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Profiling U.S. Wheat Sustainability

By Elizabeth Westendorf, USW Policy Specialist

In 2016, Field to Market published its third National Indicators Report that assessed sustainability metrics in U.S. agriculture and looked at production of each crop on a national scale. Based on its environmental indicators, the report showed that wheat production has continued to improve, with particular progress in reducing soil erosion, over the past 25 years. The assessment results reflect yield improvements in wheat and demonstrate how farmers have adopted conservation practices. Reports like this help quantify sustainability and production improvement over time.

Assessing wheat sustainability on a national scale is difficult, however, because of the highly regional nature of its production. There are six U.S. wheat classes, grown in distinct regions and local micro-climates. Aggregate measures of sustainability are important, but they fail to capture the nuances of a crop that is grown across many different climates, soil types and farm environments.

To capture some of those nuances, USW has developed a series of farmer profiles that highlight regional sustainability in U.S. wheat production. Featuring farmers that grow a specific U.S. wheat class, the profiles highlight their practices, dedication to sustainability and unique growing conditions. They illustrate that while no two farmers are the same, they share a dedication to protecting their land for the next generation and a commitment to responsible stewardship.

The profiles include:

We encourage our customers and stakeholders to read the profiles at www.uswheat.org/factsheets. There is also more information about how U.S. farmers, ranchers, fishermen and foresters share their values, sustainability experiences and conservation practices online at The U.S. Sustainability Alliance.

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U.S. Wheat Planted Area Falls to Record Low

By Stephanie Bryant-Erdmann, USW Market Analyst

Over the past decade, U.S. wheat planted area peaked in 2008/09 at 63.2 million acres (25.6 million hectares). Since then, U.S. wheat planted area has fallen 27 percent to a projected 46.1 million acres (18.7 million hectares) in 2017/18 according to the March 31 USDA Prospective Plantings report. If realized, it will be 16 percent below the 5-year average of 55.0 million acres (22.3 million hectares) — making it the lowest planted wheat area since 1919 when USDA records began.

This report actually increased winter wheat planted area by 360,000 acres (146,000 hectares) from USDA’s January 2017 estimate to 32.7 million acres (13.23 million hectares). However, the new estimate is still 9 percent down from 2016/17 planted area. The increase came from hard red winter (HRW) area, estimated at 23.8 million acres (9.63 million hectares), up 2 percent from the previous projection. Still, HRW planted area will be down 10 percent from 26.5 million acres (10.7 million hectares) planted for 2016/17.

Soft red winter (SRW) planted area decreased from the previous estimate to 5.53 million acres (2.24 million hectares). The biggest declines occurred in Midwest states where SRW faces strong competition for acres from corn and, particularly this year, from soybeans.

USDA expects white wheat acres — planted in both winter and spring — to reach 4.12 million acres (1.67 million hectares) for 2017/18, down slightly from 2016/17, but in line with the 5-year average. For the first time in three years, the Drought Monitor shows adequate soil moisture in the Pacific Northwest (PNW) following a rather wet winter.

Given the drop in planted area, crop conditions become crucial to any look out at potential production for 2017/18. For HRW, the April 6 Drought Monitor also shows that 45 percent of Kansas and 66 percent of Oklahoma were abnormally dry or experiencing moderate drought, even though the region received 1 to 4 inches (2.5 to 10 cm) of rain last week. Fifteen percent of Oklahoma remains in severe or extreme drought. In 2016, these states grew nearly half of the total U.S. HRW crop.

Last week’s beneficial moisture improved U.S. winter wheat condition in Kansas, Oklahoma and Texas, but the crop is still in worse condition than last year at this time. As of April 3, USDA rated the winter wheat crop at 51 percent good to excellent, compared to 59 percent on the same date in 2016. USDA rated 14 percent of the crop as poor or very poor, up from 7 percent last year.

