January 12, 2017
U.S. Wheat Associates (USW) is the industry’s market development organization working in more than 100 countries. Its mission is to “develop, maintain and expand international markets to enhance the profitability of U.S. wheat producers and their customers.” USW activities are funded by producer checkoff dollars managed by 19 state wheat commissions and USDA Foreign Agricultural Service cost-share programs. For more information, visit www.uswheat.org or contact your state wheat commission. Stakeholders may reprint original articles from Wheat Letter with source attribution. Click here to subscribe or unsubscribe to Wheat Letter.
In This Issue:
1. Wheat Exports Rebounding: Even More Impressive on Value
2. Trade Policy and Wheat in the Obama Administration
3. Outlook for 2017/18 U.S. Winter Wheat Plantings
4. World Wheat Supply and Demand Situation and Outlook
5. U.S. Wheat Associates Hires Technical Specialist in Beijing
6. Wheat Industry News
Online Edition:Wheat Letter – January 12, 2017 (http://bit.ly/wheatletter01122017)
PDF Edition: (Attached)
USW Crop Quality Reports: http://www.uswheat.org/cropQuality
1. Wheat Exports Rebounding: Even More Impressive on Value
By Stephanie Bryant-Erdmann, USW Market Analyst
2016 ended on a high note for U.S. wheat exports, which posted the largest volume of sales in the fourth quarter since 2010. From October through December, the United States exported 6.5 million metric tons (MMT) of wheat, 48 percent above last year’s sales and 28 percent greater than the 5-year average. The strong export sales pace pushed total U.S. wheat exports to 20.9 MMT through Dec. 29, 7 percent ahead of the 5-year average and greater than total 2015/16 sales of 20.7 MMT.
Hard red winter (HRW) and hard red spring (HRS) are leading the charge. Year-to-date, HRW sales of 8.43 MMT are 24 percent ahead of the 5-year average and already greater than both 2015/16 and 2014/15 total sales. U.S. HRS sales are also 31 percent ahead of the 5-year average at 6.78 MMT and just shy of last year’s total 2015/16 sales of 6.91 MMT. These sales allowed the United States to regain the title of the largest single-country exporter in volume and value in a calendar year from Canada. According to USDA export sales data, U.S. wheat exports totaled 25.9 MMT, up 27 percent from CY 2015.
In CY 2015, Canada exported roughly 2.3 MMT more wheat than the United States and Russia, which nearly tied with a difference of less than 30,000 MT between them, based on Global Trade Atlas (GTA) data. The extra tonnage boosted the value of Canadian wheat exports to $6.23 billion compared to the U.S. wheat export value of $5.62 billion and the Russian value of $3.95 billion. In other words, despite the United States and Russia being virtually tied for the number two spot by tonnage in CY 2015, U.S. wheat exports earned 42 percent more dollars.
This year, the value comparison is even more interesting. GTA data shows U.S. wheat exports back on top from January to November with a value of $4.88 billion. For the same time period, GTA estimates Canadian wheat export value at $4.13 billion and Russian wheat export value at $3.32 billion.
While industry reports tend to focus on tonnage for grains, reports concerning other crops often refer to value of exports. While volume of exports reflects the drawdown of available stocks and infrastructure utilization, the value of exports reflects the relative financial return to the various exporting country economies as well as to producers and grain handlers. International Grains Council (IGC) data shows the export price of Canadian 13.5 percent protein (on a 13.5 percent moisture basis) spring wheat at Vancouver averaged $218/MT ($5.93/bu) in 2016, and Russian milling wheat averaged $179/MT ($4.87/bu). By comparison, U.S. HRS 13.0 percent protein (on a 12.0 percent moisture basis) at the Pacific Northwest averaged $232/MT ($6.31/bu) in 2016.
With many of the world’s largest exporters producing record-large crops with lower than normal protein content this year, buyers around the world are looking for high-quality, higher protein wheat. As the fourth quarter sales show, the U.S. wheat store continues to supply customers with the wheat they need. Customers around the world see the value of U.S. wheat versus its competitors and rely on it to provide consistent high quality flour to their own customer demand.
