thumbnail

By Vince Peterson, USW President

U.S. Wheat Associates (USW) President Vince Peterson traveled to Australia last month to speak to an Australian farmer organization about what the future might hold for wheat farmers around the world. His message was far more upbeat than might be expected at a time when U.S. wheat planted area is historically low and Russian wheat production and export demand in on the rise.

Peterson shared this summary of his presentations for Wheat Letter.

There is no doubt that Russian wheat has benefited from record yield after record yield for the last five years leading to an 85 million metric ton (MMT) year in 2017. That yield was about two-thirds of a metric ton per hectare greater than its trend line projection. Digging deeper, though, it is interesting to note that Russia has not increased its wheat planted area all that much. It is about 3 million hectares on the trend line. Its farmers have increased land area planted to “other crops” at more than double the rate they increased wheat. Russian farmers and investors, like their counterparts around the world, will be looking for the best possible return on that land. As the cropping trend continues, it implies a shift in future growth away from a wheat concentration to broader diversification of crops.

Buyers and other industry analysts also need to remember that Russia has, on average over the past five years, sold more than 80 percent of its wheat exports to buyers in Africa and the Middle East. Those regions are wheat production deficient — and per capita wheat consumption in many of those countries is very high. Population in those regions will grow by 1.3 billion people who will collectively eat at least another 60 MMT of wheat every year and about 50 MMT of that increased demand will likely need to be imported.

In addition, the final cost of imported wheat, rather than end-product quality, weighs most heavily in these same markets. The signals from these buyers back to Russian wheat farmers will continue to be a need for low to moderate protein wheat at very low, delivered prices.

Rightly so, markets in Russia’s “backyard” will represent its most profitable export opportunity. In turn, these market factors offer limited incentives for Russian farmers to produce high performing wheats for far off markets.

Freight costs matter, too. The cost of moving wheat has shifted wildly over the past 15 years. The commodity spikes in 2007 to 2012 in both prices and trade volume, fueled by the price of petroleum reaching $140 per barrel, pushed ocean freights to outlandish numbers about 10 years ago. That provided an incentive for ship building and expansion that more than doubled the dry bulk carrier fleet.

The growing cargo fleet capacity peaked in 2015. In 2016, for the first time in a dozen years, the fleet capacity began to decline. Ocean freight rates quickly hit bottom so Russia could afford to move wheat almost everywhere. That pendulum is now starting to swing back. Oil prices have moved back up; the ship supply will continue to shrink with fewer new commissions and increased demolition/scrapping. It is likely the next cycle will “normalize” with freight rates back at least at moderately higher levels that are profitable for ship owners. The next cycle is going to make it far more expensive, and far less economical, for Russia (and any origin, for that matter) to be shipping their wheat half way around the globe into a competitor’s backyard. Particularly if those supplies are just of moderate to fair quality parameters.

So, my crystal ball conclusion is that the influence of Russian wheat is not done growing, but the outlook for other global suppliers is much more positive. While Russia’s wheat industry is here to stay as a main player in the world market, it will behave more responsibly to these changing market signals in the next 20 years, making this next cycle far different for the United States, Canada, Australia and other suppliers than it has been in the past 20 years.

thumbnail

By Stephanie Bryant-Erdmann, USW Market Analyst

According to the March 29 USDA Prospective Plantings report, U.S. total spring-planted area will jump to an estimated 14.1 million acres (5.71 million hectares), 12 percent above 2017/18, if realized. The estimate includes 12.1 million acres (4.90 million hectares) of hard red spring (HRS), up 17 percent from 2017, if realized. It is important to note that this is an estimate, as farmers in the top four HRS producing states of Minnesota, Montana, North Dakota and South Dakota have not started planting due to extremely cold, snowy weather across the region.

USDA expects a 1.05 million acre (425,000 hectare) increase in North Dakota spring wheat area, which is forecast at 6.40 million acres (2.59 million hectares). If realized, that would be up 20 percent year over year. Spring wheat acres in Minnesota are also expected to increase 38 percent from 2017/18 levels to 1.6 million acres (648,000 hectares). South Dakota 2018/19 HRS planted area is forecast at 1.05 million acres (425,000 hectares), up 80,000 acres (32,000 hectares). However, the planting window for spring wheat in North Dakota and Minnesota is no more than three weeks; after that the yield potential starts to decrease and farmers choose to plant alternative crops.

