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Wheat Quality Improvement Team Travels to Asia to Discuss Quality Control

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

The USW Wheat Quality Improvement Team (WQIT) connects wheat breeders who develop new varieties with overseas customers to discuss which quality characteristics end users value the most. This is essential to the breeding process because for farmers about half of their wheat is exported and importers expect high value from those purchases.

The latest WQIT travelled to Bangkok, Thailand, and Taipei, Taiwan, where they met with quality control specialists April 3 to 12, 2017. The team included:

  • Mike Pumphrey, Washington State University;
  • Phil Bruckner, Montana State University;
  • Robert Talley, AgriPro/Syngenta;
  • Steven Wirsching, USW.

To learn more about the team members, click here.

In Bangkok, the breeders met with milling managers from Vietnam, Indonesia, Thailand and the Philippines who gathered at the UFM Baking and Cooking School to test selected U.S. wheat varieties against their own flours made from competitor wheats under the supervision of Roy Chung, USW Bakery Consultant. An annual event, this year the WQIT observed test results demonstrating that U.S. hard red spring (HRS) wheat quality is improving with longer farinograph stability times and better water absorption. This group also provided feedback on hard red winter (HRW) wheat used for Asian style noodles that require color stability. Many new HRW varieties under development in Montana have very low polyphenol oxidase (PPO) enzymatic levels that help noodles remain bright during processing. U.S. soft white (SW) wheat stands out as the best option for sponge cakes, cookies and crackers. Solvent retention capacity (SRC) values are used to distinguish U.S. wheat quality from other competitors that have similar protein values but vastly different starch and baking qualities.

In Taipei, the team met with the Taiwan Flour Millers Association (TFMA) to discuss wheat quality and supply reliability. Overall, the Taiwanese are satisfied with U.S. wheat quality, but there is always room for improvement, and the U.S. wheat industry is working to stay ahead of the competition. The WQIT also attended the Taipei International Bakery Show and met with several flour millers. Over the years, USW, in partnership with TFMA, has worked to develop this market, and the fruits of our joint efforts were in full display at this international event. The market is incredibly sophisticated with thousands of products that continue to drive wheat flour consumption higher, such that Taiwanese now consume more wheat than rice on a per capita basis. The team also met with China Grain Products Research and Development Institute (CGPRDI) staff who have trained thousands of bakers and other end users to create a wide range of products that keep consumers interested in wheat foods. Established in the 1960s with funding from USW and state wheat commissions, CGPRDI provides technical training for bakers and millers as well as wheat quality analysis.

The wheat breeders also discussed the benefits of hybrid wheat and other non-GMO plant breeding innovations. Talley, the Syngenta wheat breeder, is developing commercial hybrid wheat varieties that promise to increase drought tolerance, heat resistance and overall yield, which could bring benefits to the wheat industry within 5 to 7 years. Some of the millers asked if the new hybrid wheat would be considered a GMO. Talley explained that hybridization has been used for many crops, most notability corn, since the 1930s. Hybrid wheat will not be a GMO crop, but will benefit from the hybrid vigor of crossing two dissimilar high quality parent lines. Like all U.S. public and private breeding programs, Syngenta is committed to bringing high quality wheat to the market.

In today’s hyper-competitive market, overseas customers are not just looking for the lowest prices. More and more are seeking real value. USW is working with public and private breeders to develop high quality wheat varieties that perform not only in the flour mill, but also in the bakery or cookie/cracker line, delivering economic value to the end users and, in turn, to millers and farmers alike.

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Importer Ending Stocks Shrink to 6-Year Low

By Stephanie Bryant-Erdmann, USW Market Analyst

On April 11, USDA released its latest World Agricultural Supply and Demand Estimates (WASDE) report. With six weeks left in marketing year 2016/17, USDA expects wheat world ending stocks to reach a record high 252 million metric tons (MMT), up 4 percent year over year and 22 percent ahead of the 5-year average, if realized. The current marketing year factors in this report are well defined and the record large ending stocks are neither surprising nor new to those who follow the wheat industry. However, the position of those stocks has been quietly changing.

