You are here: / / Wheat Letter Blog
thumbnail
, ,

USDA Projects Shifting Supplies of Wheat, Location Will Likely Impact Quality and Availability

By Stephanie Bryant-Erdmann, USW Market Analyst

USDA expects a lower world wheat production in 2017/18 of 751 million metric tons (MMT) (27.6 billion bushels), down slightly from the record high 754 MMT (27.7 billion bushels) in 2016/17 but 5 percent above the 5-year average. If realized, it would be the first production decline since 2012/13. While world wheat production is projected to decline year over year, USDA expects slightly higher total consumption in 2017/18 at 740 MMT (27.2 billion bushels), compared to the 5-year average of 705 MMT (25.9 billion bushels). With production expected to decline and consumption forecast to rise, availability of global wheat supplies is largely dependent on location and whether or not that country is an importer, exporter or China.

Record-large world carry-in stocks offset the production decline with total world supply reaching a projected 1007 MMT (37.0 billion bushels), up 12.4 MMT from 2016/17. However, removing China’s 2017/18 projected beginning stocks and production from global wheat supply reveals roughly a 3 MMT decline in global supplies. While small, the decline in global wheat supplies is compounded by a shift in location, which has implied impacts on availability, quality and, of course, price.

Exporting countries. USDA forecasts supplies in the top wheat exporting countries of Argentina, Australia, Canada, the European Union (EU), Kazakhstan, Russia, Ukraine and the United States to decrease by 2 percent or roughly 10 MMT year over year to 460 MMT. A 9 MMT year over year increase in exporter beginning stocks partially offsets the anticipated 5 percent decrease in production. However, a 19 percent increase in Russian wheat supplies due to sharply higher 2017/18 production is partially masking forecasted declines in five of the major eight exporters — Argentina, Australia, Canada, Ukraine and the United States. Wheat supplies in the EU are expected to remain stable year over year at 161 MMT, and Kazakhstan wheat supply is expected to increase 2 percent from 2016/17 due to higher beginning stocks.

Russian wheat supplies total 20 percent of exporting country supplies, making the quality of the crop very important. SGS Russia, an independent crop inspection service, reported preliminary data for winter wheat in south, central and the Volga-Urals regions of Russia showed lower protein levels due to favorable growing conditions which boosted yields. According to the SGS data, 22 percent of samples graded as Russian 3rd class wheat (10.5 to 11.9 percent protein on a 12 percent moisture basis (mb)); 46 percent of the samples graded as Russian 4th class wheat (8.8 to 10.5 percent protein on a 12 percent mb); and 32 percent as 5th class wheat (feed wheat). SGS reports that some areas have Fusarium damage, high levels of sprout damage and very low falling numbers; but test weight values are generally higher across all regions.

Importing countries. Importing country beginning stocks are forecast to be 10 percent lower year over at 72.4 MMT, due to customers utilizing “just in time” purchasing strategy to take advantage of low global wheat prices. Production in the importing countries is expected to increase 7 percent year over year, lifted by a 11.4 MMT increase in India after two poor crops there. Total importing country supplies are expected to increase 2 percent to 307 MMT due to the lower beginning stocks falling and increased production. However, it should be noted that 108 MMT, roughly 35 percent, of that supply will remain in India.

China. USDA expects Chinese beginning stocks to climb to 111 MMT, up 14 percent over 2016/17. If realized, China will hold 43 percent of 2017/18 total global wheat beginning stocks. Chinese wheat production is also expected to rise in 2017/18 to 130 MMT, up 1.15 MMT from 2016/17. This puts total 2017/18 Chinese wheat supplies at 241 MMT, 7 percent greater than 2016/17. Yet Chinese wheat consumption is expected to decline 2 percent to 116 MMT due to an anticipated decrease in wheat feed usage. With supply up and consumption down, 2017/18 Chinese ending stocks are expected to grow to 127 MMT, up 14 percent from last year and a new record. If realized, Chinese ending stocks would account for 47 percent of all global wheat ending stocks for 2017/18.

While supplies in most importing countries are shrinking (India being the notable exception), global human consumption of wheat continues to grow. USDA expects global human wheat consumption to increase 2 percent in 2017/18, led by increases in regions that depend on imports for the entirety of their supply, including Southeast Asia, Central America and the Caribbean. With 81 percent of global wheat consumption going to humans, understanding the quality and availability of the 2017/18 crop is important.

The 2017/18 USW Crop Quality report will be available online on Monday, Oct. 23. Contact your local USW representative for more information about the 2017/18 U.S. wheat quality, production and logistics.

/by
Harvest Report
, , , ,

USW Reviews Crop Quality for the 2017/18 Hard Red Spring, Soft White and Durum Crops

USW and its partner organizations have completed the crop quality analysis of the 2017/18 U.S. hard red spring (HRS), soft white (SW) and durum crops. The final data is summarized below. The complete analyses will appear in class-specific reports and USW’s 2017 Crop Quality Booklet, and shared with hundreds of customers around the world as part of USW’s annual Crop Quality Seminars.

