June 1, 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 18 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. Variable Conditions Dominate as 2017/18 Harvest Begins
2. Maghreb Region Trade Team Focuses on Quality and Integrity of U.S. Wheat Marketing System
3. Renegotiating Bilateral FTA with Korea Risks Disrupting Effective Trade Relationships
4. USW Strongly Opposes Budget Proposal Eliminating Market Development Funding
5. “All Aboard Wheat Harvest” Blog Follows 2017 Wheat Harvest
6. Wheat Industry News
Online Edition: Wheat Letter – June 1, 2017 (http://bit.ly/wheatletter06012017)
PDF Edition:
USW Supply & Demand Report: http://www.uswheat.org/supplyDemand
USW Harvest Report: http://www.uswheat.org/harvest
1. Variable Conditions Dominate as 2017/18 Harvest Begins
By Stephanie Bryant-Erdmann, USW Market Analyst
Combines are beginning to roll for winter wheat harvest in the United States with highly variable wheat and field conditions. The U.S. National Weather Service reported that in May much of the U.S. Plains region received 1.5 to 3 times more rain than normal. On Tuesday, May 30, USDA rated 50 percent of the winter wheat crop in good to excellent condition, down 2 percentage points from the prior week; 15 percent of the crop was rated in poor or very poor condition. The following is a summary of harvest progress, crop conditions, field conditions and planted area by state.
Colorado. Growing conditions across Colorado have been highly variable this year with some parts of the state experiencing very favorable conditions and others quite the opposite. The late April snowstorm dumped snow across eastern Colorado, albeit on less mature wheat. Parts of the state have also been hit by severe storms and hail in the last two weeks, with damage still being assessed. Farmers noted crop development is 7 to 10 days ahead of normal across the state. On May 30, USDA rated 50 percent of Colorado winter wheat in good to excellent condition compared to 43 percent the prior week; 16 percent of the crop is in poor or very poor condition. USDA reported 70 percent of Colorado wheat is headed, behind the 5-year average of 61 percent. Colorado farmers planted 891,000 hectares (2.20 million acres) of wheat last fall, down 6 percent from 2015. USDA expects winter wheat production to fall to 1.96 million metric tons (MMT), or 72.1 million bushels, down an estimated 31 percent from the prior year.
Kansas. Kansas Wheat CEO Justin Gilpin reports that the extent of damage from the May snowstorm that dropped as much as 22 inches (54 cm) of snow on western Kansas will depend largely on planting date, maturity and varieties. Since that storm, Kansas has continued to receive excessive rain leading to standing water in fields and increased disease pressure. On May 30, USDA rated 45 percent of winter wheat as good to excellent compared to 47 percent the prior week; 25 percent of Kansas wheat is rated poor or very poor. Kansas wheat is 97 percent headed, ahead of the 5-year average of 93 percent. Last fall, Kansas planted 3.00 million hectares (7.40 million acres), down 13 percent year over year and the lowest planted area in 60 years. USDA expects Kansas to produce 7.89 MMT (290 million bushels) in 2017/18, down 38 percent from last year.
Montana. Montana farmers noted good stands of wheat, but soil moisture conditions are variable across the state. USDA rated topsoil moisture supplies at 34 percent short or very short, 62 percent adequate and 4 percent surplus, compared to 17 percent short or very short, 72 percent adequate and 11 percent surplus last year on the same date. On May 30, USDA rated 48 percent of Montana winter wheat in good to excellent condition compared to 52 percent the week prior. Montana wheat has not yet started to head, which is behind the 5-year average pace of 5 percent headed. Farmers planted 770,000 hectares (1.90 million acres) of wheat in 2016, down 16 percent from 2015 due to wet field conditions and strong price competition from peas and lentils. USDA expects Montana to produce 2.22 MMT (81.6 million bushels), down 23 percent from 2016/17.
Nebraska. Farmers report that a cool, wet spring is increasing disease pressure across the state. They also noted abandonment of some fields after a late spring freeze badly hurt yield potential. USDA rated 47 percent of Nebraska winter wheat in good to excellent condition on May 30, up slightly from the prior week. Winter wheat is 86 percent headed, compared to the 5-year average of 55 percent on the same date. Nebraska farmers planted 441,000 hectares (1.09 million acres) of wheat in 2016, down 20 percent from 2015 and the lowest planted area on record for Nebraska. USDA expects Nebraska winter wheat production to total 1.4 MMT (51.5 million bushels), down an estimated 27 percent from the prior year.
