,000 hectares). Krueger believes the state’s final area planted to HRS in 2019 will fall below the USDA’s estimate due to price and weather concerns.

“In the fall, there was a lot of enthusiasm for HRS because the initial 2019 CRC insurance price for spring wheat is $5.77.  That compares to $6.31 a year ago,” Krueger said.

He believes Minnesota farmers will convert more 2019 spring wheat acres to soybeans because, despite trade disputes with China, the domestic soybean market is firmer on average than the markets for corn and wheat. Soybeans may be the most viable alternative if record precipitation keeps Minnesota farmers out of the fields for the next 20 to 30 days, forcing them out of the ideal spring wheat planting window.

Competitive Soybeans. Comparing average and recent cash prices, relative stability can offer an incentive for farmers in North Dakota and Minnesota to plant more soybeans than spring wheat. This year, wet conditions could also favor more soybean planting. 

 

South Dakota 2019/20 HRS planted area is forecast at 1.02 million acres (41,000 hectares), down 3% from last year. Reid Christopherson, executive director of the South Dakota Wheat Commission, said the USDA’s estimate may be a little optimistic given current weather and price conditions in the state. In the fall, producers were enthusiastic about converting harvested soybean acres to winter wheat, before extremely wet conditions delayed harvest and winter planting. Then, he said, hope for strong wheat markets persisted into the spring until the “bomb cyclone” hit the state, leaving many would be HRS acres buried under 30 to 43 cm. of snow. Now, he expects, spring wheat planting in South Dakota to be delayed until the third or fourth week in April. Christopherson said, “Late planting and low market prices will prompt producers to plant more row crops in 2019 than spring wheat, despite earlier intentions.”

On April 1, USDA also updated the country’s winter wheat planted area from the February forecast. Total U.S. winter wheat area is now expected to hit 31.5 million acres (12.8 million hectares), up 200,000 acres (81,000 hectares) from the February forecast, but still 3% below the planted area for 2018/19 harvest. USDA now forecasts HRW planted area at 22.4 million acres (9.07 million hectares), up slightly from the previous projection, but still 3% below the year prior and 10% below the 5-year average on delayed planting. Soft red winter (SRW) planted area for 2019 harvest decreased from the previous estimate to 5.55 million acres (2.25 million hectares), 5% below 2018/19 planted area. The first USDA Crop Progress report of 2019, released April 1, indicated 56% of the country’s winter wheat to be in good to excellent condition.

USDA expects white wheat acres, planted in both winter and spring, to fall to 3.9 million acres (1.57 million hectares) for 2019/20, down 5% from 2018/19 and the 5-year average of 4.1 million acres (1.66 million hectares). The U.S. Drought Monitor shows adequate moisture for wheat-growing regions clustered in northeastern Oregon, southeastern Washington and north-central Idaho. However, central Washington and Oregon are experiencing abnormally dry to moderate drought conditions. Still, USDA reported that the majority of the white wheat crop in those three states is in good to excellent condition.

Planted area reductions for all classes bring the total wheat planted area for 2019 harvest down to 45.8 million acres (18.5 million hectares), 4% below 2018 and 7% below the 5-year average, making this year’s total wheat planted area the lowest since USDA records began in 1919.

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By Ben Conner, USW Vice President of Policy

Two weeks ago, Brazilian President Jair Bolsonaro visited President Trump in Washington, D.C., to help forge closer ties between the two largest countries in the Western Hemisphere. The joint statement published at the end of the visit highlighted several areas for cooperation and expanded commerce. One of those was a commitment to allow “the annual importation of 750 thousand tons of American wheat at zero rate.”

Of course, U.S. wheat farmers would be delighted if Brazilian buyers choose to import all 750,000 tons from the United States, though duty-free treatment mandated by the World Trade Organization (WTO) would apply to all imports from outside existing free trade agreements like Mercosur. Even with competition, annual average U.S. exports to Brazil are likely to increase substantially; and for this, U.S. farmers can thank the hard work of staff at the Office of the U.S. Trade Representative and the U.S. Department of Agriculture, members of Congress who pushed for this outcome, and officials in Brazil who recognized the benefits of closer trade ties with the United States and the importance of complying with WTO rules.

