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Wheat Industry News

Recent news and highlights from around the wheat industry.

Quote of the Week: “It’s been gratifying to witness the world’s receptiveness to U.S. farm and food products. Consumers worldwide have a true affinity for the American brand and immediately recognize the safety and quality of our products.”

— The Honorable Ted McKinney, USDA Under Secretary for Trade and Foreign Agricultural Affairs. Read more here.

Congratulations. We are fortunate to have devoted, loyal colleagues at USW. This month Financial Accountant Cathy Marais from the USW Cape Town Office, is celebrating 25 years. Thank you, Cathy, for your service to our organization, to U.S. wheat farmers and to our customers around the world.

USDA Reports Delayed. Due to a lapse in federal funding, several USDA reports have been suspended since Dec. 22, 2018, and remain suspended. Given the lead time required for analysis and compilation Crop Production, Crop Production-Annual, World Agricultural Supply and Demand Estimates (WASDE), Grain Stocks, Winter Wheat Seedings and other reports will not be released on time. USDA will announce new release dates after funding is restored.

Promoting Wheat … Not Gluten-Free. The Michigan Wheat Program recently shared this: U.S. consumers are hearing less about gluten and staying away from wheat products. This fall, the top-rated Jimmy John’s® sub [sandwich] shops made U.S.-grown wheat used in sandwich rolls the focal point of its marketing campaign. Jimmy John’s didn’t just mention whole grain buns but focused an entire advertising campaign on U.S.-grown wheat being used in its bread products. Click here to see the ad, which was filmed in a North Dakota wheat field.

Climate Change Effect on Wheat Quality Modeled. A group of European scientists recently published results of a study that simulated “the combined effects of CO2, water, nitrogen and temperature on wheat grain protein concentration in a changing climate for the world’s main wheat producing regions.” The authors noted that based on their model, “climate change adaptations that benefit grain yield are not always positive for grain quality, putting additional pressure on global wheat production.” Full results of this single study are posted here: https://onlinelibrary.wiley.com/doi/full/10.1111/gcb.14481.

Washington Grain Commission (WGC) and USW. USW is getting lots of coverage by WGC this month. USW Vice President of Overseas Operations is featured in the “Q&A” section of its website and Vice President of Communications Steve Mercer is interviewed for the “Wheat All About It!” podcast. WGC is one of 17 state wheat commission members of USW and we thank them for the recognition.

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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Mid-Year Report: U.S. Wheat Export Pace Likely to Pick Up

By Claire Hutchins, USW Market Analyst

Due to the U.S. government shutdown, the U.S. Wheat Associates (USW) mid-year report on 2018/19 export sales reflects USDA export sales data through Dec. 13, 2018. Year over year comparisons are drawn from USDA data on Dec. 14, 2017. Though not current, the data still provides valuable insight into U.S. wheat export conditions as of late last year.

USDA continues to predict 2018/19 exports will reach 27.2 million metric tons (MMT), which, if realized, would be 11 percent higher than 2017/18 and 9 percent above the 5-year average. Total U.S. sales through the second half of the marketing year would have to reach 10.5 MMT to meet that estimate. USW expects the high quality and competitive pricing for select U.S. wheat classes will help push up the sales pace in the second half of the marketing year. Sales of soft red winter (SRW), hard red spring (HRS), and durum are all up year over year, while hard red winter (HRW) and soft white (SW) are behind last year’s pace.

 

Hard Red Winter (HRW)

USDA reports HRW year-to-date exports at 5 MMT, down 33 percent from Dec. 14, 2017. Export sales to Mexico dropped 14 percent year over year to 1.27 MMT, which USW believes can be attributed to a rocky trade relationship. In 2018, Russia produced its third largest crop of wheat. The significant volume of Russian Third Class held a firm FOB price advantage over U.S. HRW in the first half of the marketing year. Competition for HRW remains stiff in the price-conscious markets where Russia has a freight advantage, but the spread between Russian Third Class and U.S. HRW FOB prices has narrowed significantly since June 2018, a price convergence that could boost HRW demand. The 2018 HRW crop quality attributes significantly exceed the last two years and many of the 5-year averages, indicating that this is one of the highest quality HRW harvests in several years.