Historically, global wheat exporters — Argentina, Australia, Canada, the European Union (EU), Kazakhstan, Russia, Ukraine and the United States — have held roughly 30 percent of global ending stocks. China has historically held one third of global endings stocks and the mostly net importers that remain have held about 37 percent. The 5-year average breaks out with exporter stocks at 61 MMT, China holding roughly 70 MMT and the world’s importers carrying out about 75 MMT

However, USDA expects that ratio to shift at the end of 2016/17. Chinese ending stocks are expected to reach a record high 111 MMT, or 44 percent of global ending stocks. In global wheat exporting countries, ending stocks are also expected to grow slightly to 74.0 MMT, but the ratio will fall to about 29 percent of global ending stocks. Carryout stocks in the world’s wheat importing countries are expected to fall 16 percent year over year to 67.1 MMT. If realized, that would be 11 percent below the 5-year average and 27 percent of global ending stocks, down 10 percentage points from the 5-year average.

This decrease is due in large part to a shift in purchasing behavior. Four consecutive record production years have enticed many buyers to adopt a “just-in-time” approach to take advantage of the lower prices and reduce storage costs where possible. That is why ending stocks in the top 20 markets for U.S. wheat (excluding China) are expected to cover just over two months of consumption, 6 percent below the 5-year average.

Additionally, 28 countries (including the EU, the world’s largest wheat consumer and normally a top wheat exporter) expect to have one month or less of domestic consumption in carryout stocks at the end of 2016/17, compared to the 5-year average of 20 countries with one month or less of domestic consumption. There are also 23 countries for which USDA does not show ending stocks data. These countries import 6.09 MMT of wheat annually and, with limited storage capacity, tend to buy “just-in-time.”

With lower planted area and an expected return to trendline yields, world wheat production is poised to decrease in 2017/18. With importing country stocks drawn down to the lowest level since 2010/11, any supply shocks would increase price volatility in wheat futures markets. On paper, the world has ample wheat, but 44 percent of that supply resides in China, which rarely offers wheat or flour for export.

After four consecutive years of larger global production and lower global wheat prices, many customers have minimal stocks on hand to weather supply shocks, and as one wheat buyer noted, “wheat (export) prices take the stairs down and the elevator up.” Fortunately for our customers, the United States holds 12 percent of world wheat ending stocks, ensuring the U.S. wheat store is always open. What is still uncertain is whether the price of U.S. high-quality wheat will remain at the current low levels. As always, weather is the wildcard, both in its direct effects on world wheat production and the wheat price impacts of any production problems with other major grains, especially corn and soybeans.

Customers should be aware of changing conditions around the world, and can track USDA weekly wheat crop condition and planting progress reports, as well as the latest U.S. weather forecast on the weekly USW Price Report.

USW will begin weekly Harvest Reports in May. To subscribe to any of USW’s reports, click here.

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No Difference Between Modern and Heritage Hard Red Spring Wheat for Celiac Incidence

By Dr. Senay Simsek, Bert L. D’Appolonia Cereal Science and Technology of Wheat Endowed Associate Professor, North Dakota State University, Fargo, ND

With the global demand for wheat remaining quite strong, there is a continual need to develop new varieties that have resistance to the latest disease threats, as well as improved yield, agronomic and end-use qualities. The varieties available today are improved over historic varieties, yet their basic genetic structure is essentially unchanged. In the Northern U.S. Plains during the past century, there have been many improved wheat cultivars, including many public varieties developed by breeders at North Dakota State University (NDSU).

Those of us involved in wheat research, production and processing fully accept that flour from HRS and other wheat classes as well as semolina is healthy and very nutritious for the vast majority of people. However, this has not prevented opposing points of view, and serious attacks against food products that contain gluten.

Celiac disease is a real and serious autoimmune condition that has gained a lot of attention in the past few years. Reputable medical organizations have determined that celiac disease is prevalent in about 1 of every 100 people worldwide. However, the over-simplified explanation that “gluten causes celiac disease” has likely hurt the reputation of wheat and wheat foods. There is a subtle but significant difference that demonstrates gluten alone does not cause celiac disease and, as our study showed, that new wheat varieties are not responsible for increased cases of celiac.

The gluten in wheat, which is essential for the elastic texture of dough, is composed of two separate proteins: glutenin and gliadin. Glutenin and gliadin are divided into distinct compounds, which in turn are made up of specific peptides (compounds of two or more amino acids in a chain).

A genetic predisposition to celiac must exist in individuals before the presence of certain gliadin and glutenin peptides may trigger an immune response that results in damage to the lining of the small intestine. These peptides are therefore considered “immunogenic.” Previous studies have found that α-gliadin proteins in wheat have a high number of immunogenic peptides.