“This cold, wet spring could work against spring wheat planting in eastern North Dakota and western Minnesota,” said Mike Krueger, an independent market analyst based in North Dakota. “Farmers in these areas are reluctant to plant spring wheat after late April and right now the forecast is calling for another two weeks of cold weather and snow. If planting is delayed until May, we will probably see a switch to soybeans or other crops.”

USDA forecast Montana HRS planted area at 2.50 million acres (1.00 million hectares), in line with 2017/18 planted area. But, in contrast to eastern North Dakota and western Minnesota, the late spring may increase HRS planted acres in parts of Montana according to Cassidy Marn, marketing program manager with the Montana Wheat & Barley Committee.

“Farmers in Montana have fewer alternatives and, since we can only grow limited quantities of corn and soybeans here, wheat tends to be the last alternative,” said Marn. “Planting peas and lentils is possible, but given the amount of snow we still have on frozen ground, some farmers could miss the window for those crops. Planting spring wheat in June is not ideal, but it is preferable to planting nothing.”

USDA expects U.S. durum planted area to total 2.00 million acres (809,000 hectares), down 13 percent from 2017/18, if realized. The predicted decline is driven in large part by USDA’s expectation that North Dakota farmers will switch from durum to HRS or oilseed crops due to lower returns on durum in recent years. In addition, growers near the border are frustrated by a large volume of durum freely crossing the border from Canada that increases pressure on durum prices. Weather conditions will also affect durum planting decisions.

USDA also updated the winter wheat planted area from its January 2018 estimate, increasing winter wheat planted area by 50,000 acres (20,000 hectares) to 32.7 million acres (13.2 million hectares). The new estimate is still 2 percent below the 2017/18 planted area. The increase came from hard red winter (HRW) area, estimated at 23.2 million acres (9.39 million hectares), up slightly from the previous projection, but still 2 percent below the year prior and 17 percent below the 5-year average.

The decreased HRW planted area makes crop conditions even more crucial. The April 2 USDA Crop Progress report rated 10 percent of Kansas HRW, 9 percent of Oklahoma HRW and 17 percent of South Dakota winter wheat as good, with virtually none of the crop rated as excellent in those states.

Soft red winter (SRW) planted area decreased from the previous estimate to 5.85 million acres (2.37 million hectares), but is still 4 percent above 2017/18 planted area. Overall, conditions for SRW are similar to what growers faced at the same time last year with a majority of the crop rated in good to excellent condition.

USDA expects white wheat acres — planted in both winter and spring — to reach 4.15 million acres (1.68 million hectares) for 2018/19, up 3 percent from 2017/18, but in line with the 5-year average. The U.S. Drought Monitor shows adequate moisture for Washington, but southern Idaho and Oregon are experiencing abnormally dry to moderate drought conditions. Still, USDA reported that the majority of the white wheat crop in those states are in good to excellent condition.

The expected increase in spring wheat area would increase total U.S. wheat planted area to 47.3 million acres (19.1 million hectares) in 2018/19, up 3 percent year over year. The increase was unexpected, but if realized it would still be the second lowest planted wheat area since 1919 when USDA records began.

As always, spring brings the waiting game — all we can do is watch how the crops respond to conditions going forward.

thumbnail

Excerpts from “How Does Trade Affect Me?,” the March 13, 2018, blog entry in “Big Sky Farm Her. Navigating Life as a Montana Farmer” by Michelle Erickson-Jones.

Trade has become an area I am increasingly interested in studying as well as advocating for. In order to advocate for trade, a notoriously complex, slow moving, and polarizing policy issue, I needed to convey why trade is important to me. Why it is important to our farm, our state, and our national agriculture economy.

Why is trade important to our farm? 

We rely on export markets to provide us with consistent outlets for our grain. Unfortunately, there is not enough demand domestically for wheat. Also unfortunately, we do not necessarily have the ability to change the crops we raise for numerous reasons. We pride ourselves in our ability to produce high quality hard red winter and spring wheat that is in high demand in the Asian [and other] markets. They need/want our wheat to produce products that are popular in those markets. We want to maintain these markets as an outlet for our production.

My personal feelings on trade and its impact on our operation are that current trade policy and the shift towards protectionist policies keep me up at night. Never before have policies and government regulations caused me to lose sleep. I lose sleep [now] because I know agriculture trade is incredibly competitive, our ability to increase market share is limited, trade policy is incredibly slow to develop (and requires at least two willing partners), and because I know every day that goes by under our current policies risks our market share. It risks decades worth of work done by individual farmers through our commodity commissions, trade negotiators, other government officials and others.