Full regional quality reports for the 2017 HRS, SW, northern durum and Desert Durum® crops are posted at www.uswheat.org/cropQuality.

Hard Red Spring. USDA estimates that the total 2017/18 HRS supply (excluding imports) is down 19 percent from 2016/17 due to smaller production and beginning stocks.

Overall, 97 percent of Eastern Region and 83 percent of Western Region samples graded U.S. No. 1. The overall average test weight is 61.6 lb/bu (81 kg/hl), similar to the 5-year average, though the Western Region average is lower due to drought. The average protein is 14.6 percent (12 percent mb), higher than both 2016 and the 5-year average. More than one-half of all samples have greater than 14.5 percent protein in 2017 compared to just 36 percent in 2016.

The smaller 2017 HRS crop has many positive attributes, including high grades, plentiful protein, little to no DON and very good functional performance. Protein levels, shrunken and broken kernels and thousand kernel weights are more variable than recent years due to the vast differences in growing conditions across the region. Diligent contract specifications are still encouraged on this high-quality crop to ensure buyers get the quality expected.

Soft White. USDA estimates total 2017 SW production at 6.14 MMT, down slightly from 2016. Of that, the Washington Grain Commission estimates white club (WC) accounts for 359,000 MT.

The 2017 SW and WC overall average grade is U.S. No. 1. The average SW test weight of 60.9 lb/bu (80.1 kg/hl) is close to last year’s 60.8 lb/bu (80.0 kg/hl), while WC test weight of 60.2 lb/bu (79.2 kg/hl) is slightly less than 2016’s 60.8 lb/bu (80.0 kg/hl). The overall SW and WC wheat protein contents (12 percent mb) of 9.6 percent and 9.4 percent, respectively, are each 0.5 percentage point below the respective 2016 values and well below the wheat protein 5-year averages.

The 2017 PNW soft white wheat crop is generally characterized by having similar kernel characteristics to last year with good test weight, lower moisture content, lower protein content, higher falling number values and acceptable finished product characteristics. This year’s WC quality characteristics follow the same trend as SW. The high protein segment of the SW crop provides opportunities in blends for Asian noodles, steamed breads, flat breads and pan breads.

Durum. Production in the U.S. Northern Plains is down by more than 50 percent from 2016 due to a small decline in acreage and sharply lower yields caused by severe drought. Scattered rain delays toward the end of harvest affected the color of a portion of the crop.

The 2017 Northern durum crop average grade is U.S. No. 1 Hard Amber Durum (HAD). However, a larger portion of the samples than in 2016 graded U.S. No. 1 or 2 Amber Durum due to color loss in some areas. Average test weight of 60.9 lb/bu (79.4 kg/hl) is slightly below last year. Hot, dry conditions pushed protein levels higher, with the 2017 average at 14.5 percent (12 percent moisture basis).

Buyers will be pleased with this year’s excellent grading Northern durum crop boasting strong protein levels, overall high vitreous kernel levels, higher semolina extraction and improved mixing and pasta quality characteristics. With reduced supply and isolated areas with lower vitreous kernel levels, lighter thousand kernel weights and some DON detections, buyers should always remain diligent in their contract specifications.

2017 Desert Durum® production acreage was less than in 2016, largely due to lower prices available at planting time. Yields were average, and quality was uniformly good. The crop exhibits consistently large kernels and low moisture, traits that contribute to efficient transportation costs and high extraction rates. The 2017 crop will deliver the valuable milling, semolina and pasta quality traits that customers have learned to expect and appreciate.

/by
thumbnail
, , ,

Shifting Destinations of U.S. Wheat Exports

By Stephanie Bryant-Erdmann, USW Market Analyst

Over the past twenty years, roughly 10 MMT of U.S. wheat exports have shifted from price sensitive markets to quality-driven markets. Consumption in quality-driven markets in Southeast Asia and Latin America increased an average 2 percent annually over the past ten years, according to USDA.

In 1995/96, the top ten destinations for U.S. wheat included Egypt, Pakistan and Sri Lanka, whose respective governments purchased large quantities of wheat for subsidized food programs and strategic reserves. Thus, these markets were very price sensitive. While some liberalization has occurred in these markets, subsidized food programs and strategic reserves are still the primary uses for imported wheat by these markets.

Rounding out the top destinations in 1995/96 were markets that value quality: Japan, Mexico, the Philippines, South Korea, Taiwan, Nigeria and the European Union. These markets continue to be top ten destinations for U.S. wheat. Over the past five years, U.S. wheat exports to these seven countries averaged 13.6 MMT compared to 9.78 MMT in 1995/96, an increase of 39 percent, while total consumption increased an average 7 percent over the same time period, indicating increased usage and preference for U.S. wheat despite prices often higher than from other sources.