Hard Red Spring (HRS)

Total HRS sales of 5.2 MMT are up 4 percent from this time last year and fall right in line with the 5-year average. The HRS harvest was the largest in 22 years and boasts above average protein levels and excellent dough and bake qualities. That quality and competitive pricing* drive export demand as FOB prices out of the Pacific Northwest remain near a constant $255 per MT. The Philippines continues to import the largest volume of HRS at 1.4 MMT, which marks a 24 percent increase over last year’s pace. Sales to Vietnam are up significantly year over year to 132,000 MT, and sales to Thailand are up 50 percent at 338,000 MT. Only the tariff conflict with China, which has imported no U.S. wheat since March 2018, holds back current HRW sales.

*From November 17, 2017, to Nov. 18, 2018, U.S. HRS FOB prices declined nearly 20 cents per MT while competitor prices over the same period trended slightly higher.

Soft Red Winter (SRW)

Export sales of SRW through Dec. 13, 2018, are up 15 percent over 2017/18 at 2.15 MMT, driven by competitive SRW FOB prices. Sales to nine of the top 20 U.S. SRW export markets, including Brazil, Costa Rica and South Africa, are ahead of last year’s pace. Sales to Mexico are 10 percent ahead of 2017/18 at 605,000 metric tons (MT). Ecuador’s SRW imports stand at 147,000 MT, up substantially from last year.

Soft White (SW)

As of Dec. 13, 2018, export sales of SW are down 8 percent year over year at 3.9 MMT. However, total sales rise above the 5-year average by 20 percent. The loss of Chinese SW imports points to the drop in export sales year over year. The Philippines and Indonesia, two of our SW top markets, hold steady at 911,000 MT and 507,000 MT, respectively, compared to the 2017/18 pace. Sales to Yemen are 18 percent ahead of last year’s pace at 181,000 MT and sales to Thailand are 46 percent ahead of last year’s pace at 283,000 MT. SW customers are taking advantage of this year’s good test weight, lower moisture and lower protein content.

Durum

Year to date durum exports total 406, 000 MT, up 50 percent from Dec. 14 last year with increased import paces in all U.S. durum markets. Most notably, export sales to the European Union, already the largest buyer of U.S. durum, increased by 101 percent to 232,000 MT, supported by the crop’s excellent quality and competitive price. The 2018 harvest boasts high protein and excellent kernel characteristics, ideal for premium pasta products.

Hard White (HW)

USDA reports notable HW sales of 135,000 MT to Nigeria. This is the first significant export sales of HW in many years, as HW production is up slightly from the year prior and boasts high protein levels and good bread baking potential.

Looking Ahead

USDA projects a 4 percent increase in global wheat consumption over the 5-year average at 744 MMT. As exportable supplies from Russia, the EU and Australia begin to wane as we move into the second half of the marketing year, U.S. FOB prices for HRW, SRW, and HRS are more competitive now than they were in June 2018. This represents an advantageous opportunity for customers to extract even more value from the 2018/19 U.S. wheat supply.

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2019 Trade Policy Outlook

By Ben Conner, USW Vice President of Policy

If there is anything we learned from 2018, it is that the trade policy landscape is unpredictable. While many upcoming or ongoing issues are known, there are a range of possible outcomes within each, some of which could drastically alter the trade landscape in the future.

Let us start with China. This week, U.S. and Chinese negotiators met in Beijing to work toward resolving the current trade dispute, which has seen tariffs slapped on over $300 billion in trade. According to the U.S. Trade Representative, there is a hard deadline of Mar. 1 to reach a deal that will at least prevent further imposition of tariffs. U.S. wheat farmers have been shut out of China since March 2018, leaving their Chinese customers scrambling for other sources. The next couple months could reveal if trade will resume this year, or if the conflict will continue.