Like most farmers I dream of the day my children take over the farm, I dream of giving them a better agricultural economy and a better operation than I started with (not that there was anything wrong with our operation but there is always room for improvement). Our current trade policy puts that dream at risk.

Why is trade important to our state? In 2016 Montana exported $1.6 billion in agricultural products. Agriculture is also the number on economic driver in Montana. We depend on our export markets to maintain that economy for the state.

Montana has a proud history of producing high quality wheat, barley, and beef among many other products. These products are in high demand across the globe, largely because of the high quality. We produce some of the highest quality hard red wheat (both winter and spring) as well as durum in the world. Many of the most competitive markets for these products demand Montana raised products. The Montana Wheat and Barley Commission (MWBC), in conjunction with [U.S. Wheat Associates] has spent decades developing relationships with Japanese buyers to ensure we can supply them with the quality they demand. The Montana Wheat and Barley Commission has traveled to Japan countless times as well as welcoming their trade teams to our farms. Despite their hard work, their ability to attract and maintain those relationships hinges on our free trade agreements. The TPP 11 agreement without the United States gives Canada and Australia a $65 per metric ton discount compared to U.S. sourced wheat; this is a tariff reduction that we will not be able to overcome, despite years of market building.

Why is trade important to our country? Agriculture trade has been growing exponentially over the past 50 years. So much so in fact that we have had a trade surplus in agricultural goods for the past 50 years. Across the nation agriculture maintains our rural economies and creates vital jobs throughout our communities. Trade policy throughout the past several decades has opened up new markets for agricultural exports, increased access in existing markets, and lowered or eliminated various tariffs and technical barriers to trade. Opportunities for improvement still abound; however, the benefits far outweigh the drawback for the agricultural community.

The increase in market access and increase in economic activity has been a significant driver in the improvement of our rural economy. Unfortunately, that rural economy continues to be under threat, a threat that risks significant economic impacts, as well as a domino effect that impacts every facet of our economy.

In conclusion, I have become passionate about international trade, I am passionate about the agricultural industry and our export partners, and I am passionate about the future of our industry. We depend on trade to maintain our export markets, ensure we have the ability to pass on our farmers to a future generation, and to ensure the rural economies stay strong for decades to come. I also understand trade is not perfect. International trade, bilateral agreements, and multi-nation free trade agreements will always have winners and losers. It is a difficult situation to deal with, it is delicate to advocate for, and it is a fact that does cause me great concern. It is also increasingly difficult to stand by and watch protectionist trade policies risk the future of agriculture and more importantly risk the future of my own farm.

Agriculture, particularly the wheat and barley industry, depend on maintaining our current market access, increasing access to new markets through free trade agreements, and improving our current agreements. Trade does not thrive on protectionism and uncertainty.

Michelle Erickson-Jones is a 4th generation farmer in South Central Montana, married to a 4th generation Montana rancher. They are raising two little boys who hopefully will be the 5th generation on their farm. The family raises wheat, malt barley, safflower, sunflowers, corn, alfalfa, forage grains, and maintains a small cow/calf operation. Michelle is the current president of the Montana Grain Growers Association but notes that all views expressed in her blog are her own. She recently worked with Farmers for Free Trade to record a national television ad focused on the importance of trade. 

thumbnail

As U.S. Wheat Associates (USW) President Vince Peterson often says, at any given hour of the day there is someone, somewhere, talking about the quality, reliability and value of U.S. wheat. Wheat Letter wants to share some of the ways USW was working in January and February to promote all six classes of U.S. wheat in an ever more complex world grain market.

Hong Kong. In February, the management of Hong Kong’s restaurant, hotel, resort and supermarket retailing scenes turned out in force to welcome the new USDA Foreign Agricultural Service (FAS) Agricultural Trade Officer, Alicia Hernandez. Hernandez will lead the trade promotion office that covers the agricultural import markets of Hong Kong and Macau. The Consul General hosted a reception at his residence, which featured a U.S. Food and Beverage Showcase event. Long-time baking consultant Heinz Fischer, who created pastries for the event, USW Assistant Regional Vice President Jeff Coey represented U.S. wheat farmers. In addition to undertaking baking demonstrations, Fischer is a mainstay of the USW sponsored Sino-American Baking School in Guangzhou, with a branch-training center in Hebei province, North China.