Since 1995/96, wheat consumption in other quality-driven markets has also grown. Southeast Asian markets, including Indonesia, Thailand, Vietnam and Malaysia1, have grown an average 6 percent annually. U.S. exports to the region increased 93 percent to 2.23 MMT in 2016/17, according to Global Trade Atlas data. Year-to-date, U.S. wheat export sales to the region total 1.23 MMT, on pace with last year’s pace. U.S. wheat exports also increased 59 percent to Latin and South America with 5-year average sales of 6.48 MMT compared to 4.07 MMT in 1995/96.

In 2016/17, the top destinations for U.S. wheat are a veritable who’s who of the markets that value quality, dominated by Asian, Latin and South American markets. In total, the top ten destinations represented 64 percent of U.S. wheat sales during that marketing year. Countries in Central America and South America, including Chile, Guatemala, Honduras, Peru, Venezuela and the Dominican Republic, were in the top 20 destinations for U.S. wheat and accounted for another 9 percent. See the latest USW Commercial Sales report for the resulting increases in wheat exports to the increasingly quality-driven markets in Southeast Asia, Latin and South America.

The goal for any company selling a high-quality product is to make demand for that product inelastic — an increase in price does not have an equal decrease in quantity demanded. Put another way, consumers have such a strong preference for the good that increases in price result in very small decreases in quantity demanded. Creating inelastic demand takes a combination of the right consumers, the right product, hard work, and, in many cases, time.

It is a market development strategy that also provides value to U.S. farmers in the form of higher prices for their wheat compared to farmers in most competing countries. U.S. farmers also continue to work on product quality, investing an average $12 million annually on wheat research through their state checkoff programs, according to a study done by the National Wheat Improvement Committee in 2012. USW has also put more focus and resources into its marketing efforts in markets that are traditionally quality conscious and experiencing growth, such as Japan, Mexico and the Philippines.

1The Philippines is normally included in the Southeast Asia region, but due to the prior reference, its exports sales were excluded from this region’s analysis.

/by
thumbnail
, ,

The International Treaties Upholding Science-Based Wheat Trade

By Elizabeth Westendorf, Assistant Director of Policy

It’s no secret that the U.S. wheat industry and its customers rely heavily on international trade rules to keep markets open and wheat moving. The World Trade Organization (WTO) is the prime example of this, particularly in its limits on tariffs and subsidies that have done so much to push towards a level playing field in global trade. But along with the WTO are other institutions that play a critical role in trade.

As traditional barriers to trade have decreased due to the WTO and other trade agreements, many countries have adapted and found new ways to protect industries, limit imports, or retaliate on trade issues (and clearly there are still many issues with traditional barriers!). Technical barriers – in particular sanitary and phytosanitary (SPS) barriers that purportedly address health, safety, and environmental problems – are a big challenge in trade today and likely to be a growing concern in the future.

The WTO SPS Agreement identifies two additional international treaties that are relevant to wheat trade: the Codex Alimentarius and the International Plant Protection Convention (IPPC). The Codex Alimentarius is a collection of standards, guidelines and practices that aim to protect consumer health while also ensuring fair practices in international trade, and the IPPC is the international standard setting body for plant health.

The most visible standards in wheat are probably the maximum levels for pesticide residues (MRLs), mycotoxins, and heavy metals set by Codex, but there are other influential standards for things like phytosanitary certificates and pest risk assessments adopted by the IPPC.

The SPS Agreement requires that any measures that a country adopts that are more trade-limiting than the standards developed by Codex and IPPC be scientifically justified, taking into account relevant factors like exposure and risk. Countries have every right to limit imports of unsafe products, whether they’re unsafe to their consumers or the environment, as long as they have gone through the process of providing sound justification. The WTO provides a clearing house of announcement for regulatory changes proposed by member countries, giving all others an opportunity to comment and object if needed. USW staff routinely monitor these announcements for any potential new restrictions on wheat trade.

Divergence from an international SPS measure is not necessarily a violation of trade commitments, but it can be a sign that something is wrong and needs to be fixed. The U.S. government has personnel dedicated to fixing these sorts of technical barriers and ensuring that standard setting bodies rely on the best science available and avoid acting as unnecessary impediments to trade.

The highly technical nature of SPS measures means that these measures are often difficult to implement properly and address if something is wrong. Following these standards or an alternative science- and risk-based process is extremely important for trade in wheat and wheat products to avoid market disruptions. The evolving nature of trade also means that these institutions need to pursue robust agendas while maintaining their scientific integrity so that they do not become pawns of agendas, but remain independent arbiters of good trade practices in SPS measures.

/by
thumbnail
, ,

Reintroducing U.S. Wheat to Angola’s Expanding Flour Milling Industry

The West African nation of Angola is making good progress in its desire to improve food security for a rapidly growing population, currently estimated at 24.5 million people. The Angolan government believes that building its own food processing capacity will help reduce the cost of importing food, while creating jobs for the Angolan people and preserving foreign exchange. Angola annually imports an estimated 800,000 MT of processed wheat flour from various origins.