U.S. wheat farmers have long sought expanded commercial ties with Brazil, which is one of the world’s largest agricultural producers but also one of its largest wheat importers. The United States used to be Brazil’s primary wheat supplier, but it has since been supplanted by Argentina. This makes some sense, since duty-free treatment for Argentina and other Mercosur suppliers, coupled with a 10 percent external tariff, made U.S. wheat less competitive.

While Argentine dominance of Brazil’s imports will not be reversed with this new policy, U.S. farmers are hoping for a more stable relationship with their Brazilian customers. Tariffs prevented development of a consistent market in Brazil for a long time but, now with the tariff rate quota (TRQ) open, the opportunity is there for Brazil’s flour millers to consider U.S. wheat every year equally, instead of only after a poor South American wheat crop.

Now Brazil must take the final steps to implement the TRQ. No country has a perfect record of complying with WTO commitments, but U.S. Wheat Associates (USW) is grateful to see President Bolsonaro taking Brazil in that direction on this issue so early in his presidency. Brazil and the United States have much in common as major agricultural exporters and we hope to see our countries to work together at the WTO to advance a trade liberalizing agenda while expanding the commercial relationship between our wheat sectors.

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In much of the Western World, on April 1 people go sometimes to great lengths to create mostly harmless “April Fools’ Day” hoaxes. There are many theories about how this odd “celebration” came to be, including an association with the first day of spring in the Northern Hemisphere, when Mother Nature fooled people with changing, unpredictable weather.

On this April Fools’ Day, however, it is no hoax that today the effective tariff applied to U.S. wheat imported by Japan is nearly $20 per metric ton (or 50 cents per bushel) more than the tariff applied Canadian and Australian wheat. That is because the United States is not a member of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership or CPTPP. In fact, the effective internal tariff on wheat from those CPTPP member countries will drop again on April 1 in 2020 and drop again every April 1 until 2026.

There is no hard evidence that U.S. wheat sales to Japan have gone down because of this harmful situation. Eventually, however, this reduction will be about $70 per metric ton, or 45 percent below the current effective tariff applied to U.S. wheat. Japan has no obligation to change this tariff reduction schedule so that difference will likely shut a major portion of U.S. wheat exports out of the Japanese market and undo decades of market development work.

“We have spent countless hours and millions of hard-earned farmer dollars building demand for U.S. wheat in this market,” said U.S. Wheat Associates (USW) President Vince Peterson last December in testimony to the Office of the U.S. Trade Representative about trade negotiations with Japan.

He continued by saying that achieving a satisfactory outcome in negotiations between the United States and Japan matters a great deal to U.S. wheat farmers who have long ties with Japan.

“That legacy is on the verge of disappearing due to CPTPP,” Peterson said.

USW and U.S. farmers have urged the Trump Administration to act quickly to prevent such losses. Hopefully that will happen long before the next April Fools’ Day.

 

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By Ben Conner, USW Vice President of Policy

On February 19, 2019, the World Trade Organization (WTO) released the final report of the panel in the U.S. case alleging that China has not complied with its domestic support commitments on wheat and rice. While the panel disagreed with a few arguments, it agreed with the accusation that China was far out of compliance due to the operation of the market price support (MPS) program for certain commodities.

U.S. Wheat Associates (USW) believes it is important for its overseas customers and the farmers it represents to better understand why the United States brought this case to the WTO and how the panel reached its conclusion.

Most countries with sizable agriculture sectors provide some domestic support (subsidies or safety net programs) for farmers. The countries that negotiated the WTO Agreement on Agriculture (AoA) established disciplines for domestic support because they had experienced the price suppressing effects of foreign or, in some cases, domestic agricultural subsidies. The WTO members agreed to set limits on the types of support that could impact farmer’s production decisions and, thus, distort trade. A government subsidy that incentivizes the farmer to plant more wheat than barley is one example. On a large enough scale (such as across a country), that additional production can significantly suppress wheat prices for other wheat farmers who are not eligible for these subsidies.

Developed countries like the United States, Japan, and European states provided most agricultural subsidies at the time the AoA was negotiated. Over time, these countries either reformed their programs or have stayed within their limits. However, within the past decade, trade distorting domestic support has shifted significantly to developing countries, with China and India leading the way. Those countries are, in many cases, far out of compliance with their WTO commitments.