Panama. In February, USW Technical Specialist Marcelo Mitre attended the 41st Annual International Association of Operative Millers (IAOM) Latin American Regional Millers’ Conference and Expo in Panama City, Panama. Mitre met with representatives of several mills in the Mexico-Central American-Caribbean region. Technical presentations covered a variety of industry topics, as well as a panel discussion on “challenges of the milling industry in the next decade.”

South Korea. In February, USW Country Director Chang Yoon (CY) Kang and Food/Bakery Technologist Shin Hak (David) Oh carried out trade and technical service for two snack food manufacturers in Korea, including one that has applied research done at the Wheat Marketing Center (WMC) Whole Wheat Cookie /Cracker course in 2016. USW staff provided an updated world supply and demand report and forecast for 2018, and encouraged manufacturers to test new U.S. wheat blend formulations to enhance their biscuit and whole grain product quality.

The Philippines. In February, USW Manila Baking Consultant Gerry Mendoza presented as a guest lecturer for a Filipino milling company’s baking course. His presentations on yeast performance and cake science reach 20 participants from both small bakeries and large industrial bakeries. Mendoza also conducted a one-day seminar workshop for 22 participants at the Filipino Chinese Bakery Association Research and Training Center as one of the many regular seminars offered by the Philippine Society of Baking.

South Asia. In January, USW Vice President for Overseas Operations Mark Fowler traveled to USW’s offices in Singapore, Manila and Hong Kong to meet with several customers and members of the grain trade, as well as to conduct supervisory discussions on activities in the region.

thumbnail

By Matt Weimar, USW Senior Advisor and Regional Vice President, South Asia

After 34 years of service to U.S. Wheat Associates (USW), Shi Pu “Andy” Zhao is stepping down from his position as China Country Director. Andy joined USW in 1984 during the establishment of the Beijing Representative Office, serving as a driver and assistant to the country director and secretary at the time. In the early years of the USW Beijing office, he supported liaison with the local grain industry in Beijing and the Sino-U.S. Model Flour Mill, which was established as a training facility for millers across China.

In 1998, Andy became Country Director and Chief Representative, tasked with helping maintain relationships with the national State Administration of Grain, the national grain reserve (Sinograin) and COFCO, along with north China milling companies. He helped develop, plan and participate in annual crop quality reporting seminars with a growing number of attendees from across China’s flour milling industry and grain trading companies. The event is now firmly established as one of the milling industry’s most important opportunities to meet, network and understand the U.S. wheat production and export marketing system.

Andy also accompanied several Asian and End Products Collaborative groups to Portland, Ore., and the Pacific Northwest, working with USW’s West Coast Office and the Wheat Marketing Center to increase understanding of U.S. wheat milling and flour processing quality among key milling and wheat foods processing companies. These activities were a key to increasing opportunities in China for hard red spring (HRS), soft white (SW) and hard red winter (HRW) wheat.

His work with USW colleagues helped assure that Quality Samples Program (QSP) containers of northern spring/dark northern spring wheat from North Dakota, Montana and Minnesota successfully improved miller’s knowledge of the HRS wheat class. From those events, which took place after China’s accession to the WTO in 1999, along with QSP programs for Pacific Northwest grown soft white (SW) wheat, USW has helped increase demand for both classes in recent years.  Because of Zhao’s dedication to U.S. wheat farmers, industry participants on both sides of the Pacific have come to better understand what each stakeholder needs and can offer to the others.

Thank you, Andy, for your faithful service. Your colleagues all wish you the best of luck as you begin your pursuit of “new adventures!”

thumbnail

By Ben Conner, USW Vice President of Policy

After more than a year, the Office of the U.S. Trade Representative (USTR) finally has its full leadership team in place as Deputy USTR Jeffrey Gerrish was sworn in this week to join Deputy USTRs Dennis Shea and C. J. Mahoney, Chief Agricultural Negotiator Gregg Doud, and USTR Robert Lighthizer. While Ambassador Lighthizer had been supported by a team of very capable career staff at USTR, there is no substitute for having the full suite of Senate-confirmed leadership in place to set direction for the agency.

Particularly exciting for U.S. Wheat Associates (USW) and the agriculture community, was the confirmation of Gregg Doud as the Chief Agricultural Negotiator. It is critical for U.S. agriculture to have a strong voice at the table for trade discussions. Ambassador Doud, who is a former market analyst at USW, will certainly provide that, along with Ted McKinney, USDA Under Secretary for Trade and Foreign Agricultural Affairs, and Ray Starling, the White House Special Assistant to the President for Agriculture, Trade and Food Assistance.