In many ways, simply blaming gluten for celiac has helped spark quite a bit of unwanted attention from bloggers, authors, doctors and others making claims that modern breeding practices have changed wheat protein chemistry. This has resulted in a higher concentration of immunogenic peptides in modern wheat in comparison to historical wheat varieties, and that this is a contributing factor towards increased incidence of celiac disease.

To test this hypothesis, we studied the protein chemistry of 30 HRS wheat cultivars released in North Dakota in the last century. The presence of celiac disease-initiating-peptides was determined using untargeted mass spectrometry, and the amount of these peptides was quantified using a targeted mass spectrometric approach. We collaborated with Dr. Steven Meinhardt from the NDSU Plant Pathology Department and graduate student Maneka Malalgoda worked with us as part of her master’s thesis project. This project was funded by growers through checkoff funds from the North Dakota Wheat Commission.

In the qualitative analysis, we determined the presence of 15 immunogenic peptides. We found that the presence of these peptides is not related to the release year of cultivars and that these peptides appear randomly. In our quantitative analysis, we specifically tracked two prominent immunogenic peptides, PFPQPQLPY (DQ-α-I/ glia-α9) and RPQQPYPQ (glia-α20), and total α-gliadin. The results supported our previous findings. That is, the amount of the peptides varied randomly across the years that were analyzed, and there is no correlation between release year and the number of immunogenic peptides or total α-gliadin.

Thus, overall, our results demonstrate that modern HRS wheat is not higher in terms of celiac disease immunogenicity in comparison to historical HRS varieties.

Our team plans to submit the complete study report to a peer reviewed journal in the future.

Editor’s Note: Capital Press has reported that a researcher is working with the Kansas Wheat Commission at the Heartland Plant Innovations Center in Manhattan, KS, toward a “celiac-safe” wheat. In theory, celiac-safe wheat would still contain the gluten proteins necessary for making bread, but would have none of the immunogenic peptides which trigger an immune response in people with the genetic predisposition for celiac disease, said Chris Miller, director of wheat quality research for Heartland Plant Innovations.

“I think the problem of celiac disease is so big that it won’t be solved by a single group of researchers,” Miller said. “If we can identify the underlying cause of celiac reactivity in the process, and we have the means to reduce it, we should be working towards those types of goals.”

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Visiting Farmers Learn Quality is Very Important to Latin American Customers

By Shawn Campbell, USW Deputy Director, West Coast Office

Wheat harvest is the culmination of a year’s worth of hard work and prayers. As the big day approaches, farmers contemplate many questions. What is the yield going to be? Is the quality going to be good enough to avoid discounts? Will the price go up or down? At the same time, on the other end of the supply chain, their customers are pondering many of the same questions.

Every year, U.S. Wheat Associates (USW) sends a group of farmers (selected by state wheat commissions) to tour a region of the world and gain a better understanding of what customers want and need. Earlier this month, three U.S. farmers traveled to Mexico, Haiti, Ecuador and Chile, including: Rachael Vonderhaar, a wheat farmer from Camden, OH, and secretary of the Ohio Small Grains Marketing Program; Eric Spates, a wheat farmer from Poolesville, MD, and member of the Maryland Grain Producers Utilization Board; and Ken Tremain, a wheat farmer from LaGrange, WY, and member of the Wyoming Wheat Marketing Commission. Shawn Campbell, Deputy Director of USW’s West Coast Office, led the team and was joined by overseas staff based in the USW Mexico City and USW Santiago Offices.

“I wanted a better understanding of the full supply chain logistics from my farm to Latin America,” said Vonderhaar. “The trip was a big commitment of time and energy away from our farming operation, but necessary to understand the buying decisions of the millers.”

Spates added, “I hoped to learn about international wheat trade and what USW does, and I was not disappointed.”

In Mexico, the team found the largest importer of hard red winter (HRW) and soft red winter (SRW) wheat, an advanced milling industry and a well-funded association dedicated to constant improvement of the country’s baking industry. On average the past 5 years, Mexico has imported 4.4 MMT of wheat annually, of which 70 percent is U.S. wheat. However, thanks to competitive pricing and low ocean freight rates, the United States is facing increasing competition from Canada, Europe and the Black Sea Region. The customers the team met also expressed concerned about U.S. political rhetoric on the future of the North American Free Trade Agreement (NAFTA).