The U.S. Northern Plains received abundant precipitation this winter, providing good soil moisture for HRS and durum planting. The past two years, farmers in North Dakota, Montana and Minnesota began HRS planting 7 to 14 days ahead of normal due to early springs. This year, planting dates will be closer to normal as farmers are now waiting for fields to dry out.

According to USDA, U.S. total spring-planted area will decline to an estimated 11.3 million acres (4.57 million hectares), 3 percent less than in 2016/17. The estimate includes 10.6 million acres (4.3 million hectares) of hard red spring (HRS), down 7 percent from 2016, if realized.

USDA expects U.S. durum planted area to total 2.00 million acres (809,000 hectares), down 17 percent from 2016/17. If realized, this would further constrict the global durum supply discussed in the March 23 Wheat Letter.

Continuing to drive the decline in U.S. wheat planted area is a net farmer return on wheat that dropped 18 percent between 2015/16 and 2016/17, while input costs declined only one percent in the same time period. USDA expects this trend to continue in 2017/18, with returns falling another 6 percent from already unprofitable 2016/17 levels.

There is a long way to go before the final count is in. However, with less planted area and an expected return to trend line yields, the International Grains Council (IGC) pegged 2017/18 U.S. wheat production at 50.2 MMT, down 20 percent from 2016/17.

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A Look at the Current Global Ocean Freight Market

By Jay O’Neil, Senior Agricultural Economist, IGP Institute

For dry-bulk vessel owners and their customers, the first quarter of calendar 2017 has revealed rather dramatic changes in freight rates and vessel values and points to additional volatility ahead.

From 2009 through 2015, owners made what I consider an unreasonable and uncontrolled expansion of the dry-bulk fleet. As global economic factors turned against them, owners saw the Baltic Panamax Dry-Bulk index sink to just 287 points by February 2016. Dry-bulk Panamax shipping rates from the U.S. Gulf to Asia hit a low of $22.50 per MT and rates from the Pacific Northwest (PNW) to Asia were $12.50 per MT. Some ships were hiring out simply for the cost of voyage fuel and every vessel owner was losing piles of money. Numerous bankruptcies resulted.

The severe financial hardships of this past period finally motivated the shipping industry to all but stop ordering new vessel builds and, in turn, the expansion of the fleet.

As a result, dry-bulk freight rates and vessel values have slowly but steadily risen from those dark depths. In the past 13 months, Panamax vessel daily hire rates are up from less than $2,000 per day to more than $10,000 per day. Dry-bulk Panamax shipping rates from the U.S. Gulf to Asia are now sitting at $37.00 per MT and rates from the PNW to Asia are close to $20.50 per MT.

At such levels, ship owners and operators can cover operating costs and make a small profit if they manage things right.

The big question now is: can vessel owners keep their hands in their pockets and not scratch the itch to invest in additional tonnage because they believe better times are ahead? If not, they will certainly end up back in dangerous financial waters. Global GDP is only growing at close to 2.5 to 2.7 percent, not enough to absorb further fleet expansion for some years to come.

On a separate note, I am hearing a lot of market talk about Mexico possibly looking to other origins to source their commodities. Russia just extended an offer to purchase Mexican beef in exchange for purchase of Russian wheat. International traders have recently requested quotes on Handymax vessel freight from Brazil and Argentina to Veracruz, Mexico. Those quotes came in at $22.00 per MT and 27.00 per MT respectfully verses freight from the U.S. Gulf to Veracruz at $15.00/MT.

Can Mexico purchase corn, sorghum, wheat and soybeans from other countries? The simple answer is yes, if its private importers can afford to pay more relative to imports from its U.S. neighbors.

And, we do not yet know what effects crop weather conditions and production prospects will have for the 2017/18 marketing year. So, as they say, hold on to your hats, it could be an interesting, and bumpy, ride through the balance of 2017.

Jay O’Neil can be contacted at [email protected].