Getting the team in place comes at a critical time for U.S. agriculture, our trade relationships and the global trading system in general. Negotiations of the North American Free Trade Agreement (NAFTA) could be in the home stretch, steel and aluminum tariffs threaten to disrupt trade relationships with some of our best customers and the United States and China are gearing up for the largest trade conflict in the post-World Trade Organization (WTO) era. Not to mention the desperate need for the United States to re-engage with the Trans-Pacific Partnership (TPP) and start working to support other customers around the globe.

The USTR team has a big task ahead that will affect the global trading system, U.S. agriculture and our customers overseas for decades. For the U.S. wheat value chain, the best course of action is negotiating new and stronger trade rules, and enforcing them along with existing rules through an effective, binding dispute settlement system. That will be a far better course for U.S. farmers and their loyal overseas customers than any misguided trade war.

thumbnail

By Stephanie Bryant-Erdmann, USW Market Analyst

The end of March heralds not only the beginning of spring — a crucial time for both winter and spring wheat production — but also the first round of winter wheat condition reports.

Black Sea — Snow across Russia and Ukraine is providing much needed protection from the recent cold snap in the region, but is delaying spring planting, according to Ukrainian consultancy UkrAgroConsult and the Russian Meteorological Service. As of Feb. 26, the Russian Meteorological Service reported 95 percent of Russian winter grains were rated in fair to good condition, unchanged from the last crop condition report on Nov. 30, 2017. UkrAgroConsult rated 49 percent of Ukrainian winter wheat in good to excellent condition, compared to 40 percent the year prior. Stratégie Grains forecast 2018/19 Russian wheat production at 77.0 million metric tons (MMT), down sharply from 2017/18 due to an anticipated return to trendline yields and smaller planted area. Ukrainian 2018/19 wheat production is estimated at 26.5 MMT, compared to 26.1 MMT in 2017/18.

European Union (EU) — According to the March EU crop monitoring service (MARS) report, EU winter conditions were adequate for winter wheat development despite unusual temperature fluctuations. Temperatures in December, January and the first half of February were generally 1°C to 6°C warmer than normal across Europe before plunging the last half of February to as low as -15°C and -20°C across Poland, Denmark and Sweden. Precipitation in excess of 20 cm (8 inches) in France, the EU’s top wheat producing country, flooded some fields. On March 16, FranceAgriMer rated 80 percent of French common wheat as good to excellent, compared to 81 percent the week prior and 92 percent last year. Stratégie Grains expects 2018/19 EU wheat production to total 141 MMT, down an estimated 900,000 metric tons (MT) from 2017/18 due to expected increases in winterkill and smaller planted area in France and Germany.

India — Wheat harvest is currently underway in India, the world’s second largest wheat producing country behind China. While crop condition ratings there are not available, Stratégie Grains anticipates 2018/19 Indian wheat production will fall to 91.4 MMT, down 7 percent year over year due to a 5 percent reduction in planted area and unfavorable weather and disease pressure.

United States — On March 19, USDA released weekly crop progress reports for top hard red winter (HRW) producing states of Kansas, Oklahoma and Texas that showed continued deterioration of topsoil and subsoil moisture and winter wheat crop conditions in Kansas and Texas, but an improvement in Oklahoma. USDA rated 55 percent of Kansas, 66 percent of Oklahoma, and 60 percent of Texas winter wheat in poor or very poor condition, compared to ratings of 53 percent, 72 percent and 53 percent, respectively, the week prior. USDA will resume weekly U.S. crop progress reports on April 4.

Subsoil moisture in Kansas was rated 71 percent short or very short, 28 percent adequate and 1 percent surplus, while 68 percent of Oklahoma and 63 percent of Texas subsoil moisture was rated short or very short. USDA’s evaluation took place before this week’s rain event, so its effects will appear on next week’s report. However, additional precipitation will be needed to make up the shortfall. According U.S. National Oceanic and Atmospheric Administration (NOAA) data, accumulated precipitation across the majority of the HRW-growing area in Kansas, Oklahoma and Texas is 3 to 6 inches (8 to 15 cm) below normal.