2. Trade Policy and Wheat in the Obama Administration
By Ben Conner, USW Director of Policy
Next week, the United States will hold its quadrennial pageantry to mark the beginning of a new presidential term. Since term limits prevented President Obama from running again, his administration will come to an end.
The wheat industry has not always seen eye to eye on every issue with the Obama Administration, but on trade policy there has been a great deal of common ground. As the Obama years draw to a close, it is worth reflecting on the trade policy accomplishments of this Administration.
The first major trade policy accomplishment of interest to wheat was finishing the agreements with Colombia, Panama and South Korea that were negotiated during the George W. Bush Administration, which were passed by Congress and signed into law in 2011. Tariffs for wheat went to zero as soon as the agreements entered into force. This is especially important as some of U.S. wheat’s major competitors in Australia and Canada were also negotiating FTAs with these countries.
After these agreements were finished, the focus shifted to negotiating the two largest free trade areas in terms of GDP ever attempted — the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP). These agreements are full of complexity due to the scope and the number of economies involved. TPP negotiations were completed in 2015 but have not been ratified by Congress. Its future is highly uncertain in the next Administration. TTIP has much further to go, but its delay has much to do with political dynamics in the European Union. Regardless of the ultimate outcome of these agreements, the Obama Administration can rightfully be proud of its ambitious free trade agenda.
One of the most high profile initiatives affecting wheat was the Administration’s reestablishment of diplomatic relations with Cuba and accompanying efforts to reduce the regulatory burdens around trade with that market. Cuba imports no U.S. wheat today, but could be a top 10 market with the end of the trade embargo. Unfortunately, the embargo is still in place and no U.S. wheat has been sold, but these actions to improve relations with Cuba were important first steps.
A major but often overlooked accomplishment is that this Administration finally put the brakes on the World Trade Organization’s (WTO) Doha agenda, which had long since stopped being a serious avenue for opening trade. There are some countries that will still insist that Doha needs to continue, but any real prospect of reviving those negotiations ended with the 2015 Nairobi Agreement. Another accomplishment of that agreement was a phased out end to export subsidies — historically a major source of distortion in global wheat trade.
Finally, there are the WTO cases launched against China’s excessive subsidies and its opaque tariff rate quota (TRQ) administration for wheat imports. These are two of the most significant trade cases ever taken on behalf of U.S. farmers (and, of course, Chinese consumers). USW is proud to have played a major role in getting those cases going and congratulates the Administration for filing them. The incoming Administration has pointed to trade agreement enforcement as one of its priorities, so we have every reason to believe these cases will be pressed to their conclusions.
These are the trade policy accomplishments that grab the headlines. There have been dozens of other actions taken on behalf of U.S. wheat farmers that facilitate sales, keep markets open and improve the global trading system. As the Obama Administration leaves and the Trump Administration begins, the wheat industry can be grateful that the exceptionally competent top career staff at the U.S. Department of Agriculture and U.S. Trade Representative will still be in their jobs on Jan. 21, continuing their efforts on behalf of U.S. agriculture.
3. Outlook for 2017/18 U.S. Winter Wheat Plantings
By Stephanie Bryant-Erdmann, USW Market Analyst
U.S. farmers made critical decisions last fall while they had bins full of wheat from record-breaking yields with prices near ten-year lows. Therefore, it is no surprise that many farmers chose to decrease their winter wheat planted area. USDA’s 2017/18 winter wheat seeding report released Jan. 12 reported U.S. farmers planted the second lowest number of winter wheat acres on record and 10 percent fewer acres than 2016/17. USDA estimated U.S. farmers planted 32.4 million acres (13.1 million hectares) of winter wheat with reductions for all three classes of winter wheat — HRW, soft red winter (SRW) and white winter wheat.