The country was not always dependent on flour imports. With support from state wheat commissions and USDA’s Foreign Agricultural Service (FAS) export market development programs, USW introduced HRW wheat to Angolan milling companies in the 1990s through the USDA PL 480 Title 1 monetization program. The Angolan milling industry processed a significant volume of HRW, and Angolan bakers very much liked the quality of the HRW flour to make popular baguettes and Portuguese-style bread. When the Title 1 program ended in 2001, donated supplies of U.S. HRW were no longer available, so the Angolan government turned to subsidizing imported flour.

Economic conditions and the government’s new focus created an opportunity to begin increasing flour milling capacity. To build on its prior experience in Angola, USW invested funds from the FAS Market Access Program (MAP) for a part-time consultant to provide timely and accurate information about U.S. HRW to Angolan flour millers, bakers, grain traders and government officials.

Early in 2016, under the FAS Quality Samples Program (QSP), USW coordinated the shipping of a HRW wheat sample to an Angolan mill, and a HRW flour sample to a bakery. Analysis of the samples all showed the HRW wheat and flour met industry standards and produced good quality products. The milling managers said they would strongly consider HRW for import, given competitive prices and expanded storage.

In a separate QSP activity, USW’s local representatives and staff from its West Coast Office in Portland, Ore., worked through the North American Millers’ Association (NAMA) to purchase and mill HRW wheat and ship the flour to an Angola food processing company to demonstrate its use in pasta production. U.S. Ambassador Helena M. La Lime and representatives from USW and NAMA celebrated the arrival of this shipment in a ceremony at the processing company in late February 2017. Amb. La Lime highlighted the great potential U.S. wheat has in supporting Angola’s milling and food industries and said the United States “supports Angola’s efforts to diversify the economy through industrialization and increased local production of consumer goods.”

In September 2017, USDA reported that an Angolan buyer had purchased 27,500 MT (almost 992,000 bushels) of HRW, the first U.S. wheat exported to the West African nation in many years.“I believe U.S. wheat farmers would be proud to know that their wheat has the potential to help improve economic conditions in Angola,” said USW Regional Vice President Ed Wiese. “Through trade service, technical support and training funded by wheat farmers and USDA, our organization tries to build lasting relationships with our valued customers around the world. And, assuming prices remain competitive in the changing world wheat trade, we hope that our support will lead to increased demand for HRW to produce great bread, pasta and other wheat food products for the Angolan people.”

/by
Wheat food products to illustrate Wheat Industry News
, ,

Good Functional Characteristics, Lower Average Protein Mark New HRW Crop

USW and its partner organizations have completed the crop quality analysis of the 2017/18 U.S. hard red winter (HRW) crop. The final data is summarized below. The complete analysis will appear in both a class-specific report and USW’s 2017 Crop Quality Booklet, and shared with hundreds of customers around the world as part of USW’s annual Crop Quality Seminars.

This HRW crop is a strong testament to the primal role of economics and weather in farming.

At planting, the profit potential of HRW did not look very good to many farmers and those who could do so planted more land to other crops. Planted area fell to its lowest level in more than 100 years. Then, although variable conditions challenged the crop, moisture remained adequate, or even excessive in some areas, resulting generally in better than expected yields. Still, USDA has estimated the HRW supply (excluding a small volume of imports) at 36.5 MMT, down 13 percent from 2016/17. Whole crop composite average protein levels are generally lower than average but the crop offers good milling and processing characteristics.

Wheat and Grade Data. Overall kernel characteristics are outstanding in the 2017 crop, although protein levels were again relatively low. Despite the challenging growing conditions, overall 92 percent of Composite, 86 percent of Gulf-Tributary and 100 percent of Pacific Northwest-Tributary samples graded U.S. No. 2 or better. Test weight averages 60.5 lb/bu (79.6 kg/hl), above the 5-year average of 60.3 lb/bu (79.3 kg/hl) and equal to last year. The total defects average of 1.2 percent is below the 2016 and 5-year averages. Foreign material is 0.1 percent, below last year’s 0.2 percent, while shrunken and broken at 0.9 percent is equal to last year and below the 5-year average. Average thousand kernel weight of 31.0 g significantly exceeds the 5-year average of 29.1 g. The average wheat falling number is 378 sec, below 2016 and the 5-year average, but still indicative of sound wheat.

The average protein of 11.4 percent (12 percent mb) is similar to last year, but significantly lower than the 5-year average. Protein content distribution varies by growing region. Approximately 56 percent of the samples tested were less than 11.5 percent protein, 28 percent between 11.5 percent to 12.5 percent and 16 percent greater than 12.5 percent.