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Learning About Food Security and Development in Tanzania

By Elizabeth Westendorf, USW Policy Specialist

U.S. wheat farmers are proud of their commodity’s role in U.S. foreign aid around the world, and the U.S. Wheat Associates (USW) Food Aid Working Group (FAWG) works diligently to support U.S. international food assistance programs. Food aid has always been an important focus of USW’s policy work, both to ensure wheat’s appropriate use in programming and to help protect and expand U.S. food aid programs. Wheat makes up 40 percent of U.S. in-kind food donations, making it the most popular commodity for aid donations.

To better understand the role of wheat in U.S. aid programming, USW Policy Specialist Elizabeth Westendorf led a team of U.S. wheat farmers, state wheat commission staff members and others to Tanzania to visit current USDA Food for Progress projects funded by wheat monetization. The team included: Mike Schulte, Oklahoma Wheat Commission Executive Director and FAWG Chairman; Reid Christopherson, South Dakota Wheat Commission Executive Director; Scott Yates, Washington Grain Commission Director of Communications and Producer Relations; Leonard Schock, Montana Wheat and Barley Committee Director and past USW Chairman; Ron Suppes, Kansas Wheat Commission Commissioner and past USW Chairman; Cathy Marais, USW Financial Accountant at the USW Cape Town Office; Brian Holmes, CFA Services Director;  Don Evans, Program Coordinator for Africa in the USDA Foreign Agricultural Service (FAS) Office of Capacity Building and Development; and Nicola Sakhleh, Branch Chief of Food for Development in the FAS Office of Capacity Building and Development.

Tanzania is one of the least developed countries in the world, ranking 151 of 188 on the Human Development Index. Eighty percent of the population is involved in farming, typically at the subsistence level — and most farmers are women. Tanzania grows very little wheat and relies on imports to supplement that production. Those imports come primarily from Russia, but mills will buy smaller quantities of higher quality wheat for blending purposes, mainly from the EU, Argentina and Australia. USDA Food for Progress has five active projects in Tanzania focused on agricultural development, and wheat monetization funds four of those. In Tanzania, the team visited those four projects as well as the World Food Programme (WFP) and the mill that purchased the monetized wheat to fund the Food for Progress projects.

The team spent its first three days around Dar es Salaam. On the first day, the team met with Global Communities, which works with small and medium-sized enterprises in Tanzania, Kenya and Malawi. They also met with one of the project recipients, Basic Element, which is a corn and sorghum mill. Basic Element’s mill manager Abel Tabula said that with the help of Global Communities, they can source their inputs directly from smallholder farmers instead of relying solely on middlemen that aggregate purchases from smallholder farmers at a markup.

“We appreciate that the wheat we monetize comes from farmers,” said Simon Muli, Global Communities Deputy Chief of Party. “What you create in another part of the world is creating serious impact here.”

The team also met with Small Enterprise Assistance Funds (SEAF) to visit Hill Animals Feeds, one of their project recipients in Bagamoyo. Hillary Shoo started the company in 1993 and, with a loan from SEAF, he plans to increase his storage capacity, which will allow him to buy directly from smallholder farmers during harvest season.

The team spent an afternoon with WFP to learn more about emergency aid in Tanzania. USAID Food for Peace works with WFP to provide aid to refugee camps in the northwest region of the country, where there has been a recent influx of refugees from Burundi.

The team then spent a day at Bakhresa Mill and its baking facility to gain a better understanding of the wheat monetization that funds the Food for Progress projects. Bakhresa Mill purchased the wheat that funded four of the Tanzanian projects. Bakhresa’s Milling Director Arvind Shukla told the team that they fortify products going to poorer segments of the population, and purchasing the monetized wheat allows them to pass savings on to their consumers and sell their flour at a lower price. This way, customers in Tanzania also benefit from the monetization, in addition to those who benefit directly from the funded projects.