Oklahoma. Harvest is underway in Oklahoma, though storms are causing some delays. Many of the recent storms included damaging hail and farmers are concerned about getting the wheat safely into the bin. USDA rated 45 percent of Oklahoma winter wheat in good to excellent condition on May 30, compared to 49 percent the week prior; 14 percent of the crop is in poor or very poor condition. USDA reported wheat harvest in Oklahoma is 3 percent complete, behind the 5-year average of 10 percent complete on the same date. Oklahoma farmers planted 1.82 million hectares (4.50 million acres) of wheat in 2016, down 10 percent from the year prior because late-season rain prevented some wheat planting. USDA expects Oklahoma winter wheat production to fall to 2.42 MMT (89.1 million bushels), down 35 percent year over year.
South Dakota. Temperatures fell below freezing last week in South Dakota, though the damage has not yet been assessed. Topsoil moisture is rated as 56 percent adequate, compared to 82 percent adequate last year, with subsoil moisture rated as 39 percent short to very short and 58 percent adequate. USDA rated 50 percent of South Dakota winter wheat in good to excellent condition compared to 54 percent last week; 20 percent of South Dakota winter wheat is in poor or very poor condition. Winter wheat is 32 percent headed in the state, on par with the 5-year average. South Dakota farmers planted 364,000 hectares (900,000 acres) of winter wheat, down 24 percent year over year. USDA expects South Dakota winter wheat production to decline to 1.19 MMT (43.7 million bushels), down 32 percent year over year.
Texas. Harvest started two to three weeks ahead of average in Texas and, as in Oklahoma, severe storms and hail threaten the crop. As of May 30, harvest is 22 percent complete, ahead of the 5-year average of 15 percent complete. Last fall, Texas farmers planted 1.82 million hectares (4.50 million acres) of wheat, down 10 percent from the year prior in very dry field conditions. In the past two years, Texas planted wheat area has dropped by 20 percent. USDA expects Texas wheat production to total 1.88 MMT (69.0 million bushels), down 23 percent from 2016/17. On May 30, USDA rated 31 percent of Texas winter wheat in good to excellent condition compared to 36 percent the week prior; 17 percent of the Texas crop is in poor or very poor condition.
Soft Red Winter (SRW) Conditions. Harvest is underway in the mid-South (13 percent of SRW wheat has been harvested in Arkansas). Crop conditions are generally good. However, recent rainy, cool conditions from the mid-South through the Midwest, Mid-Atlantic and Southeast have slowed maturity. In Ohio, Extension workers reported that the crop would benefit from drier and warmer weather. A poor price outlook compared to alternate crops has SRW planted area on a steady decline. USDA calculates SRW planted area at 2.24 million hectares (5.53 million acres) for 2017/18.
To track harvest progress, subscribe to the USW Weekly Harvest report.
To read the latest USW Weekly Harvest report, click here.
2. Maghreb Region Trade Team Focuses on Quality and Integrity of U.S. Wheat Marketing System
By Amanda J. Spoo, USW Communications Specialist
Trade servicing and technical assistance are key elements of USW’s mission to help customers understand the value of U.S. wheat. In the Maghreb region of North Africa, USW works directly with end users and importers to help strengthen commercial links with U.S. export companies and help motivate North African buyers to move toward more value-driven purchasing.
To give those buyers a deeper look at U.S. wheat, USW welcomed a trade team of four from Algeria and Morocco to the United States, May 14 to 20, led by Mina El Hachimi, North Africa Administration and Programs Manager, USW Casablanca Office. USW collaborated with the Montana Wheat & Barley Committee (MWBC) and the North Dakota Wheat Commission (NDWC) to organize and host this trade team. Funding for this trade team also came from the USDA Foreign Agricultural Service (FAS).
“These activities show customers how U.S. wheat can meet both quality and quantity requirements in the most profitable manner, as well as demonstrate the benefits of blending U.S. wheat classes with local and other imported wheat for specific end products while fostering more demanding quality specifications,” said El Hachimi. “Our focus was on the unique quality and integrity of the U.S. wheat marketing system, including how wheat is graded and exported. The team was particularly interested in learning more about U.S. durum characteristics and specific uses of Dark Northern Spring (DNS) wheat as an improver wheat.”
The team began its trip in Montana with a schedule that included tours focusing on research and breeding, milling, transportation and export logistics.
“Although this is not a new market for Montana, this was a fun, unique team for us to host,” said Collin Watters, MWBC Executive Vice President. “It was eye-opening for us to learn about the specifications they are interested in for durum, and for spring and winter wheat.”