The U.S. government recognized that if any countries are allowed to flout WTO rules consistently, the incentive for others to follow the rules collapses. It also kills the potential for productive negotiations, since negotiating partners must be convinced that others will uphold their end of the bargain. Therefore, in 2016, the U.S. launched this case against China both to address the particular concerns in China and to demonstrate that the rules apply to all countries (Australia, Brazil, and Guatemala recently launched similar cases against India over its support for sugar production).

In the China domestic support case, the U.S. legal team chose to focus specifically on a measure called market price support (MPS) to demonstrate that China had breached its commitment on aggregate measurement of support (AMS). MPS sets a commodity’s floor price at which a farmer can sell to a government buyer instead of to a private buyer. This keeps internal prices artificially high and signals farmers to produce more of the supported commodity.

The AoA has a specific formula to calculate how MPS contributes to AMS: the quantity of eligible production multiplied by the difference between the annual support price and a fixed reference price established in the AoA. This was a legal case, so there were arguments about everything, but the most important question was what constitutes eligible production.

China’s argument was that eligible production is only the amount procured by the government. But the panel agreed with the United States, saying eligible production is the “amount of product which qualifies to be purchased from producers,” not the amount that is, in fact, purchased. The only limitations in Chinese rules were that the price supports only applied in six provinces (covering approximately 80 percent of production) and to wheat that met basic quality standards (99 percent of production in those provinces). In 2015, this was 103 MMT out of the 130 MMT produced. In its notification to the WTO for that year, China claimed only 21 MMT. Under that notification, China claimed it was complying; under the panel’s methodology, this quantity put China far out of compliance.

The 2015 support price was 2360 renminbi (RMB) per metric ton (MT) and the panel confirmed that the fixed reference price was 1698 RMB/MT. The difference between the two times the 103 MMT of eligible production equals 68 billion RMB, or 22.4 percent of the value of production. Since China’s WTO limit is 8.5 percent, China’s AMS for wheat in 2015 was nearly triple its allowed limit. This AMS figure only accounts for MPS – the panel did not review a suite of other subsidies available to Chinese wheat farmers that would likely increase the size of China’s AMS violation. The panel made a similar finding for rice and did not make calculations for corn due to technical reasons.

The United States and other countries have been arguing for years that China has a responsibility to bring its programs into compliance so that its farm production decisions are no longer based on artificial price signals or other incentives that violate China’s WTO commitments.

Now they – and thousands of wheat farmers outside China – have a WTO panel decision to back them up.

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Recent news and highlights from around the wheat industry.

Quote of the Week: “Not only would establishing the TRQ increase export opportunities for American farmers, it would also benefit certain Brazilian flour mills that have petitioned their own government in the past to remove the tariff to increase their access to high-quality U.S. wheat.”  — From a letter to President Trump from 11 U.S. Senators encouraging negotiations with Brazil to open a duty-free tariff rate quota on wheat imported from non-Mercosur countries.

USDA Celebrates National Ag Day with New Youth Website

On March 14, 2019, the USDA joined the nation in celebrating National Ag Day by launching a new Youth and Agriculture website. The new website seeks to engage, empower, and educate the next generation of agricultural leaders by featuring three key components of agriculture-focused youth engagement – classroom studies, experiential learning, and leadership training. Young people can learn about USDA summer outreach programs, youth loans for business projects, outdoor volunteering and employment opportunities.

Agricultural Economist Joins IGP Institute. With more than 25 years of industry experience in international commodities trading and marketing supply chains, Guy H. Allen has been hired as the senior agricultural economist for the IGP Institute beginning March 25, 2019. Allen will lead grain marketing and risk management curriculum and serve as an outreach specialist hosting teams and engaging with IGP Institute stakeholders. He will also work to identify research opportunities and collaborate with other grain science and industry faculty to support their teaching efforts. Read the full release here.

2019 National Wheat Yield Contest. The National Wheat Foundation (NWF) is now accepting grower enrollment for the 2019 National Wheat Yield Contest. The Contest includes winter wheat and spring wheat primary categories and dryland and irrigated subcategories. NFW is accepting winter wheat entries between April and May 15, 2019, and spring wheat entries between June 15 and Aug. 1, 2019. Learn more here.