After Dar es Salaam, the team traveled to Morogoro to visit rural programs in the region run by Catholic Relief Services (CRS) and FINCA International. The CRS project, Soya ni Pesa, is a soybean value chain development project, geared toward helping farmers produce soy and gain access to the poultry feed value chain. CRS provides management and technical assistance to facilitate farmer growth. The project has stimulated a soybean price increase for farmers and benefits the feed producers by giving them better access to the soy inputs they need. The team met directly with some of the farmers in the program and learned about their challenges and successes.

The FINCA project provides loans to smallholder farmers, focusing on loans that are accessible to agricultural workers. USW met with several farmers who receive these loans. They shared what they have accomplished with increased access to credit. It has allowed many of them to increase their farm size, improve infrastructure and send their children to school.

Agriculture plays a crucial role in Tanzania’s economy, so improvements to that industry benefit the entire country. The four Tanzanian projects funded by wheat monetization work in different ways toward a common goal of agricultural development. Seeing the positive effects of those projects on the entire economy helped the trip participants better understand the role that U.S. wheat plays in the process.

“This trip helped clarify how the funding works, but more importantly, the big picture of the real purpose of the projects,” said Schock. “It was transformational for my attitude of world food production. As humans, and particularly as farmers, we must try to help those that want to help themselves, and that’s what these programs do.”

Pictures from this trip can be found on the USW Facebook page at www.facebook/uswheat.

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Educational Partners Add Value to U.S. Wheat Exports

By Erica Oakley, USW Program Manager

Every year, USW collaborates with educational organizations to offer training that fits the needs of overseas customers. From grain purchasing to milling and end-product development, these courses are created to provide information and training that is beneficial to U.S. wheat buyers and their customers.  This year, approximately 70 USW customers from more than 15 countries will travel to the United States to participate in 11 short courses at our partner institutions.

Wheat Marketing Center. This week, the Wheat Marketing Center (WMC) in Portland, OR, is hosting a USW-sponsored Korean team taking part in an Asian noodle development course aimed at evaluating noodles made from various blends of U.S. wheat. The course includes testing a whole-wheat noodle made with soft white (SW) wheat flour.

“Last year, a Korean development team found that noodles with more than 30 percent whole wheat flour from hard red winter wheat did not have the texture, color and flavor that Korean consumers desire,” said Janice Cooper, WMC Managing Director. “In discussions with WMC Technical Director Dr. Gary Hou, the soft white option came up and Dr. Hou developed a research proposal, which was funded by the Idaho Wheat Commission. This year’s Korean team will help test the validity of that concept.”

The WMC provides key programs including technical training, product development and research on end-product quality to help solve customers’ issues and expand the demand for U.S. wheat around the world.

Northern Crops Institute. As in years past, customers from several USW regions will attend a Grain Procurement Management for Importers course at Northern Crops Institute (NCI) in Fargo, ND, this summer. Along with USW participants from Europe and Latin America, the Philippines, one of USW’s largest customers, will be represented by four rising managers and top executives.

“Many of these managers have significant experience and have been active in the industry for some time but are attending the NCI course to refine their knowledge base and increase their skills,” said Joe Sowers, USW Assistant Regional Vice President based in Manila. “They will observe state of the art grain trading software and technologies in the North Dakota State University Commodity Trading Lab. Through the course, they hope to improve their contract specifications and price risk management practices.”

Millers in the Philippines purchase more hard red spring (HRS) and SW wheat than any country. The NCI course includes local farm visits so participants can see HRS production practices first hand. After the course, the Philippine participants will continue to the heart of SW country in eastern Washington state to meet farmers, visit wheat variety breeding facilities, and observe inland logistics infrastructure that has more than doubled in size in the last decade.

International Grains Program. At the International Grains Program (IGP) in Manhattan, KS, a team from Nigeria and South Africa will participate in a customized flour millers short course in June. For both Nigerian and South African senior personnel, “the course offers a refresher on the basics of milling and an enhanced understanding of new milling equipment, techniques and concepts,” said Gerald Theus, USW Assistant Regional Director for Sub-Saharan Africa based in Cape Town, South Africa. “Whereas for junior level milling managers and technicians, the in-depth exposure to various USW classes is a great tool for determining end-use applications and enhancing performance at work.”