We are months away from knowing what the 2018/19 world wheat crop will look like and, as always, the weather will have the final say on yields and production. Buyers can be sure the U.S. wheat store will continue to supply high-quality wheat, regardless of what happens in 2018/19.

thumbnail

By Gary Baily, Washington Grain Commission Chairman, USW Director and a wheat farmer from St. John, Wash.

As Washington Grain Commissioners, trade has consumed a great deal of our time this past year. Relationships with our international partners are critical to the survival of our trade with countries such as Japan. Most of us have seen the proposed effects on our trade with Japan if the United States stays outside of the Trans-Pacific Partnership (TPP): a phased in $65/MT tariff reduction for TPP countries, U.S. market share for wheat falling from 50 percent to about 23 percent, and a reduction of baseline futures prices of $0.50 at a time when prices are already depressed.

I have been raising wheat in Eastern Washington for almost 30 years and have seen wheat fall victim to political whims several times. Looking back, however, I have not been as anxious about the future of our industry since the financial crisis of the 1980s. The divisive nature of the North America Free Trade Agreement (NAFTA) negotiations and the conclusion of the above mentioned TPP trade treaty without the United States cause concern about the long-term heath of our profession. This is especially true for young farmers who may not have the equity or financial backing to weather these storms.

Adding to the current trade environment is President Trump’s announcement that tariffs on steel and aluminum imports are being considered. The effects of those tariffs have yet to be quantified. If enacted, agriculture exports will likely be targeted for retaliation.

It is time for the President to consider the ramifications of his proposed tariffs, and acknowledge the positive contributions that our industry has for trade, and re-engage in TPP.

thumbnail

By Stephanie Bryant-Erdmann, USW Market Analyst

Total U.S. planted wheat area will rise 500,000 acres (202,000 hectares) in 2018/19 due to an expected increase in spring wheat area (including durum) according to Joanna Hitchner of the USDA World Agricultural Outlook Board. The USDA held its annual Agricultural Outlook Forum on Feb. 22 to 23, where Hitchner presented the 2018/19 Grain and Oilseeds Outlook.

USDA forecasts 2018/19 combined spring wheat and durum planted area at 13.9 million acres (5.63 million hectares). If realized, that would be up 2 percent from 2017/18 and the largest spring and durum planted area since 2015/16. Increased spring wheat and durum planted area is expected to more than offset the lowest U.S. winter wheat planted area since 1909. USDA currently estimates 2018/19 (June to May) wheat acreage at 46.5 million acres (18.8 million hectares), a one percent increase from last year, if realized.

Wheat buyers should note that factors affecting planting decisions can change before seed is sown. Long-term dry conditions in top hard red spring (HRS) and durum producing states of Montana, North Dakota and South Dakota may significantly alter farmers’ plans.

In January, USDA reported U.S. farmers planted 32.6 million acres (13.2 million hectares) of winter wheat last fall, down slightly from 2017/18, but 15 percent below the 5-year average. Increases for soft red winter (SRW) and white wheat offset a decrease in hard red winter (HRW). USDA assessed 2018/19 HRW planted area at 23.1 million acres (9.35 million hectares), down 2 percent from 2017/18 with planted acreage down year over year in nearly every HRW-producing state. However, 2018/19 total SRW planted area of 5.98 million acres (2.42 million hectares) increased 4 percent from last year, and white winter wheat planted area increased to an estimated 3.56 million acres (1.44 million hectares), up 1 percent from the prior year. Winter durum planting in the Southwestern United States was estimated at 74,000 acres (30,000 hectares), down 41 percent from 2017/18 and 51 percent below 2016/17.

Based on trend yields, USDA expects the national average yield to grow to 47.4 bushels per acre, up from 46.3 in 2017/18 due to expected increases in spring and durum wheat yields which were hard hit by last year’s drought. USDA projects the wheat harvested-to-planted ratio will increase to 0.83, up slightly from last year’s 0.82 due to a small decrease in expected abandonment rates. Total U.S. 2018/19 wheat production is forecast to rise by 6 percent year over year to 50.0 million metric tons (MMT).

In addition to lower planted area for winter wheat, crop conditions for many HRW-producing states are deteriorating due to sustained drought conditions. On Feb. 26, USDA rated 12 percent of Kansas winter wheat in good to excellent condition, down from 14 percent at the end of December. Winter wheat condition remained unchanged in Oklahoma with just 4 percent rated good to excellent, but declined in Colorado, Montana, Nebraska, North Dakota and South Dakota. SRW conditions improved in Illinois, where 45 percent of the winter wheat crop was rated in good to excellent condition compared to 38 percent last month. USDA will resume weekly U.S. crop progress reports in April.