“It is important to keep our legislators aware of our buyer’s needs,” said Tremain. “Trade with our partners is vitally important and necessary for good relationships.”

The visit to Haiti, the least economically developed country in the Western Hemisphere, was a major learning experience for the team. Haiti imports 134,000 metric tons (MT) annually, 57 percent of which comes from the United States, with the remainder sourced from Russia, Canada and Mexico. Haiti is an underdeveloped market, but with a population of 10 million people, it is growing. The team got a firsthand look at the challenges USW overseas staff face in their efforts to promote U.S. wheat exports there.

“I was most surprised by the poverty in Haiti,” said Spates. “The conditions are emblematic of the varied and challenging places USW works, and yet Haiti is a market with great potential to import more U.S. wheat.”

In Ecuador, the team observed the country’s democracy in action as its citizens voted for its next president. Ecuador imports 710,000 MT of wheat annually, but only 33 percent comes from the United States, a marked difference compared to neighboring countries. Ecuador is a former favorite of the now defunct Canadian Wheat Board, which aggressively defended its market share there. Now USW representatives are working diligently to demonstrate the increased value to be found in U.S. wheat. A highlight in Ecuador was the tour of a cookie plant.

“We received many compliments on U.S. wheat quality,” said Vonderhaar. “But the buyers are definitely aware of weather issues that affect that quality from year to year and are very clear about their expectations for clean wheat.”

The journey’s final leg was to Chile, a country with a highly developed milling and baking industry constantly working to guarantee they receive the highest quality wheat at the lowest price. Chile imports an average of 845,000 MT annually, of which 45 percent comes from the United States. Major competitors include Canada and a resurgent Argentina, which is rapidly becoming a major exporter again since its government removed wheat export tariffs last year. The team met with several millers in Chile who were excited to show off their mills and quality laboratories.

The team members returned home with a greater appreciation for the nuances of overseas demand and USW’s activities to foster increased demand for their wheat.

“I am impressed with, and appreciate the strong personal friendships USW people have built within the region, said Vonderharr. “I want to make sure we are growing wheat that our Latin American millers and bakers demand.”

“USW has a complicated job promoting wheat around the globe as some customers are very receptive to their efforts, and some less so,” said Spates. “Hearing the millers emphasize the need for quality certainly reinforced my commitment to producing high quality wheat.”

“We have a responsibility to share with other farmers what we learned about the kind of quality our buyers expect from the United States,” said Tremain. “USW is vital in the promotion of our product.”

The team will report to the USW Board of Directors later this year. To see pictures from this and other USW Board Team trips, please visit the USW Facebook page at www.facebook/uswheat.

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Policy Organizations Call for Increased Investment in Agricultural Research

Excerpts reprinted from Agri-Pulse, April 5, 2017

USW shares strong support for more investment in agricultural research with our sister organization, the National Association of Wheat Growers (NAWG). NAWG notes that wheat relies on public, private and grower funding for crop innovation. Only 1.6 percent of the $142 billion U.S. federal investment in research is allocated toward agriculture research, according to American Association for the Advancement of Science (AAAS).

NAWG adds that the amount of funding dedicated to wheat research has been dwarfed by the funding dedicated to other major crops. So, growing the investment in wheat research over time is critical to achieving the innovation needed to sustainably support a rapidly growing world population.

Several major policy organizations and influential non-governmental organizations also see global benefits to enhanced agricultural research. For example, the Chicago Council on Global Affairs recently issued a report called “Stability in the 21st Century; Global Food Security for Peace and Prosperity” that calls for increased research investment. The Chicago Council introduced that report, at a Global Food Security Symposium in Washington, DC, covered this week by Agri-Pulse, a news organization reporting on U.S. agricultural policy.

At the symposium, Nick Austin, the director of agricultural development for the Bill and Melinda Gates Foundation, called for the United States and other developed countries need to continue to support agricultural research if farmers are to meet the demand for food from a burgeoning world population.

“We need to feed more with less,” Nick Austin told Agri-Pulse. “I’d like to look at the glass half-full scenario, with ag research leading to improved conditions, especially for small-holder farmers, many of which are women.”

He cited research by the Farm Journal Foundation which found that the high-yielding wheat and rice varieties developed by the Green Revolution during the 1970s led to “substantial growth” in Asian and Latin American agriculture. Those same varieties were used successfully in the United States and added $3.7 billion in value to the U.S. economy by 1996, “an astonishing return to taxpayers on the $134 million investment,” Austin said.