A customized course like this provides the opportunity to identify and address issues that are unique to Nigeria and South Africa, which keeps those customers returning year after year.

California Wheat Lab. The California Wheat Quality Laboratory, housed within the California Wheat Commission (CWC) in Woodland, CA, is unique in that it also has an on-site milling and baking laboratory. Through the lab, CWC provides hands-on training to customers and conducts quality testing, chemical analysis and end-product testing.

“The CWC Lab has developed a relationship with overseas buyers, particularly those from Latin America, as they trust our results and seek our input,” said Executive Director Claudia Carter. “The CWC Lab provides guidance about wheat quality related issues and the overseas customers that utilize the lab tend to be those that seek high quality wheat.”

In addition to providing services to overseas customers, the CWC Lab analyzes samples of hard red winter (HRW) wheat and Desert Durum® for USW’s annual Crop Quality Report.

These are just a few examples of the technical support provided by our U.S. educational partners and the value they add to USW’s ability to help meet our customers’ needs. These partnerships will remain a crucial part of USW’s service to our customers overseas on behalf of the U.S. wheat farmers and USDA Foreign Agricultural Service export market development programming that fund such activities.

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Farmer Leaders to Meet with Customers in Mexico, Haiti, Ecuador and Chile

Whether it is for noodles in Asia, bread in South America or cookies in North Africa, once U.S. wheat leaves the farm, the journey it will go on has only just begun. The choices U.S. wheat farmers make when growing their wheat plays a big role in that journey but they seldom see exactly how their practices impact those overseas markets and end-products. Every year USW sends teams of U.S. farmers overseas to visit markets they supply with wheat. These regional visits highlight the day-to-day work and marketing strategies of USW’s overseas offices and connect the farmers to their customers and industry stakeholders. Earlier this year, USW’s first 2017 board team travelled to Thailand and the Philippines.

“The purpose of these teams is to give U.S. wheat farmers a better understanding of the wide variety of markets and issues that USW works on to position the benefits of importing U.S. wheat,” said USW Deputy Director of the West Coast Office Shawn Campbell. “We aim to better educate growers on the challenges they face in marketing their wheat overseas, so they can make decisions at home and with their state wheat commissions that are focused on meeting customer needs.”Campbell will lead USW’s 2017 Latin America Board Team to Mexico, Haiti, Ecuador and Chile this month. The team includes: Eric Spates, a wheat farmer from Poolesville, MD, and a member on the Maryland Grain Producers Utilization Board; Rachael Vonderhaar, a wheat farmer from Camden, OH, and a member on the Ohio Small Grains Marketing Group; and Ken Tremain, a wheat farmer from LaGrange, WY, and a member of the Wyoming Wheat Marketing Commission.

The team will first meet at the USW Headquarters in Arlington, VA, for briefings, then visit USDA/FAS and the Federal Grain Inspection Service offices in Washington, DC. The team will then head to Mexico and Haiti for five days, followed by six days in South America with stops in Ecuador and Chile. The team will tour multiple mills and international food manufacturing plants, as well as an industrial equipment supplier, and they will meet with groups such as Seaboard and ASEMOL, the Ecuadorian Millers Association and Caribbean Milling. Throughout the course of the trip, the team will connect with staff from the USW Mexico City, Mexico, and Santiago, Chile, regional offices.

Latin American countries import 40 percent of all U.S. wheat exports, yet U.S. wheat faces growing competition in the region due to changes in laws affecting grain exports, as well as rebounding domestic wheat production that brings a new, large-scale source of lower value wheat into the marketplace. Due to its geographic location, consistency, and a preferential trade agreement, Mexico is the largest customer of U.S. wheat in the world so far in 2016/17 and is the second largest customer on average over the last five years. Year to date, Mexico is also the top buyer of U.S. soft red winter (SRW) wheat and HRW wheat.