Flour and Baking Data. The Buhler laboratory mill flour yield average is 78.1 percent, above the 2016 average of 76.6 percent and the 5-year average of 75.2 percent. However, flour ash of 0.64 percent (14 percent mb) is also higher than 2016’s 0.56 percent and the 5-year average. Gluten index values average 93 percent, equal to both last year and the 5-year average. The W value of 199 (10-4 J) is slightly lower than last year’s average and well below the 5-year average. Average bake absorption is 62.8 percent, similar to 2016 and the 5-year average. Farinograph development and stability times are 4.5 min and 6.1 min, respectively, compared to last year’s respective times of 4.0 min and 6.7 min and significantly lower than the 5-year averages. Loaf volume averages 806 cm3, below 2016 and the 5-year average, but still indicative of good baking quality.

Summary. The quality of the 2017 HRW crop is very similar to the 2016 crop. Generally, the 2017 crop was planted and developed in a favorable environment until late in the growing season, with abundant moisture and no heat stress in the Central and Southern Plains. High yields resulted in lower quantities of wheat and flour protein, but the crop exhibits very good milling characteristics. The loaf volumes achieved indicate there is adequate protein quality to make good quality bread even though mix times are shorter than the 5-year averages. This crop meets or exceeds typical HRW contract specifications and should provide high value to customers.

 

/by
thumbnail
, , , , , , , ,

USDA Reports Smallest U.S. Harvested Area in 127 Years

By Stephanie Bryant-Erdmann, USW Market Analyst

USDA’s Sept. 30 Small Grains Summary reported that U.S. farmers harvested 37.6 million acres (15.2 million hectares) of wheat for the 2017/18 crop, a 14 percent reduction from 2016/17 and the smallest harvested area since 1890. USDA estimated U.S. 2017/18 wheat production at 47.4 million metric tons (MMT) (1.74 billion bushels), down 25 percent year over year and 15 percent below the 5-year average. The smallest planted area since USDA record began in 1919, adverse weather conditions and wheat streak mosaic virus all contributed to reduced harvested area.

The largest beginning stocks since 1988/89 will partially offset lower production. USDA expects 2017/18 U.S. beginning stocks to total 32.2 MMT (1.18 billion bushels), up 21 percent year over year and 57 percent greater than the 5-year average. Total 2017/18 U.S. wheat supply is forecast at 79.6 MMT (2.92 billion bushels), down 11 percent from 2016/17 but in line with the 5-year average. Despite the sharp year over year reduction in yields, USDA expects the final average yield to reach 46.3 bu/acre (3.11 MT/ha), similar to the 5-year average of 46.6 bu/acre (3.13 MT/ha).

Last fall, low farm gate prices and large carry-in stocks prompted U.S. farmers to plant 32.7 million acres (13.2 million hectares) of winter wheat, down 9 percent from 2016/17. The winter wheat crop went into winter dormancy in good or above average condition. A mild winter and early spring was beneficial for both winter wheat and, unfortunately, the mites that carry wheat streak mosaic virus. The disease was widespread in Kansas, Oklahoma and parts of Nebraska, cutting yields and causing higher rates of abandonment in affected hard red winter (HRW) areas. A late spring blizzard in western Kansas cut yields and increased abandonment. Soft red winter (SRW) generally came out of dormancy in better than normal conditions, but growing conditions also varied widely across the Southeast. In some areas, excessive moisture helped boost yields, in others it delayed or prevented emergence.

As with winter wheat, low spring wheat and durum farm gate prices and large carry-in stocks reduced planted areas. After planting (which is generally early), drought conditions spread across Montana, North Dakota and South Dakota with devastating effects on yield. As a result, the rate of abandonment in South Dakota, which was particularly hard hit, is estimated at 37 percent — nearly triple the state’s 5-year average.

Here is a by-class breakdown of the Sept. 30 report.

Hard Red Winter (HRW). USDA estimates total 2017/18 HRW production fell to 20.4 MMT (750 million bushels), down 31 percent from 2016/17 and 15 percent below the 5-year average. USDA forecast 2017/18 HRW beginning stocks at 16.1 MMT (593 million bushels), up 33 percent year over year and 81 percent above the 5-year average. Even with large beginning stocks, total HRW supply will fall 12 percent year over year to 36.5 MMT (1.34 billion bushels). Total HRW planted area fell to 23.8 million acres (9.63 million hectares), down 10 percent from 2016/17. Yields also fell an average 13 percent from 2016/17 in the top HRW-producing states of Texas, Oklahoma and Kansas.

Hard Red Spring (HRS). USDA estimates total 2017/18 HRS production fell to 10.5 MMT (385 million bushels), down 22 percent from 2016/17 and 26 percent below the 5-year average. USDA forecast 2017/18 HRS beginning stocks at 6.40 MMT (235 million bushels), down 14 percent year over year but still 21 percent above the 5-year average. Total HRS supply will fall 12 percent year over year to 16.9 MMT (620 million bushels). USDA estimates farmers planted 10.3 million acres (4.17 million hectares) to HRS, 10 percent below 2016/17 levels. The drought cut yields an average of 11 bu/acre (0.74 MT/ha) in Montana, North Dakota and South Dakota. Abandonment in Montana and North Dakota was double the respective 5-year averages at 9 and 6 percent, and South Dakota farmers abandoned 37 percent of wheat fields due to the drought. The single bright spot for HRS production was Minnesota, with a record high average yield of 67.0 bu/acre (4.50 MT/ha) offsetting lower harvested area.