On a tour of Montana Milling in Great Falls, MT, Watters said the team was especially interested in the mill’s specialty products and in the design of the mill itself. During another stop at Northern Seed, LLC, in Fort Benton, MT, which develops new durum varieties, the team saw progress toward the color specifications that their market demands.
The team was impressed by the level of research and connectivity throughout the entire U.S. wheat industry.
“I will share information with my own colleagues about the importance U.S. wheat farmers place on research and developing their industry,” said Adil El Eulj, Administrator, IZDA.
While in North Dakota, the team met with grain trade representatives and transportation experts to learn more about sourcing options and how to tender for combination shipments with spring wheat and other commodities. They also received a crop update and market outlook to help guide their buying decisions.
“This team was especially important to us because it represents one of our largest durum markets, behind only Italy,” said Erica Olsen, NDWC Marketing Specialist. “These buyers have unique quality needs, specifically regarding high semolina color. But we also have strong competition in these markets based on logistics and cost.”
U.S. durum sales to Algeria as of May 18 in marketing year 2016/17 (June to May) are 127,913 metric tons or 4.7 million bushels versus 89,811 metric tons or 3.3 million bushels at the same time last year, and Olson reported that the customers had positive feedback on the quality consistency. She also shared that the team met with Dr. Frank Manthey, North Dakota State University (NDSU), who presented promising quality data on new durum varieties that show improvements in semolina color, which was good news for the Moroccan team members.
“I think the dialogue that took place during this visit was extremely helpful for our promotion efforts in that region and some of the most valuable we’ve had in recent years,” said Olson.
Looking back on the experience, all the team members commented on the collaboration between farmers, state commissions, universities and suppliers as “passionate and exemplary.”
“We learned that wheat producer success spanning many generations was not by chance,” said Farid Taieb Ezzraimi, Director General, Group SIM, Algeria. “It is due to the close collaboration with the universities and advanced research in the agricultural sector.”
Reda Sellami, Director General, Moony Group, added, “The cultivation of cereals in the United States is a perfect model of development with the best control and management of the production process, storage and wheat marketing.”
“The interactions these customers had while traveling on a U.S. trade team will have a great impact on buying decisions,” said El Hachimi. “The experience helps build confidence between the U.S. wheat industry and the North African importer.”
The Maghreb region of North Africa is comprised of the Atlas Mountains and the coastal plain of Morocco, Algeria, Tunisia, and Libya. Morocco and Algeria are a part of USW’s Middle Eastern, East and North Africa (MEENA) region, directed by Regional Vice President Ian Flagg from Rotterdam, Netherlands, and supported by offices in Casablanca, Morocco, and Cairo, Egypt.
3. Renegotiating Bilateral FTA with Korea Risks Disrupting Effective Trade Relationships
By Ben Conner, USW Director of Policy
It was a decade ago this month that the United States completed its last successful free trade agreement negotiation. Under the Bush Administration, the United States and South Korea signed the U.S.-Korea Free Trade Agreement (KORUS) on June 30, 2007. However, it would be almost five more years before it entered into force following minor modifications by the Obama Administration.
Now the Trump Administration has hinted that it, too, may try to make its mark on the U.S.-Korea trade relationship, citing statistics that the U.S. goods trade deficit with South Korea has doubled since KORUS implementation in 2012.
History shows that with bilateral FTAs there are always issues that may block some trade, and balancing all bilateral trade relationships is impossible. For example, KORUS maintained major barriers to U.S. rice exports and the United States maintained significant barriers on Korean automotive exports. Reducing the overall trade deficit is a major policy goal of the United States, so renegotiating free trade agreements one by one is not the best approach.
The only way to reduce overall deficits is to promote savings and decrease consumption by U.S. citizens. The most effective way to do that is recession, as evidenced by 2009, the lowest U.S. trade deficit in the past 10 years and the heart of the “Great Recession.” New restrictions on trade are not likely to affect the trade deficit, except that they could lead to or exacerbate economic recession, an outcome previous U.S. administrations have wisely avoided.
Renegotiating agreements risks disrupting established supply chains and endangering trade. Our organization has worked for many decades to build a preference for U.S. wheat in South Korea. While there were limited policy barriers to U.S. wheat exports before KORUS, the agreement provides strong assurances about the continued viability of the trade relationship between U.S. wheat farmers and Korean customers. This is an extremely valuable trade relationship for both sides and it would be unfortunate for both partners if it does not remain open and fair.
USW will continue to advocate for trade policy that is based on openness to trade, with individual actors being free to choose with whom to buy and sell. That has always been the best policy framework for U.S. wheat farmers and their customers, and KORUS as it exists today for wheat trade is an important part of that system.