Haiti, on the other hand, is a much smaller and more price sensitive market, versus the other quality oriented markets that the team will visit. In South America, Ecuador represents a moderate size market that is willing to pay for quality, but U.S. wheat faces strong competition. U.S. wheat holds the majority market share in Chile, but it is still a market where the United States is increasingly facing competition. USW has maintained close, long-term relationships with regional industry leaders through an office established in Santiago in 1978 and by providing technical and trade servicing in Mexico for more than two decades.

“These four markets represent buyers that USW staff work closely with each day,” said Campbell. “The farmers will gain a unique look at the value of using high quality U.S. wheat and why these markets increasingly prefer it for their end-products.”The team will post regular travel updates and photographs, and will report to the USW board later this year. Follow their progress on the USW Facebook page at www.facebook/uswheat and on Twitter at @uswheatassoc.

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Global Durum Production Expected to Fall in 2017/18

By Stephanie Bryant-Erdmann, USW Market Analyst

Global durum prices remain under pressure from a large 2016/17 crop. Per International Grains Council (IGC) data, global durum production increased 3 percent year over year to 40.2 million metric tons (MMT), 9 percent above the 5-year average and the largest since 2009/10.

As reported in the USW Price Report, U.S. free-on-board (FOB) Great Lakes durum prices have slipped 4 percent since the beginning of marketing year 2016/17 to a range from $303 to $309 per metric ton (MT) on March 17. Over the same time, Canadian FOB St. Lawrence durum prices declined 10 percent year over year based on Agriculture and Agri-Food Canada (AAFC) data.

Despite lower prices, global durum trade is expected to decline 7 percent to 8.0 MMT in 2016/17. But while trade volumes are expected to decrease, consumption of durum is expected to increase 5 percent year over year to 38.7 MMT. Global human durum consumption remains steady at roughly 30 MMT. Seed and residual usage is projected to increase 10 percent in 2016/17 to 5.4 MMT, but the largest change is expected in global durum feeding. IGC anticipates durum feed usage to reach 3.2 MMT in 2016/17, up 68 percent year over year, if realized. Canadian animal feed usage is expected to double to 1.4 MMT in 2016/17 due to lower prices and lower quality supplies. Animal feed usage in the European Union (EU) is also expected to more than double in 2016/17 to 700,000 MT.

International Grains Council Feb. 23 2017 Grain Market Report

While there are eight major exporters of common wheat, there are just four major exporters of durum — Canada, the European Union (EU), Mexico and the United States — all of which are in the Northern Hemisphere and benefited from the wet spring and mild summer that boosted 2016/17 yields and supplies. These four exporters account for an average 95 percent of total global durum exports each year. Year over year, durum supply in the major exporting countries increased 19 percent to 49.3 MMT. IGC expects global durum ending stocks to total 10.7 MMT, 41 percent above the 5-year average.

Against this backdrop, farmers are making plans and, in some places, are beginning to sow durum in the Northern Hemisphere. Spring weather affects planting decisions, but early projections expect significantly lower durum planted area in 2017/18. Stratégie Grains expects reduced planted area and more normal yields will cut 2017/18 EU durum production by 9 percent year over year to 8.9 MMT. AAFC pegged Canadian durum production at 5.5 MMT, which would be down 29 percent year over year if realized. The reduction is based on an expected 20 percent decline in planted durum area and a projected 15 percent decrease in yield. Stratégie Grains forecasts 2017/18 Mexican durum production at 2.0 MMT, down an estimated 20 percent from 2016/17, if realized.

As discussed in the March 9 Wheat Letter, USDA pegged U.S. spring and durum planted area at 13.6 million acres (5.51 million hectares) at its annual Agricultural Outlook Forum and forecasted total U.S. wheat production to fall 20 percent year over year. USDA will release detailed acreage projections in the Prospective Plantings Report on March 31.