A decrease in carryover stocks is expected to offset increased production, and the total U.S. wheat supply is expected to fall in 2018/19. USDA forecasts 2018/19 U.S. supplies at 77.5 MMT, down 2 percent from 2017/18, if realized, in part because USDA anticipates a slight increase in domestic use, from 30.4 to 30.7 MMT.

Price competition and large supplies in other wheat exporting countries will continue to pressure demand for U.S. wheat. USDA expects U.S. exports to fall to 25.2 MMT, down 3 percent from the forecasted 2017/18 U.S. wheat export level of 25.9 MMT.

To read more from the USDA Outlook Forum or to download presentations, please visit https://www.usda.gov/oce/forum/.

To see the latest Drought Monitor, please visit https://droughtmonitor.unl.edu/

thumbnail

By Matthew Weaver, Capital Press; Reprinted with Permission

Most U.S. wheat farmers will never meet Roy Chung, but during the last four decades he’s played a vital role in selling the wheat they grow. As the bakery consultant for U.S. Wheat Associates based in Singapore, Chung meets with customers around Asia to show them how to use U.S.-grown wheat in the cakes, cookies, crackers and noodles they sell. U.S. Wheat is the overseas marketing arm of the industry.

His hard work pays off. The countries Chung visits in south Asia — Singapore, Thailand, Malaysia, Indonesia, the Philippines, Vietnam, Myanmar and Sri Lanka — purchase about 4.4 million metric tons of wheat worth $1.1 billion each year, according to U.S. Wheat. That’s more than 16 percent of all U.S. wheat exported each year.

Chung’s secret: He tells buyers they will not find another, more sincere farmer-owned wheat organization anywhere in the world. U.S. wheat may not be the cheapest option, he says, but it offers the best value.

“In business, all people want to make money; our motivation is to assist them (making) money while getting the satisfaction of selling our products to them,” Chung said. “Hard work and sincerity never fails.”

Industry leaders light up when they talk about Chung.

“It’s in his soul,” said Mike Miller, the U.S. Wheat chairman, a member of the Washington Grain Commission board and a Ritzville, Wash., farmer. “This is who he is. He doesn’t do it for any other country. He’s trying to do it so we can sell more wheat at a better price.”

Chung’s “unparalleled” knowledge of wheat starch properties and how they perform in a food product leads people to seek out his expertise. He helps companies design production lines and new products, said Dana Herron, a Connell, Wash., seed dealer and grain commission board member.

“We would be 20 years behind in marketing and sales if there’s no Roy Chung,” Herron said.

Getting his start. Kah Hee “Roy” Chung, 63, has worked for U.S. Wheat for more than 40 years.

Before that, he assisted in his father’s bakery in Malaysia. Chung was home during college vacation and helping his father, who immigrated from China to Malaysia during World War II, when a consultant from Western Wheat Associates asked to use the bakery for a product demonstration. Western Wheat later merged with Great Plains Wheat to form U.S. Wheat Associates.

“My father was generous in allowing his competitors into the bakery to observe the demonstration as well,” Chung said.

Chung’s father did not speak English and the consultant was working alone, so Chung served as his assistant and interpreter for the event. Months later, he received an offer to join Western Wheat, but declined, as he was not yet finished with school. He was studying production engineering at the Ungku Omar Polytechnic in Malaysia.

Western Wheat waited two years for Chung to complete his education, and he was interviewed by Tom Mick, who would later become CEO of the Washington Grain Commission. Mick hired him to join WWA.

“He has a unique ability to teach people how to make a superior end-product and at the same time reduce costs that would make it profitable,” said Mick, who is now retired.

Mick said Chung could “pull miracles,” convincing reluctant bakers to change wheat or flour sources.

“I think (Chung is) one of the greatest hires I’ve ever been involved with,” Mick said. “To the wheat producer, he is a godsend.”

Selling U.S. wheat. If a buyer is new to U.S. wheat, Chung goes back to basics. He explains the difference in U.S. wheat classes, their uses and the suitability of different classes for the products they make in each country.

He likens this to teaching them the ABCs before turning the letters into words, then the words into sentences.

“For the more experienced buyers, it gets even more exciting if you can string sentences to make paragraphs,” Chung said. “And then paragraphs to make a chapter and eventually chapters into an entire book.”

U.S. Wheat employees, he said, show a company the possibilities they can get from the wheat American farmers produce.