During the Chicago Council symposium, speakers discussed how agriculture must adapt to a number of challenges, including climate change, which is bringing increased temperatures, erratic rainfall, flooding and increased pests and disease. At the same time, Austin said, the world’s farmers need to boost food production by about two-thirds to feed a global population of more than 9 billion by 2050, up from 7.5 billion at present.

“It is a real challenge, but it can be done,” Austin said, citing several hopeful signs, including projects supported by the Gates Foundation.

The fact is, global demand for wheat is on a steadily increasing trend and today’s surplus can quickly become tomorrow’s shortage. U.S. farmers are doing their part to increase average yields through direct support for wheat breeding and research through state wheat commission support and in partnership with land grant universities. With the cost and stakes increasing, Austin stressed that governments need to contribute to the effort, not only to help the poor, but for their own benefit, given the “high rate of return” from investments in ag research.

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Wheat Quality Improvement Team to Hear Customer Preferences in Asia

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

This week and next, USW is conducting a top-level Wheat Quality Improvement Team (WQIT) of U.S. wheat breeders taking face-to-face meetings with Asian milling and baking quality control managers to discuss end-use quality and functionality.

The breeders will hear first-hand what quality characteristics customers in overseas markets need so they can apply that knowledge in their work on new wheat varieties.

This team includes both public and private wheat breeders from the PNW focused on bringing the very best genetic technology to U.S. wheat farmers. Team members include:

  • Mike Pumphrey, Associate Professor and the Orville Vogel Endowed Chair of spring wheat breeding and genetics at Washington State University, Pullman, where he has worked since 2010. He was previously a research geneticist employed by the USDA’s Agricultural Research Service at Kansas State University, Manhattan. Dr. Pumphrey’s participation is sponsored by the Washington Grain Commission (WGC).
  • Phil L. Bruckner, a winter wheat breeder and Professor in the Plant Sciences & Plant Pathology Department at Montana State University, Bozeman. Dr. Bruckner obtained bachelors and master’s degrees at Montana State and a Ph.D. in 1985 from North Dakota State University, Fargo.
  • Robert Talley, Plant Scientist and Head of the Hybrid Wheat Development team at AgriPro/Syngenta. Talley earned a bachelor’s degree from Colorado State University, Ft. Collins, in Soil and Crop Sciences. Prior to his current position, he was with Busch Agricultural Resources where he worked on the International Barley Research and Germplasm Exchange. Talley’s participation is also sponsored by the WGC.

The team will have the chance to interact with customers that are participating in a USW wheat quality analysis program at the United Flour Mill (UFM) Baking and Cooking Center in Bangkok, Thailand, as another team of wheat breeders did two years ago. Each breeder will make a presentation on how they are contributing to continuous quality and yield improvement of U.S. SW and HRS wheat, and, in Talley’s case, the potential for hybrid wheat varieties now in development. The breeders end their trip early next week in similar meetings with millers and wheat food processors in Taiwan.

Following their activity, the WQIT members will consider how to incorporate what they hear from customers into their breeding programs and communicate their activity to U.S. wheat farmers through the Wheat Quality Council and public as well as private breeding programs.

USW will post photos and other information from the 2017 WQIT on its Facebook page at www.facebook.com/uswheat.

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USW Seeks Consultants for Service and Technical Assistance

The wide range of classes and functional characteristics of U.S. wheat allows customers to produce flour for almost every end-product. Part of USW’s value-added mission is to help strengthen milling, storage and handling and wheat food industries through technical courses and service activities that demonstrate the quality, value and reliability of U.S. wheat.

To fulfill that mission, USW currently works closely with several experienced and respected risk management, milling and food processing consultants from around the world.

“Every wheat market that USW works in has a unique line up of end-products and changing consumer preferences, so engaging consultants who are experts in their field has become an essential part of promoting U.S. wheat,” said Erica Oakley, USW Program Manager. “We are proud of the work our current group of consultants have done and will continue to do. We also see the interest in our services growing, so we welcome the chance to hear from additional consultants who may be interested in helping provide the assistance and training that will benefit our customers.”

USW is currently seeking recommendations for consultants with expertise in the following areas:

  • Cookies and crackers
  • Pastries
  • Pasta (durum and non-durum)
  • Milling
  • Asian noodles
  • Wheat procurement and risk management

For more information or inquiries, please contact Erica Oakley at [email protected].

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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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