In the United States, durum farmers have a saying, “plant durum every year and sell every third year.” The soaring yields seen in marketing year 2016/17 put plenty of durum in storage, but provided little incentive to farmers to sell it. U.S. farmers see this as a time to wait for prices to rise, ensuring that regardless of final 2017/18 production volume, the U.S. store will remain open and able to supply the world market with high quality durum.

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USDA Expects U.S. Wheat Production to Fall 20 Percent Year-Over-Year

By Stephanie Bryant-Erdmann, USW Market Analyst

The USDA held its annual Agricultural Outlook Forum Feb. 23 to 24 where the 2017 Grain and Oilseeds outlook was presented. USDA currently estimates 2016/17 (June to May) wheat acreage at 46.0 million acres (18.6 million hectares), a nine percent decrease from last year.

USDA reported that winter wheat plantings are down 10 percent with the HRW crop having the largest decrease. HRW plantings fell by 12 percent to 23.3 million acres (9.43 million hectares). Soft red winter (SRW) plantings decreased by 300,000 acres (121,000 hectares) to 5.7 million acres (2.3 million hectares). USDA anticipates a 3 percent reduction in spring wheat plantings due to more favorable returns for other commodities. Currently, USDA’s spring wheat and durum acreage projection stands at 13.6 million acres (5.51 million hectares).

Due to the expected reductions in planted area and a return to trend line yields, production will decrease to a projected 50.0 MMT. If realized, that would be down 20 percent year-over-year. Based on trend yields, USDA expects the national average yield to fall to 47.1 bushels per acre (31.6 MT per hectare). USDA projects the wheat harvested-to-planted ratio will be 0.85, on par with 2016/17 and the 5-year average.

Though winter wheat planted area is at its lowest level in 108 years, growing conditions can greatly impact production levels as demonstrated in 2016/17. In February, winter wheat ratings declined in Illinois, Kansas, Montana, Nebraska, North Dakota and South Dakota, according to the monthly USDA Crop Progress report. The biggest change was noted in Montana, where USDA rated 5 percent of winter wheat in good to excellent condition compared to 70 percent in January. The percentage of Oklahoma wheat rated good to excellent increased to 43 percent, up from 33 percent in January. USDA reported 15 percent of Oklahoma wheat in poor or very poor condition, down from 17 percent in January, but significantly higher than the 1 percent poor or very poor on the same date last year. USDA resumes weekly crop progress reporting on April 3.

Large carryover stocks will partially offset the projected lower production, yet the forecast expects total U.S. supplies to decrease in 2017/18. USDA forecasts 2017/18 U.S. supplies at 84.3 MMT, down 9 percent from 2016/17, still 1 percent more than the 5-year average, if realized. Demand in the United States will decline in 2017/18, due to decreased feed usage. USDA anticipates a 2 percent decrease in domestic use, from 33.9 MMT to 33.1 MMT.

Smaller U.S. supplies and competition from other origins are expected to constrain U.S. wheat exports. USDA expects U.S. exports to decline slightly to 26.5 MMT, down 5 percent from the forecasted 2016/17 U.S. wheat export level of 27.9 MMT. U.S. ending stocks are forecast to decrease to 24.6 MMT, down 21 percent year-over-year but still 8 percent above the 5-year average.

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

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An Aggressive Trade Policy Agenda for 2017

By Ben Conner, USW Director of Policy

On March 1, the U.S. Trade Representative’s office released the President’s Trade Policy Agenda for 2017. This document lays out the key trade policy principles and objectives of the Trump Administration.

Probably the best word to describe this agenda is aggressive. Some might have expected a word like transformative or even cataclysmic, but for those worried about the future of U.S. trade policy, this document is somewhat reassuring.

That could come as a surprise. The U.S. wheat industry supported the Trans-Pacific Partnership (TPP), is a major beneficiary of the North American Free Trade Agreement (NAFTA), and hopes China remains a member of the World Trade Organization (WTO). These positions seem to be at odds with some of President Trump’s trade rhetoric, but this trade policy agenda demonstrates that there may be substantial common ground.