USDA assessed HRW planted area at 23.3 million acres (9.43 million hectares), down 12 percent from 2016. Planted area in Kansas, the number one U.S. HRW-producing state at 7.40 million acres (3.00 million hectares), is down 13 percent from 2016 and 20 percent below the 5-year average. Nebraska farmers planted a new record low area to winter wheat of just 1.09 million acres (441,000 hectares), 25 percent below the 5-year average.
Total SRW planted area of 5.68 million acres (2.30 million hectares) fell 6 percent from 2016. Increases in Delaware, Georgia, Kentucky, Maryland, North Carolina and South Carolina were not enough to offset decreases in most of the other SRW-producing states, including a 16 percent decline in Ohio, the number one producer of U.S. SRW in 2016/17. USDA believes Ohio farmers planted 490,000 acres (198,000 hectares) of SRW, 15 percent below the 5-year average.
White winter wheat planted area decreased to 3.37 million acres (1.36 million hectares), down 4 percent from 2016/17. Exportable soft white wheat supplies are concentrated in Idaho, Oregon and Washington. Planted area in Idaho and Oregon fell 4 percent and 3 percent, respectively. Idaho farmers planted 730,000 acres (295,000 hectares) compared to 760,000 acres (308,000 hectares) in 2015/16 and 2016/17. Planted area in Oregon dropped 20,000 acres (8,000 hectares) from 2016/17 to 700,000 acres (283,000 hectares), while planted area in Washington remained stable year over year at 1.70 million acres (688,000 hectares).
Durum planting in the Southwestern United States is estimated at 140,000 acres (56,700 hectares), down 8 percent from 2016/17 and 38 percent below 2015/16. According to USDA, planting is well underway in Arizona at 22 percent complete, up 8 percentage points from the same date last year. Delays from wet conditions are slowing progress in California. Arizona and California plant durum from December through January for harvest in May through July.
With the decrease in planted area in the United States, customers should pay close attention to weather maps and consider purchasing farther out to protect themselves from supply shocks.
4. World Wheat Supply and Demand Situation and Outlook
By Stephanie Bryant-Erdmann, USW Market Analyst
The USDA pegged 2016/17 world wheat production at 753 MMT (27.6 billion bushels), up 2 percent from 735 MMT (27.0 billion bushels) in 2015/16 and 6 percent above the 5-year average. If realized, it would be the fourth consecutive year of record wheat world production. USDA projects production will increase in seven of the eight major exporting countries. The only exporter with decreased production is the European Union.
Record-large world carry-in stocks add to the global surplus, resulting in the largest estimated world wheat supply on record. USDA estimates 2016/17 world carry-in stocks at 240 MMT (8.84 billion bushels), up 11 percent from last year and greater than the 5-year average of 197 MMT (7.25 billion bushels). Total world supply will reach a projected 993 MMT (36.5 billion bushels), up 40.4 MMT from the record set in 2015/16. The ample world supply will help meet strong global wheat demand.
USDA expects total consumption will increase for the fourth consecutive year and reach a record 740 MMT (27.2 billion bushels), compared to 712 MMT (26.2 billion bushels) in 2015/16. Feed wheat use is predicted to grow an estimated 6 percent to a record high 147 MMT (5.42 billion bushels) due to increased global supplies of feed wheat after rain increased yield in nearly every producing region (with western Europe a notable exception) but hurt quality.
USDA expects 2016/17 world wheat trade to grow to a record large 178 MMT (6.54 billion bushels). If realized, it would be 11 percent greater than the 5-year average of 160 MMT (5.86 billion bushels). USDA expects world carry-out stocks to increase 12.8 MMT (470 million bushels) year over year to 253 MMT (9.31 billion bushels), 23 percent greater than the 5-year average of 206 MMT (7.56 billion bushels).
5. U.S. Wheat Associates Hires Technical Specialist in Beijing
USW hired Dr. Ting Liu, Sep. 1, 2016, as Technical Specialist to provide technical support and training to demonstrate the performance qualities of U.S. wheat in production of baked goods and traditional Chinese wheat based products. Liu works from USW’s Beijing office and will regularly travel across China and the region to visit customers and provide baking assistance and technical service.