The United States has also initiated formal processes for trade negotiations with Japan, the European Union, and the United Kingdom (U.S. Wheat Associates will submit comments on the UK negotiations next week). However, there are still a number of unknowns, such as the scope and length of negotiations with Japan, the inclusion of agriculture in negotiations with the EU and the nature of the UK’s post-Brexit relationship with the EU.

The new U.S.-Mexico-Canada Agreement (USMCA) will likely be submitted to Congress this year to replace the North American Free Trade Agreement (NAFTA), but shifting political dynamics in the United States complicate Congressional approval and implementation of the agreement.

There is the threat of new tariffs on automobiles under Section 232 authority, potentially covering hundreds of billions in trade. While this is mitigated somewhat due to side letters negotiated alongside USMCA and the promise to avoid imposing tariffs on Japan and the EU while negotiations are ongoing, declaring automobile imports to be a national security threat has the potential to enrage U.S. trading partners and lead to new retaliatory measures.

Finally, there is the possibility that the World Trade Organization (WTO) Appellate Body will cease to function by December 2019. This is the culmination of over a decade of complaints by the United States about the way the Appellate Body functions. It is important for other countries to engage the United States to find a solution, because if a solution is not reached, it will mean the effective end of the WTO’s dispute settlement function and the ability of countries to enforce trade commitments.

In other words, based on the uncertainty these trade issues represent, we cannot expect 2019 to be less exciting than 2018.

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Latin American Holiday Traditions Help Inform Wheat Breeders

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

In Latin America, the holidays are filled with special wheat food traditions. Mexicans celebrate the visit of the Three Kings to the Christ child with Rosca de Reyes (Kings Cake Wreath), a ring-shaped sweet bread. In Peru, wheat consumption increases with Panettone bread sales. This holiday sweet bread can be traced back to the Italian bakers that made Peru their home many generations ago.

Special holiday breads are thriving despite a baking industry transitioning from artisan bakery shops to highly automated commercial operations. Such modern bakeries employ equipment that drives a need for ever more consistent, high-quality flour.

It was in this context that U.S. Wheat Associates (USW), with funding from member state wheat commissions and USDA’s Foreign Agricultural Service, assembled a team of leading wheat breeders to visit the top markets in Latin America. This Wheat Quality Improvement Team (WQIT) traveled to Mexico City, Mexico, Guatemala City, Guatemala, San Jose, Costa Rica and Lima, Peru, Dec. 8 to 18, 2018. Meetings with several food processing and flour milling industry representatives focused on U.S. wheat quality relative to the unique production challenges these customers face.

Wheat farmers, state wheat commissions, and public and private breeders understand that the end-use quality of U.S. wheat, as measured by end-use functionality, is more important than ever before in today’s increasingly competitive marketplace Such direct input from Latin American food processing companies to breeders is one of the ways USW is helping determine breeding targets, as well as helping develop selection criteria for new variety releases. The face-to-face interaction with breeders in this activity helps overseas buyers understand that U.S. wheat quality is no accident but is, rather, the product of investment from farmers and years of scientific work.

Customers shared several preferred characteristics from U.S. wheat including consistent quality from shipment to shipment, increased dough strength and water absorption, and lower polyphenol oxidase (PPO) to prevent color change. These messages and more will be relayed to state wheat commissions at upcoming Wheat Quality Council meetings in Portland, Ore., and Kansas City, Mo.

Market development programs like this Wheat Quality Improvement Team help ensure that Latin American sweet breeds like the Rosca de Reyes and Panettone continue to be a holiday tradition — made with high-quality wheat from the United States.