An aggressive trade policy agenda does not necessarily mean aggression towards supply chains, and likely means further opening of trade opportunities. The agenda’s guiding principle is that trade should be expanded “in a way that is freer and fairer for all Americans,” with four major priorities:

  • Defending national sovereignty over trade policy;
  • Strictly enforcing U.S. trade laws;
  • Using leverage to open foreign markets;
  • Negotiating new and better trade deals.

There is certainly a sharper edge to this than we have come to expect in the past, but it seems to be more of a difference in tone and priorities rather than a total break from past trade agendas. In fact, following through on this trade agenda could be good for U.S. wheat customers. Barriers to U.S. exports make imported wheat more expensive and sometimes cost-prohibitive. If the United States takes a more energetic approach to eliminating these barriers, wheat importers and exporters alike could benefit.

One special point of emphasis in this trade policy agenda is sovereignty. It discusses at length that the WTO has no jurisdiction in the United States. This is emphatically true, and an important reminder about what the WTO is. WTO agreements are not international law in the sense that they supersede the law of domestic courts. The WTO commits nations to lower import barriers as agreed and formalizes processes for countries to retaliate when other countries act unfairly. The document also points out that WTO agreements are not meant to be “living agreements” that can be interpreted to mean something not originally intended by the signatories. While lawyers likely disagree on this point, it is certainly not outside the mainstream of trade policy thinking and seems to be consistent with the Obama Administration’s approach.

The point of this is not to suggest that there is no cause for concern. The concern of some in the Administration about trade in goods deficits and the inefficient emphasis on bilateral negotiations do not our preferred approach to a more open and transparent international marketplace (and could be detrimental to U.S. agricultural exporters). However, if this policy statement represents the Administration’s trade agenda going forward, there may be cause for optimism.

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USW and USDA Partnership Reintroduce HRW 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 is a crucial part of that effort to help reduce the cost of importing processed wheat flour, maize meal and cooking oils, while creating jobs for the Angolan people, lowering consumer food expenses and preserving foreign exchange.

Angola currently imports an estimated 800,000 MT of processed wheat flour from various origins to produce popular baguettes and Portuguese style bread, but the country was not always dependent on flour imports.

“U.S. Wheat Associates (USW) introduced HRW wheat to Angolan milling companies in 1993 through the USDA PL 480 Title 1 monetization program,” said Ed Wiese, USW Regional Vice President for Sub-Saharan Africa. “The industry processed many thousands of MT of HRW every year until 2001 when the Title 1 program ended. And Angolan bakers told me they very much liked the quality of the HRW flour to make baguettes and Portuguese-style bread.”

When monetized U.S. HRW was no longer available, the Angolan government turned to subsidizing imported flour. Recently improved economic prospects and the government’s new focus created an opportunity to begin increasing flour milling capacity. To build on its legacy of success, USW hired a part-time consultant to provide timely and accurate information about U.S. HRW to Angolan flour millers, bakers, grain traders and government officials. Funding for this trade service comes from USW’s partnership with USDA’s Foreign Agricultural Service export market development programs.

In 2016, Wiese met with representatives of an Angolan flour mill that plans to expand its capacity beginning in 2017. Wiese proposed a way to demonstrate the value and utility of U.S. HRW to that mill’s staff and customers. Under the USDA/FAS Quality Samples Program (QSP), USW arranged for 100 MT of HRW from the state of Kansas to be shipped to the Perdue export terminal in Norfolk, VA, loaded into five shipping containers and ultimately delivered to the mill in late January 2017.

A separate QSP shipment of U.S. HRW flour recently arrived at an Angola food processing company, intended to demonstrate the usefulness of HRW in pasta production. The current U.S. Ambassador to Angola, Helena M. La Lime, and representatives from USW and the North American Millers’ Association celebrated the arrival of this shipment in a ceremony at the processing company on Feb. 28. Africa Today reported that 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.”

“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 Wiese. “Through trade service, technical support and training, 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.”

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