Soft Red Winter (SRW). USDA estimates total 2017/18 SRW production fell to 7.95 MMT (292 million bushels), down 15 percent from 2016/17 and 32 percent below the 5-year average. USDA reported 24 percent of SRW acres were abandoned compared to 17 percent last year. Record high yields in six SRW producing states partially offset the lower harvested area. USDA forecast 2017/18 SRW beginning stocks at 5.85 MMT (215 million bushels), up 37 percent year over year and 47 percent greater than the 5-year average. So, total SRW supply will rise slightly year over year to 13.8 MMT (507 million bushels). USDA estimates total 2017/18 SRW planted area at 5.61 million acres (2.27 million hectares), 15 percent lower than 2016/17 and 30 percent below the 5-year average.

Soft White (SW). USDA estimates total 2017/18 SW production declined to 6.14 MMT (226 million bushels), down 11 percent from 2016/17 due to small declines in harvested area and average yields in Washington and Idaho that were down 7 and 10 percent, respectively. USDA reports white wheat planted area decreased 3 percent year over year. White wheat planted area fell to 4.02 million acres (1.63 million hectares), 2 percent below the 5-year average. USDA projected white wheat beginning stocks will increase 42 percent year over year to 3.02 MMT (105 million bushels). If realized, that would be 65 percent above the 5-year average.

Durum. U.S. durum production fell 51 percent in 2017/18 to 1.49 MMT (54.9 million bushels) from lower planted area and yields in Montana, North Dakota and South Dakota. USDA estimates 1.91 million acres (773,000 hectares) were planted to durum, down 11 percent from 2016/17 but still 6 percent above the 5-year average of 1.80 million acres (729,000 hectares). Abandonment also increased this year from 2 percent in 2016/17 to 8 percent in 2017/18, due to the drought. USDA projected 2017/18 durum beginning stocks to climb to 980,000 metric tons (MT) (36 million bushels), nearly double the 5-year average and 29 percent above 2016/17 levels. USDA forecast total U.S. durum supply at 2.48 MMT (91 million bushels), down 31 percent year over year.

/by
thumbnail
, , , ,

Cuba’s Recovery from Another Hurricane Should be Eased by an End to the U.S. Embargo

By Steve Mercer, USW Vice President of Communications

The aftermath of Hurricane Irma is simply stunning. So many of our Caribbean neighbors are facing so much destruction, including in Cuba where the full fury of Irma raked the northern coastline as a Category 5 hurricane that killed at least 10 people and flooded central Havana.

As I read about the damage in Cuba, I could not help thinking about other hurricanes and their impact on our relationship with the island nation.

In 1998, Hurricane Lily hit Cuba hard, too, putting flour mills offline. The Kansas Wheat Commission responded with a generous offer to donate 20 MT of flour to help Cuban people in need. USW helped coordinate the donation, but it had to be made to Caritas, a CARE affiliate non-governmental organization relief organization, not directly to Cuba, because the U.S. government’s embargo prevented them from sending it directly to Cuba.

We believe that the donation did help open some hearts and minds, and the Trade Sanctions Reform Act (TSRA) of 2001 opened exports of wheat and other U.S. agricultural products to Cuba. Yet, the travel and financing restrictions that remained continued to compound the regulatory difficulties of trading with Cuba.

When another hurricane, Michelle, struck Cuba later in 2001, the U.S. government offered aid. The Cuban government refused that offer, but the gesture helped encourage Alimport, Cuba’s food buying agency, to import its first bulk load of U.S. HRW wheat. According to former USW President Alan Tracy, “Cuba’s flour millers and bakers loved that wheat.”

More and more HRW was imported until the annual volume reached almost 500,000 MT, a substantial portion of Cuba’s annual imports of about 800,000 MT.

In 2005, it was not a hurricane, but rather new regulations implemented by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) that interrupted this trade. The changes forced Cuba to obtain and present letters of credit from a third-party, foreign bank, and U.S. exporters had to receive payment only from a third-party bank, rather than through direct payment from Alimport. It was an excessive and unnecessary administrative burden that increased Cuba’s cost of buying U.S. wheat. OFAC also modified the definition of “cash in advance” that required payment before a shipment left a U.S. port rather than before the title changed hands at the shipment’s destination. This rule was unique to our exports to Cuba and removed the ability of Alimport officials to inspect U.S. origin cargo before payment.

Alimport slowed and ultimately stopped importing U.S. HRW wheat completely by marketing year 2011/12.