Participating Wheat Breeders 

The WQIT to Latin America in December included:

  • Guorong Zhang, Leader, Kansas State wheat breeding program and Associate Professor at Kansas State University;
  • Brett Carver, Wheat Genetics Chair in Agriculture, Oklahoma State University;
  • Mike Giroux, Co-director of the Montana State Wheat Quality Laboratory and leader of the Montana State durum breeding program;
  • Jackie Rudd, Leader of the hard winter wheat breeding program for the High Plains and Rolling Plains of Texas;
  • Arron Carter, Director of the winter wheat breeding and genetics program at Washington State University;
  • Mr. Steve Wirsching, USW Vice President and Director, West Coast Office.

The team and USW Staff in front of the Presedente Hotel in Mexico City.

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Farm Bill Renews Export Market Development Partnership with the Federal Government

U.S. farmers consistently produce enough wheat to meet domestic demand and still have about half of their crop available to overseas customers year. They support U.S. Wheat Associates (USW) with a portion of 17 state checkoff programs to build and maintain overseas demand. In turn that support qualifies USW to apply for program funding appropriated by the U.S. Congress and administered by USDA’s Foreign Agricultural Service.

 

This public-private partnership started in the 1950s and has earned a legacy of success giving wheat farmers the ability to maintain bases of operation and local USW representatives to conduct trade service and technical support activities with buyers, flour millers and wheat food processors.

 

The partnership was renewed in the Agricultural Improvement Act of 2018, which established the Agricultural Trade and Facilitation Program and provides funding for the Market Access Program (MAP), the Foreign Market Development (FMD) program and other programs available to USW and many other organizations representing U.S. farmers, ranchers and dairy producers. President Trump signed the Farm Bill into law on Dec. 21, 2018.

 

Pres. Trump signs the new U.S. Farm Bill into law on Dec. 21, 2018. National Association of Wheat Growers President and wheat farmer Jimmie Musick, (sixth from left) witnessed the signing.

 

 

Without the federal programs renewed in the current Farm Bill, USW would not be able to fulfill its mission to mission to develop, maintain, and expand international markets to enhance wheat’s profitability for U.S. wheat producers and its value for their customers.

 

USW thanked Congress for renewing the long-term investment in export market development programs.

 

“We also thanked the National Association of Wheat Growers for working to present our positions on export development funding and we are very pleased that members of Congress and their staff addressed those concerns effectively in this Farm Bill,” said USW Chairman Chris Kolstad, a wheat farmer from Ledger, Mont.

 

An additional change in the legislation now allows Congress to appropriate discretionary funds to cover the cost of administering the export market development programs, rather than covering costs from the appropriated program budgets. The law also establishes a Priority Trust Fund to be used at USDA’s discretion to help meet requests that exceed the appropriated program funds. Another important change now allows qualified organizations like USW to use program funds to conduct market development activities in Cuba.

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USW Colleagues Start Their Next Chapters as U.S. Citizens

“Immigrants: we get the job done.” – Lin-Manuel Miranda, from the hit Broadway musical “Hamilton!”

 

Two U.S. Wheat Associates (USW) colleagues recently celebrated very special milestones: in December, Fiscal Officer Kurt Coppens and Administrative Assistant Nada Obaid became naturalized citizens of the United States.

 

“Wheat Letter” asked Kurt, who was a Belgian citizen, and Nada, who was an Iraqi citizen, to share their unique paths to this life changing event.

 

USW Fiscal Officer Kurt Coppens and Administrative Assistant Nada Obaid hold their certificates proclaiming them citizens of the United States of America, December 2018.

 

“My emigration to the United States started when I was a teenager when I moved with my family to New York for my father’s profession,” said Kurt Coppens. “After having lived in West Africa and a relatively small city in France near Geneva, Switzerland, and never having lived in the country of my birth and nationality, I was in awe of New York. It was easy for a city of that size and with that much energy to make an impact on anyone, let alone a teenager. After having spent five years in New York and moving back to that same small city in France, I decided I wanted to move back to the United States after college in France. But I transferred to a university in Washington, D.C. after my second year. Since then I have only been away from Washington, in Paris, for two years.