“We will provide examples of how others are making money from the wheat that they buy from the U.S.,” he said.

Chung says he is always sincere in his approach and communication.

“Don’t bring the buffalo to the river to make it drink if the buffalo is not thirsty,” he said.

If a buyer is similarly sincere, U.S. Wheat will hold his or her hand all the way and show them how to extract value in any market, Chung said.

“He’s made those companies so much money using Pacific Northwest soft white wheat, he is highly respected,” Herron said. “People listen to his every word, because he has their best interest at heart.”

Teaching bakers. U.S. Wheat cooperates with United Flour Mills in Thailand to offer specialized baking courses at the mill’s baking and cooking school in Bangkok. Chung was instrumental in offering the first course. The program has continued for 38 years.

“U.S. Wheat finds value in educating young bakers to see and feel the differences in quality when compared to wheats of other origins,” Chung said. “The lasting impression we impart to these bakers (stays) for their entire lives.”

Many bakers trained at the school move on to the upper ranks of their organizations, helping their company expand and securing a stable supply of U.S. wheat.

“I like to say that I impart knowledge that will enable my students to make good judgment,” Chung said. “More importantly, I leave them to pursue their careers in a more passionate way knowing that I, as a representative of U.S. Wheat, will always be there for them. I am sincere when I make this offer.”

As a result of working with Chung, when mills go to grain purchasers with their specifications for U.S. wheat, they know what they want and how to ask for it, Miller said.

“He’s actually helped raise them in the wheat world,” Miller said. “He can go into their mill, they know exactly what he’s talking about.”

And they listen.

“When they hear Roy’s in the house, it’s like Paul McCartney just showed up,” Miller said. “They flock to him. He engages them, he remembers their names, asks them how they’re doing, ‘Have you addressed this problem?’ or they ask him, ‘Hey, we have this.’ They trust him. He’s no-nonsense. He stands behind his work.”

An ‘encyclopedia’. Chung worked closely with Vietnamese flour millers and bakeries to help them understand the uses of U.S. wheat, said Dinh Xuan Quang, technical manager of Vietnam Flour Mills. It took a long time because U.S. prices were higher than those of competing countries.

“Now, in Vietnam, the cookies and cake industry can’t live without soft white wheat,” Quang said.

Wilma Bocaya, vice president of Jollibee Foods Corp., a fast food bun manufacturing company in the Philippines, attended Chung’s course in 1994, after a colleague attended the year before. Her company sends students every year.

“When we met Roy in 1993, we only had 105 Jollibee stores,” Bocaya said. “This number has now grown into more than a thousand in the Philippines.”

The company is expanding its baking operation this year to support further growth.

“Suffice it to say that the technical support we got from U.S. Wheat through Roy as consultant or as course instructor enabled us to provide products that meet our customers’ expectations,” Bocaya said.

Wantana Thongthai, president of United Flour Mills Food Center Co. Ltd., and operator of the baking school, has known Chung since 1988. The company feels strongly that U.S. wheat quality best matches its needs, she said.

“Through my tenure at UFM, I have not met a consultant more knowledgeable in his trade than Mr. Chung,” she said. “He is known among us as ‘the walking baking encyclopedia.’”

Changing times. With the internet, many customers are more knowledgeable and demanding, Chung said. Few countries produce generic flour for breads, cakes and cookies, and most bakeries use specialized flour for specific products.

“We must justify these sales with scientific facts and examples of how this basic information has been used to produce more specialized flours for specialized products,” Chung said.

U.S. Wheat must keep re-educating itself technically to sell wheat at an advantage, Chung said.

“If we fail to do that, we will be just another generic seller, and worse still, a residual seller,” he said.

Chung said it’s not currently possible to retire, since there are few people with his technical expertise in the industry. He’d like to leave his customers in good hands, he said.

He hopes to leave the U.S. Wheat office with a younger team of technical staffers who would work “as passionately and sincerely with our customers as I have.”

If U.S. Wheat hired someone he could begin to train this year, he said, he could see retiring in five years.

Miller, the U.S. Wheat chairman, knows at some point Chung will want to slow down.

“I don’t know if you can replace that type of historical knowledge and energy with one person,” he said. “I bet you’d have to do it with two.”

That could be a good thing for wheat farmers, Herron believes.

“If we had a couple more Roy Chungs, we wouldn’t have to worry about competition overseas,” he said. “He makes that big of a difference.”