There was renewed hope when the Obama Administration announced its intention to renew and, eventually, re-open diplomatic relations with Cuba and ease some travel restrictions. Several organizations, including USW, formed the United States Agricultural Coalition for Cuba (USACC) to work together toward more open trade. However, the OFAC rules were never reversed and Cuba continued to import all its wheat from Canada and the EU — no doubt at higher freight rates and likely at higher relative FOB costs.

And, sadly, just hours before Irma struck Cuba, the United States officially renewed its embargo for another year, as required under TSRA.

Cuba’s proximity, as well as historical and cultural ties, should make it a natural trading partner for the United States. The U.S. wheat industry supports easing travel restrictions, permanently overturning the 2005 regulatory changes and increasing access to credit and USDA commercial loan programs. However, the larger political implications of the embargo and its negative effects will likely preclude effective competition by U.S. wheat exporters even if these other changes are implemented.

“Aside from hurting the Cuban people, the embargo has only strengthened the Castro brothers’ grip on power and stymied any change for the better,” Tracy said.

Soon after the most recent hurricane, our organization and other USACC member organizations sent a letter of support and concern to the Cuban people through Cuba’s ambassador. We wrote: “It is at these times when humanity stands together both in fear of the destructive forces of nature that impact us all, and in solidarity in the determination to help one another recover.”

In that spirit, we stand with U.S. wheat farmers to support ending the Cuban embargo entirely.

/by
thumbnail
, , ,

Taking Stock of the 2017/18 World Wheat Crop

By Stephanie Bryant-Erdmann, USW Market Analyst

USDA’s latest forecast of total world wheat production stands at 745 million metric tons (MMT), down 1 percent from 2016/17. Though USDA expects global wheat production to decrease by 8.46 MMT, it expects global wheat consumption to remain high at 737 MMT, down 1.13 MMT from the 2016/17 record. With lower production and stable consumption, staying abreast of the location and quality of the 2017/18 wheat crop is key. The following is a look at production and quality expectations for major exporting regions and countries outside the United States.

Black Sea. On Sept. 15, Russia’s Ministry of Agriculture reported wheat harvest was 84 percent complete. To date, the reported average yield is 3.51 metric tons per hectare (MT/ha) (52.2 bu/acre) compared to 2.95 MT/ha (43.9 bu/acre) on the same date in 2016. Russian consultancy SovEcon forecast 2017/18 Russian wheat production at 81.1 MMT, up 13 percent from 2016/17. Strategie Grains reported that Ukrainian farmers harvested 26.0 MMT of wheat this year, on par with 2016/17. Kazakhstan wheat harvest is underway, and Strategie Grains pegged 2017/18 Kazakh wheat production at 14.2 MMT, which would be down 5 percent from 2016/17. USDA expects Black Sea exports to total 56.5 MMT, up 7 percent from 2016/17, if realized.

SGS Russia, an independent crop inspection service, reported preliminary quality data for winter wheat in Russia’s South, Central and Volga-Urals regions, which showed lower protein levels due to favorable growing conditions and high yields. According to the SGS data, 52 percent of the samples graded as Russian 4th class wheat, up from 46 percent of samples in 2016/17. Russian 4th class wheat has between 8.8 and 10.5 percent protein on a 12 percent moisture basis. Though the percentage of samples that graded 3rd class wheat (10.5 to 11.9 percent protein on a 12 percent moisture basis) and 5th class (feed wheat) decreased in 2017/18, impacts on supplies of those two classes are expected to be minor due to record large production. SGS reports that some areas have Fusarium damage, high levels of sprout damage and very low falling numbers; but test weight values are generally higher across all regions. SGS reports the average protein of Ukraine’s 2017/18 wheat crop is 10.1 percent (12 percent mb) compared to 10.5 percent in 2016. The crop has higher average moisture and higher bug damage compared to 2016 per SGS.

Canada. In its Sept. 15 report, Agriculture and Agri-Food Canada (AAFC) projected 2017/18 wheat production (excluding durum) to be 21.6 MMT, down 10 percent from 2016/17. A 1 percent increase in planted area was more than offset by sharply lower yields. AAFC expects total Canada Western (Hard) Red Spring (CWRS) to account for 74 percent of total Canadian wheat production at 16.1 MMT. Canadian durum production is estimated at 3.90 MMT, down 50 percent year over year due to a 16 percent decrease in planted area and lower than average yields.

According to Alberta crop reports, favorable conditions are allowing harvest to proceed rapidly. As of Sept. 12, 50 percent of the crop was harvested compared to 31 percent at this time last year. Hot, dry conditions are aiding Saskatchewan wheat harvest as well. As of Sept. 14, Saskatchewan spring wheat and durum harvests were 63 and 81 percent complete, respectively, compared to 38 and 62 percent complete the week prior and significantly better than last year when frequent rainfall delayed harvest. Preliminary durum grade data from the Saskatchewan weekly crop report shows 97 percent of the crop graded as #1 or #2 Canadian Western Amber Durum (CWAD). On average, Saskatchewan produces 85 percent of the Canadian durum crop.