 

“Having lived and worked in Washington for 19 years, it made sense and seemed like a natural progression to move from being a ‘green card’ holder to becoming a citizen. I have always admired the generosity, enthusiasm and positivity of the American people, and I prefer working in that kind of environment. This also gives me an opportunity to vote and have a say in the city where I have been living for quite some time.”

 

“I was working with the Iraqi Grain Board, the government buying agency, before the conflict there began in 2003,” said Nada Obaid. “I then went to work for the Coalition Provisional Authority (CPA) through 2004 and for the USDA Foreign Agricultural Service from 2005 to 2006. At that time, especially in 2005, many Iraqis lost their lives for working there. When the U.S. government granted a special immigrant visa program for Iraqis, I applied and thank God I did. Living in peace is a great thing that I thank God for every day.

 

“The United States is a great country; lots of opportunities are there! I had never thought in my whole life that I would come one day to this great place. It was a great opportunity that I would never have missed.  Before coming, I admit I was kind of worried of the new life waiting for me here, knowing that I would be by myself. But my trust in God, the support I got from friends I knew before coming here and ending up in such great work place like USW helped me a lot to have a comfortable life here. Truly, [USW colleagues] are my family here!

 

“I trust that U.S. citizenship will open new doors for me in all aspects of my life. I immediately applied for a U.S. passport after the naturalization ceremony. It is a great honor for me to carry U.S. citizenship!”

 

The international diversity among our colleagues is one of the factors that make working at USW such a rewarding experience. We are all happy these hard-working, cheerful people share our dedication to the farmers we represent and their overseas customers, and we offer them warm congratulations on becoming U.S. citizens!

 

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Wheat Industry News

Recent news and highlights from around the wheat industry.

Quote of the Week: “After a rocky start, I’m just proud to turn a partisan bill into a bipartisan bill. That’s the way Congress is supposed to work.”

— House Agriculture ranking member Collin Peterson (D-Minn.) following passage of H.R.2, the Agriculture Improvement Act of 2018, also known as the Farm Bill, by a vote of 369 to 47; the legislation now awaits President Trump’s signature. The Farm Bill includes renewed funding for export market development programs.

USDA Announces 2019 Trade Missions. USDA will sponsor trade missions in 2019 to Taiwan, Colombia, Vietnam, Kenya, Mexico, United Kingdom and Canada. “Agricultural trade missions offer phenomenal opportunities for U.S. exporters to explore new markets and forge relationships with potential customers,” said Under Secretary for Trade and Foreign Agricultural Affairs Ted McKinney. Click here to keep up to date on plans for USDA’s 2019 trade missions.

Planted Wheat Acres Down in Kansas. Wheat acres in Kansas will likely be lower than last year, possibly reaching 100-year lows in the state. Record precipitation throughout the state in October and below average temperatures in November helped add needed soil moisture, but also kept farmers out of the fields during fall harvest and wheat drilling time. Click here to read the full story.

Congratulations. We are fortunate to have devoted, loyal colleagues at USW. This month Program Manager and Secretary Ms. Heydy Langbroek, from the USW Rotterdam Office, is celebrating 20 years. Thank you, Heydy, for your service to our organization, to U.S. wheat farmers and to our customers around the world.

IGP Milling Courses. The IGP Institute will host an Introduction to Flour Milling course Jan. 14 to 18, 2019. No milling experience or theory is required for this course. For more information, follow this link. To register, click here.  In March, the IGP Institute will offer its Buhler-KSU Expert Milling courses in English and Spanish. For more information on the training, follow this link. To register for the English offering, click here. For registration to course Spanish offering, click here.