4. USW Strongly Opposes Budget Proposal Eliminating Market Development Funding
Last week, USW expressed dismay that the Trump Administration’s proposed FY 2018 budget calls for eliminating funding for the USDA’s Foreign Agricultural Service Market Access Program (MAP) and Foreign Market Development (FMD) program and would severely cuts funding for food aid programs. These cuts and other proposed cuts to the farm safety net would be devastating to wheat farmers who are already facing severely challenging economic conditions and undermine their relationship with overseas customers.
“These are the wrong proposals at the wrong time,” said USW President Alan Tracy. “Without funding from MAP and FMD, we would not be able to continue the training, technical assistance and service that is needed to help overseas buyers get the value they need from this incredibly complex food crop. Without this service, overseas customers would buy far less U.S. wheat and the potential effect on farmgate prices is obvious.”
“It is very short-sighted to cut out programs that are vital to the health of the entire U.S. agricultural economy and create such value for our customers,” said Jason Scott, USW Chairman and a wheat farmer from Easton, MD. “Our farmer leaders agree with the National Association of Wheat Growers President David Schemm who believes MAP and FMD merit an increase in federal funding, not elimination as proposed in this budget.”
In addition, time-honored U.S. food aid programs have been engines of peace, food security and local capacity building in countless countries around the world. Wheat makes up 40 percent of all U.S. in-kind food aid and because almost all food aid recipients are wheat-import dependent, particularly in Africa, wheat donations do not distort local markets. It is not a good time to diminish our ability to promote better lives around the world.
5. “All Aboard Wheat Harvest” Blog Follows 2017 Wheat Harvest
The 2017 wheat harvest is underway on the U.S. Plains and the High Plains Journal is spending another year following the custom harvesters. The “All Aboard Wheat Harvest” blog, sponsored by John Deere, enlists five correspondents to cover the harvest as the harvesters make their way from Texas to the Dakotas.
Keep up with the blog at http://allaboardharvest.com/ or sign up for daily emails from the crew on the site’s homepage. The correspondents will also be busy on social media:
Twitter: @AllAboardTour
Facebook: https://www.facebook.com/allaboardharvest
YouTube: https://www.youtube.com/user/AllAboardTour
Flickr: https://www.flickr.com/photos/allaboardtour
You can also follow the progress of the 2017/18 crop through the USW Harvest Report every Friday afternoon at http://www.uswheat.org/harvest.
6. Wheat Industry News
· Quote of the Week: “Wheat is an incredibly complex food grain so it is essential that buyers have access to trade and technical service to help them choose the right wheat for every product.”
– Alan Tracy, USW President, addressing staff and guests at the 2017 USW World Staff Conference.
· Don’t Interrupt a Vital Trade Relationship. USW and NAWG urge caution as the Trump Administration looks ahead to renegotiating the North American Free Trade Agreement (NAFTA). The U.S. wheat industry welcomes the opportunity to improve the framework for cross border wheat trade between the United States, Canada and Mexico, but would strongly oppose changes that would limit the current NAFTA’s benefits for wheat farmers and their customers. There is nothing wrong with modernizing a 23-year-old agreement, but it must be done in a way that benefits the food and agriculture sectors in both countries. Read more at http://bit.ly/2qAZn2S.
· Thanking Our Friend and Colleague. In Nov. 2016, USW Marketing Consultant Muyiwa Talabi, from the USW Lagos Office, was in a bad accident that hospitalized him and, although his condition is improving, he had to resign from USW in January. Prior to joining USW in 1995, Talabi worked for USDA FAS at the U.S. Embassy in Lagos.
“Muyiwa was instrumental in helping the USW Cape Town Office develop Nigeria into one of the major world importers of U.S. wheat, and was an outstanding representative for U.S. wheat for 22 years. He loved working for USW and was passionate about his work,” said Ed Weise, USW Regional Vice President of the Sub-Sahara African Region. “He’s a good man and we all wish him well with his recovery.”
· IGP-KSU Risk Management Course. The IGP Institute will host this course in Manhattan, KS, Aug. 7 to 11, 2017. The course is split into two parts, Basic and Advanced, and will focus on principles of risk management and commodity price control through the principles of hedging and utilization of various hedging strategies. Registration is due July 31. Click here for more information and to register.
· KSU-Buhler Spanish Executive Milling Course. The IGP Institute will collaborate with Buhler, Inc., to host this course in Manhattan, KS, Aug. 28 to Sept. 1, 2017. The course is designed for mill owners, directors and managers, and will be an introduction to flour milling and quality, grain cleaning and functionality. Registration is due July 20. Click here for more information and to register.
· 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