Pasta Production and Technology Course. The Northern Crops Institute is hosting a Pasta Production and Technology Course April 30 to May 2, 2019, at its facilities in Fargo, ND. This course introduces participants to the fundamental and applied aspects of pasta production and quality. Click here to learn more and register.

Baking with Hard Red Spring Wheat Flour Course. The Northern Crops Institute is hosting a course focused on hard red spring (HRS) wheat and flour May 14 to 17, 2019, at its facilities in Fargo, ND. Participants will spend time in the baking laboratory, making pan breads, hamburger buns, hard rolls, bagels, pizza crusts, wheat-flour tortillas and more. 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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By Claire Hutchins, USW Market Analyst

 

Late winter conditions can make March a difficult month for wheat export supply logistics across the central and northern United States, and the seasonal effects on basis this month were even more challenging.

 

Drifting snow, bitter cold, and high inland water levels that actually increased into early March spiked export basis for nearly all classes of U.S. wheat out of the Pacific Northwest (PNW) for March and April delivery months. The latest estimate of April basis for hard red winter (HRW) of $2.20 per bushel (/bu) for PNW ports is the highest March estimate since 2015. Traders quickly responded the the conditions by only offering PNW basis estimates for April and other deferred months for the U.S. Wheat Associates (USW) Price Report.

 

Basis Spike. This month, PNW traders estimated the highest April basis for hard red winter (HRW) exports since 2015.

 

USW is more optimistic about export conditions into April and May when basis typically eases. Last week, the April export basis estimate for HRW in the PNW fell slightly from $2.25/bu to $2.20/bu. The same estimate for hard red spring (HRS) in the PNW fell 20 cents to $1.50/bu, which is the second lowest April basis since 2016. Looking ahead to May’s delivery estimates, traders expect HRW and HRS export basis in the PNW to stabilize at around $2.05/bu and $1.35/bu, respectively.

 

Spring Wheat Basis to Ease. The current estimated April export basis for hard red spring (HRS) in the PNW is the second lowest basis since 2016.

 

As long as the country’s challenging weather conditions do not continue late into the spring, USW expects export basis for all classes in the PNW to decline into and after April and May. This seasonal easing of basis should give customers improved import opportunities before the end of marketing year 2018/19 on May 31.

 

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Last week, an unusual combination of weather conditions created historic flooding in Eastern Nebraska, Western Iowa and parts of Northeast Missouri that literally wiped out many farms and ranches. In Western Nebraska, where most of the winter wheat in the state is grown, farmers suffered through a very bad blizzard at a time when wheat is normally coming out of dormancy.

 

Nebraska Gov. Pete Ricketts detailed more than $1.3 billion in damage to the state’s infrastructure, agriculture, businesses and homes on March 20. That estimate includes $400 million in projected livestock losses and $440 million in crop losses, including large volumes of stored grain. Tragically, a farmer in Eastern Nebraska, James Wilke, lost his life trying to help others during the flood.

 

This is happening at a very challenging time for many farmers facing low commodity prices and rising levels of debt.

 

“There’s not many farms left like this, and it’s probably over for us too, now,” Anthony Ruzicka, a farmer and rancher near Verdigre, Neb., said to the New York Times. “Financially, how do you recover from something like this?”

 

Royce Schaneman, Executive Director of the Nebraska Wheat Board, told U.S. Wheat Associates (USW) that wheat farmers did not suffer the worst of the storm, although some had livestock losses in the blizzard. Looking ahead, the long-lasting winter of 2019 increases the chance of flooding along the Red River that borders Minnesota and North Dakota and flows into Canada’s Manitoba province — and that is spring wheat country.

 

The federal government is developing a response to last week’s disaster. USDA Secretary Sonny Perdue sent this Tweet recently: “We are on the job helping folks in the Midwest get back on their feet and recover from these devastating floods. Farmers can expect assistance from a variety of programs we offer in the wake of disasters. More here: https://www.farmers.gov/recover.”

 

Other ways to help those affected by the storm include the Nebraska Farm Bureau’s Disaster Assistance Exchange that accepts donations and helps match donors with those in need.

 

Farmers and ranchers gladly accept the inherent risk of their work and suffer with those who experience these storms. Everyone else, including our colleagues from USW and the National Association of Wheat Growers, and our customers around the world cannot forget how much we all depend on the people who produce our food.