Thrive Through Change. The Minnesota Department of Agriculture recently sponsored a seminar about how to be resilient in the face of change, featuring Australia’s Denis Hoiberg. Hosted at the Northern Crops Institute in Fargo, N.D., Hoiberg’s presentation is now posted online, compliments of Minnesota Farmers Union.

Wheat Marketing Center Activities. Over the next few months, the Wheat Marketing Center in Portland, Ore., has an active schedule of events including workshops for wheat growers, courses on laminated dough and an end-product collaborative event with USW. For more information, visit WMC’s informative website at https://www.wmcinc.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 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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To Ag or Not to Ag*

By Ben Conner, USW Vice President of Policy.

To Ag. That is obviously the answer. The question is if the trade negotiations between the United States and the European Union should include agriculture at all. We already covered that in August after the two governments agreed to begin negotiations.

This week, U.S. Wheat Associates (USW) submitted comments to the U.S. Trade Representative on wheat growers’ priorities for the negotiations. The first priority, of course, is that the negotiations should cover agricultural products like wheat. That would avoid running afoul of WTO rules requiring free trade agreements to cover substantially all trade. It would also avoid a likely quick death in the U.S. Congress should an agreement without agriculture be presented to it.

The second priority is that the threat of Section 232 tariffs on automobiles produced in the EU should be dropped. Not only is it an ill-conceived idea to treat imported cars as national security threats, but the potential for retaliation is enormous since the U.S. imported about $40 billion in passenger cars from the EU in 2017.

Assuming those issues are addressed, USW wants to see protective EU wheat tariffs eliminated. Most EU imports from the United States are duty-free, but only for wheat that meets certain quality thresholds. Full tariff elimination would benefit buyers in the EU who may see opportunities to import U.S. wheat with different qualities.

The most significant challenges U.S. wheat growers currently face in the EU are non-tariff barriers also designed primarily to protect EU wheat producers. Pesticide residue and plant breeding regulations, phytosanitary tests and labeling requirements can disrupt U.S. wheat imports and create additional market uncertainty. A comprehensive agreement with the EU is long overdue and should end this sea of troubles.

*With sincere apologies to Bill Shakespeare.

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Global Production Continues to Decrease Due to Weather Problems in Australia and Russia

By Claire Hutchins, USW Market Analyst

In its December World Agricultural Supply and Demand Estimates (WASDE) report, USDA predicted a 4 percent year over year decline in world wheat production for marketing year 2018/19, driven by severe drought in Australia and current cold, wet conditions in Russia. Australian production is expected to fall 32 percent below the 5-year average, the lowest level since 2007/08. Russian production is expected to fall 18 percent year over year, which would exceed the 5-year average by 6 percent.

While USDA predicts a decline in global wheat production, it expects total wheat consumption to rise. This year, consumption estimates total 744 MMT, 4 percent above the 5-year average. Feed wheat consumption estimate is down 4 percent year over year, but human consumption is up 1 percent year over year and continues to drive overall consumption levels.

Australian drought is driving more than just production numbers. Exports are expected to decrease significantly year over year from 14 million metric tons (MMT) to 10.5 MMT. While production and exports decrease, Australian feed wheat consumption is expected to reach 5.5 MMT, 44 percent above the 5-year average. Total Australian consumption includes 61 percent feed wheat in 2018/19, up 8 percent from last year, as Australian producers struggle to support their livestock through the dry weather.

Pacific Northwest (PNW) free on board (FOB) prices have been relatively stable for the past few months. Soft white (SW) export price remains virtually unchanged from mid-October, while export prices for hard red winter (HRW) and hard red spring (HRS) are on the rise. With Australian exports shrinking, the United States increased exports to the Philippines, Thailand, and Bangladesh. Total exports to South Asia are up 18 percent year over year. The decline in global production and incline in global consumption will continue to support U.S. export prices in the coming months.

The United States holds the largest supply of exportable wheat in the world at 50 MMT. U.S. exportable supplies, as a percentage of top exporting countries, is up 25 percent year over year. While global production is shrinking, as always, U.S. wheat remains the world’s most reliable supply.