European Union. Stratégie Grains (SG) forecast total European Union (EU) wheat production at 151 MMT, up 4 percent year over year due to a return to normal production levels in France. Durum production is expected to decrease to 8.9 MMT, down from 9.9 MMT in 2016/17, but common (non-durum) wheat production will climb 5 percent to 142 MMT. After a disastrous 2016/17 French harvest when late rain damaged yields and quality, 2017/18 French wheat production rebounded to 37.4 MMT, up 31 percent year over year. SG noted French wheat quality is very good, but rain at harvest hurt German and Polish wheat quality. SG estimated EU milling quality wheat output at 66 percent of total 2017/18 production, putting total EU common wheat milling quality production at 93.9 MMT. That is in line with the 5-year average and 12 percent greater than 2016/17. SG expects EU total wheat exports to fall to 23.1 MMT, down 4 percent year over year, if realized, due to quality issues in Germany and increased competition from the large Black Sea supply.

Argentina. Bolsa de Cereales Buenos Aires (Buenos Aires Grain Exchange) recently estimated farmers in Argentina planted 5.35 million hectares (13.2 million acres) of wheat in 2017/18, up 5 percent from 2016/17. As of Sept. 7, Bolsa rated 71 percent of Argentine wheat in very good to excellent condition compared to 63 percent the prior year. However, excessive moisture is preventing fieldwork in some areas and threatening emerging wheat plants. The International Grains Council (IGC) pegged Argentine wheat production at 16.5 MMT, down 6 percent from 2016/17 if realized. With carry-in stocks expected to remain stable year over year at 600,000 MT, Argentine supply will also decrease 6 percent from 2016/17 to 17.1 MMT. IGC expects Argentina to export 10.5 MMT, down from 11.5 MMT in 2016/17 due to the smaller supply.

Australia. The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) forecasts 2017/18 wheat production at 21.6 MMT, down 38 percent from 2016/17 due to a 3 percent reduction in planted area and sharply lower yields. Australian farmers decreased planted wheat area for 2017/18 to 12.4 million hectares. A drier than normal winter has depleted soil moisture reserves in the many wheat-producing areas, which need timely rains to maintain current yield potential. USDA expects Australian exports to increase to 18.5 MMT, down 20 percent from 2016/17 and 1 percent below the 5-year average.

Together with its partner organizations across the United States, USW is testing more than 2,000 samples of wheat this year for its annual Crop Quality survey. The preliminary results are reported every Friday in the USW Harvest Report, and the final results for all classes are published in by-class reports and in our annual Crop Quality Report near the end of October. Please contact your local USW representative for more information about the USW Crop Quality survey, report or seminars.

/by
thumbnail

The European Union’s Uneasy Relationship with Science

By Elizabeth Westendorf, USW Assistant Director of Policy

Last week, the European Court of Justice ruled that EU member states cannot ban cultivation of genetically engineered crops without scientific evidence of risk to human health. The ruling was on a case that dates back to 2013, when an Italian farmer wanted to plant biotech corn. Italy has long banned the planting of genetically engineered crops. The farmer in question, Giorgio Fidenato, planted the corn on his land in defiance of Italy’s ban. Four years later, it is a win for science-based regulation that the European Court of Justice sided with Fidenato and ruled that Italy does not have the right to ban GM crops without a scientific reason.

It is not all good news for science in Europe though. The EU has previously had pesticide legislation that sets risk-based tolerances and maximum residue levels (MRLs). However, the EU is now in the process of introducing hazard-based restrictions on import tolerances. These restrictions are not only contrary to the EU’s MRL legislation but also contrary to the World Trade Organization (WTO) Sanitary and Phytosanitary (SPS) Agreement, which requires that decisions be based on risk assessments. A hazard-based approach risks significantly impacting trade and affecting product availability in the EU. This would also jeopardize trade litigation that could result in retaliation against billions of dollars of its exports.

For a highly traded commodity like wheat, it is imperative that regulatory systems worldwide be transparent and science-based. Otherwise, exporters jeopardize having shipments held up — or prevented altogether — and importers cannot rely on deliveries arriving in a timely manner. When technology does not have a negative impact on health or the environment, there is no reason for countries to needlessly restrict its use, or worse, vilify its existence. It is heartening that the EU has taken a step in the right direction on biotechnology, but they are moving backward on SPS issues that could inhibit trade and hurt domestic businesses. Unscientific regulations make it hard for a globalized market to function well.

/by

Think Farm Export Programs Don’t Matter? Think Again.

GET THE REST OF THE STORY

DTN Wheat Detail
DTN Corn Detail

2008-2013 U.S. Wheat Associates. All Rights Reserved
Privacy Policy | Non-Discrimination Statement