“Ting provides additional depth to the Beijing office and has the technical expertise that this position requires,” said Jeff Coey, Assistant Regional Vice President for China and Taiwan. “She is a great communicator and has already become a valued asset, translating technical documents and accompanying a recent trade team mission from the United States.
A native of Zhejiang province in east China, Liu received a doctoral degree in food science from the University of Minnesota (UMN) Twin Cities. She was advised by Dr. Gary Hou, Wheat Marketing Center technical director and wheat foods specialist, and UMN Professor Dr. Len Marquart, on developing whole wheat flour tortillas by using U.S. HRW, HRS and hard white (HW) wheat. Liu published four peer reviewed technical papers and has presented research results at the annual meetings of both the AACC International and the Institute of Food Technologists. She remains actively involved in the AACC International Milling & Baking Division.
Liu is interested in both the scientific and culinary sides of baking, and in her brief time at USW has already attended baking training courses held by Hou and fellow USW colleagues Roy Chung and Shu-ying Yang. Her responsibilities include baking demonstrations, technical seminars and popularizing research results.
“We are very pleased to have Liu with us to represent USW at Chinese and regional conferences, and provide the technical support our customers need,” said Coey.
6. Wheat Industry News
· Quote of the Week: “This type of research in other crops has found that you need all the inputs to get the maximum possible benefit, but that doesn’t appear to be the case with wheat. Intensive management can be profitable, but you need to know your wheat varieties and scout your fields to know which specific inputs present the best opportunity.” — Romulo Lollato, Kansas State University extension wheat specialist. Read the full article “Wheat Yields Hit New Highs” here.
· Congratulations to Gerald Theus on 25 Years of Service. Theus is the Assistant Regional Vice President in the USW Cape Town Office. We are so fortunate that it is not rare to have such devoted, loyal colleagues at USW. Thank you for your years of service to our organization, to U.S. wheat farmers and to our customers around the world!
· Washington Grain Commission (WGC) Hires New Program Director. Joe Bippert joins WGC this month, filling the vacant role left by current CEO Glen Squires four years ago. Most recently, Bippert worked at the Washington State Department of Agriculture as manager of its international marketing program. Squires says Bippert’s experience will allow him to do double duty at the commission. Although his knowledge of international marketing (and fluent Spanish) is an advantage, it is his background in state contracting that made him particularly attractive. Bippert grew up in Maytown, WA, where his family lives on a 120 acre tree farm. He received his degree in business finance with a real estate focus in 2008 from Brigham Young University.
· Public Wheat Breeder Consortium to be Developed by USDA Grant. Texas A&M AgriLife Research’s wheat genetic and breeding programs will have genes in play when a multi-state, multi-agency project establishes a nationally coordinated consortium to advance wheat yields. The Wheat Coordinated Agricultural Project, titled “Validation, characterization and deployment of QTL for grain yield components in wheat,” is a five-year project jointly funded by USDA’s National Institute of Food and Agriculture and International Wheat Yield Partnership. Read the full article from the High Plains Journal here.
· Society of Food Hygiene and Technology Trainer of the Year. Thomas Auer, a food safety professional with AIB International since 2007, was recently recognized as the society’s Trainer of the Year. Auer has more than 17 years of industry experience. A graduate of University of Munich as a Food Technologist, Auer is an experienced food safety auditor, Certified IFS Auditor, Food Defense Coordinator, and FSPCA Lead Instructor and conducts GFSI certification audits around the world. This is the second year for AIB International staff to be recognized for this award. Click here for the full announcement.
· Subscribe to USW Reports. USW has added a “Subscribe” menu at www.uswheat.org where visitors may subscribe to this newsletter, the weekly Price Report and the weekly Harvest Report (available May to October.) Click here to subscribe or unsubscribe.
· Follow USW Online. Visit our page at www.facebook.com/uswheat for the latest updates, photos and discussions of what is going on in the world of wheat. Also, find breaking news on Twitter at www.twitter.com/uswheatassoc and video stories at www.youtube.com/uswheatassociates.
Source: U.S. Wheat Associates