 

 

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Administration Help Needed to Protect U.S. Wheat Exports to Japan

Following is a transcript of oral testimony by U.S. Wheat Associates President Vince Peterson at a public hearing held Dec. 10, 2018, by the U.S. Trade Representative (USTR) on potential trade negotiations with Japan.

“Thank you for the opportunity to speak on behalf of U.S. wheat farmers about trade negotiations with Japan.“Our mission is to develop, maintain, and expand international markets for U.S. wheat farmers, and one of our most critical markets is Japan.

“Given its demographic and consumption trends, Japan is generally a market where we seek to maintain our strong 53 percent market share, but today we face an imminent collapse. Frankly, this is because of provisions negotiated by [a previous administration] for our benefit under the Trans-Pacific Partnership. Our competitors in Australia and Canada will now benefit from those provisions, as U.S. farmers watch helplessly.

“Over the immediate past 5 years, Japan is our largest, most reliable and valuable market. The importer is Japan’s Ministry of Agriculture, Forestry, and Fisheries or MAFF. MAFF is the only entity that can import duty-free; all others must pay a prohibitive tariff. After MAFF imports, it resells wheat to flour millers with a significant mark-up; currently in excess of $150 per ton. This is the equivalent of a 60 to 70 percent ad valorem tariff at today’s prices.

“While we certainly wouldn’t hold up this system as an example, it has historically worked for us in Japan. Wheat is higher priced than elsewhere, but MAFF still imports enormous quantities of high quality American wheat. Since the wheat market in Japan is relatively stable, there tends to be little variation in quantity of imports from the US, Canada, and Australia, the three principal suppliers.

“This will start changing in 2019 as the CPTPP (Comprehensive and Progressive Trans-Pacific Partnership) takes effect.

“There will be an immediate seven percent drop in the mark-up for Canadian and Australian wheat. By April it will have gone down by 12 percent. In very real terms, as of April 1, 2019, U.S. wheat will face a 40 cent per bushel, or $14 per metric ton, resale price disadvantage to Australia and Canada.

“After 9 years the U.S. will face an automatic premium of 70 dollars per ton. But by that, time most of the market will be long gone.

“Japanese food processors are looking at ways to reduce their exposure to U.S. wheat right now. They will reformulate products to adapt to wheat from different origins because they will have to. If they don’t, their competitors will.

“We are relieved that this Administration is prioritizing negotiations with Japan. We urgently need a solution that will fix the enormous vulnerability created by CPTPP.

“There are other improvements that can be made, such as ‘WTO Plus” sanitary and phytosanitary rules, but for us, nothing is more important than fixing the mark-up disparity.

“American farmers have been travelling to Japan promoting U.S. wheat since shortly after World War Two. We have had an office in Tokyo for over six decades. We have spent countless hours and millions of farmers’ hard-earned dollars building this market.

“During that time the Japanese milling industry has become an indispensable partner for U.S. wheat, particularly for farmers whose wheat is exported out of the Pacific Northwest. All of that is at risk without a quick U.S.-Japan agreement.

“U.S. wheat farmers and Japan’s flour milling industry hope that we can maintain provisional equivalence for U.S. wheat imports while our two countries conduct ongoing, good faith negotiations.

“We thank you for understanding the plight of these farmers, who are already facing severe trade disruptions in other markets. As you are well aware, the United States has not sold one kernel of wheat to China, our fifth largest export market, since March 1, 2018.

“We urge you to act quickly to save our market in Japan. Thank you.”

For more information about what is at stake for U.S. wheat farmers under the CPTPP agreement, visit the USW website at https://www.uswheat.org/policy/trade-negotiations/ and click on “Trans-Pacific Partnership (TPP).” Use this link to access USW’s written submission to the USTR on trade negotiations with Japan.

Vince Peterson, President, U.S. Wheat Associates

 

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