August 10, 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 wheat’s profitability for U.S. wheat producers and its value for their customers.” USW activities are funded by producer checkoff dollars managed by 17 state wheat commissions and USDA Foreign Agricultural Service cost-share programs. For more information, visit www.uswheat.org or contact your state wheat commission.

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In This Issue:
1. USDA: World Wheat Consumption Increases, Spring Wheat in Short Supply
2. Assessing the Wheat Quality Council Tour 2017 Yield Estimate
3. Essential Wheat Crop Quality Analysis is Underway
4. Global Recognition for U.S. Wheat Baking Industry Expertise
5. New Port Worker Contract Adds Stability to PNW Export Operations
6. Wheat Industry News

Online Edition: Wheat Letter – August 10, 2017 (http://bit.ly/wheatletter081017)

PDF Edition:  Attached
                                                                               
USW Harvest Report: http://www.uswheat.org/harvest

1. USDA: World Wheat Consumption Increases, Spring Wheat in Short Supply
By Stephanie Bryant-Erdmann, USW Market Analyst

USDA increased its estimates for world wheat production, consumption and trade in its August World Agricultural Supply and Demand Estimates (WASDE) report released today. USDA forecast global wheat production at 743 million metric tons (MMT), 3 percent above the 5-year average but still 2 percent below last year’s record. The global wheat consumption estimate increased to 737 MMT in 2017/18, up 4 percent from the 5-year average but down slightly from the 2016/17 record. USDA projects 2017/18 world wheat trade at 180 MMT, down 1 percent from last year but still 10 percent above the 5-year average, which would be the second highest on record. USDA also lowered its U.S. and Canada spring wheat supply estimates.

USDA forecasted U.S. wheat production to fall 25 percent year over year to 47.3 MMT. The drop is due to lower yields for spring wheat and durum as a result of the drought across the U.S. Northern Plains, but does not reflect abandoned acre data. USDA pegged U.S. spring wheat production at 9.91 MMT, down 26 percent from 2016/17 and 30 percent below the 5-year average, if realized.

Total 2017/18 U.S. spring wheat supply, which USDA pegged at 16.3 MMT, is down 22 percent from 2016/17 and results in a U.S. spring wheat stocks-to-use ratio of 24 percent. The ratio was 44 percent in the August 2016 WASDE and 51 percent in the August 2015 report. The current low stocks-to-use ratio seems supportive for U.S. spring wheat prices. Many in the industry believe supply will decrease further when abandoned acres are determined.  The North Dakota Wheat Commission noted in Assessing the Wheat Quality Council Tour 2017 Yield Estimate (below), …abandoned acres will certainly have a significant impact on final production for both spring and durum, but may not be fully reconciled until USDA releases its final harvested acreage report for the 2017 crops.”

The drought that is impacting the United States is also decreasing yield potential in Canada. USDA now estimates 2017/18 Canadian wheat production will total 26.5 MMT, down 16 percent from the prior year. The United States and Canada normally account for 60 percent of global high protein wheat exports.

Favorable spring wheat growing conditions in Russia and Kazakhstan may partially offset lower North American spring wheat production. Time will tell what quality and quantity of spring wheat is available for export, and at what value. Customers should remain abreast of current crop conditions, harvest conditions and U.S. prices and contact their local USW representative for any questions concerning the 2017/18 U.S. wheat crop.

2. Assessing the Wheat Quality Council Tour 2017 Yield Estimate
Reprinted with Permission from “Agweek,” August 2, 2017

[Editor’s Note: The original source for this article is the North Dakota Wheat Commission.]

The annual Wheat Quality Council (WQC) tour of the spring and durum wheat region took place the week of July 24, with the final yield result sparking questions and sharp criticism, especially in social media circles. The North Dakota Wheat Commission (NDWC) would like to acknowledge these concerns from producers, assess the crop tour yield estimate, and clarify some misinformation.

The wheat tour is organized by the WQC, based in Kansas City, not the NDWC. The tours are just a small part of the overall mission of the Council. Its primary focus is being a collaboration point and organization to test and evaluate new wheat varieties for end-use quality, and to ensure U.S. wheat production is meeting the quality needs of the wheat industry. It also serves to expand communication and education between wheat producers, wheat breeders, millers, bakers and other end-users.

The tour calculated an average yield of 38.1 bushels per acre for hard red spring wheat. While this is the lowest yield in about ten years for the tour, it was higher than expected by many producers, considering the severe drought conditions gripping nearly all western North Dakota. The NDWC agrees that this overall yield was higher than we anticipated based on weekly crop ratings and producer reports, and the WQC average yield needs to be looked at in its full context.

Why was the tour estimate higher than expected? Most routes covered central and eastern parts of the state, and higher yielding areas of Minnesota, with a lower than normal percent of field counts in western areas. This was not done intentionally; the tour has never taken routes into the far west portion of the state or into eastern Montana (also in severe drought). In more normal years when crop conditions are more balanced across the region, this has not been as big of an issue. However, in a drought year like this with high abandonment, it led to a lower than normal percent of field counts from western areas. The yield estimates given at the end of each day and at the end of the tour are simple averages. They are not weighted by production and there are no county yield estimates released. For durum, the average yield came in at 39.7 bushels per acre, which is well above the July USDA estimate of 27 bushels per acre for North Dakota. The tour routes did not cover the main durum producing counties in the state, which are facing the most intense drought conditions.

Accounting for abandoned acres is difficult, since yield reports are based on actual acres harvested for grain, not planted acres. It is well known that large portions of the crop are being abandoned due to the drought conditions in western growing regions, including South Dakota and Montana. Participants on the tour noted that on some routes, anywhere from 30 to 50 percent of the fields had been abandoned.

These abandoned acres will certainly have a significant impact on final production for both hard red spring and durum, but may not be fully reconciled until USDA releases its final harvested acreage report for the 2017 crops. Normal abandonment rates in the spring wheat region are 2 to 3 percent. The eastern acres will likely see normal abandonment, but portions of the western drought areas could be as high a 40 percent. In 2002, North Dakota abandoned 13 percent of its wheat plantings, and the rate was 23 percent in the 1988 drought. The question of abandonment is a concern in the market and once fully understood, it will have a big impact on final production; it is something buyers, producers and all involved in the wheat industry will need to focus on.

USDA’s July production report projected an average spring wheat yield of 38 bushels for North Dakota, 61 bushels for Minnesota, 26 for Montana, and 34 for South Dakota. All the USDA data is based directly on producer surveys with no objective yield surveys taken in fields. The upcoming August and September USDA estimates will follow the same pattern for yield, but it is uncertain when major adjustments for abandoned acres will be included. In its July estimate, USDA pegged planted acres of spring wheat in Montana, South Dakota and North Dakota at 8.55 million, and harvested at 8.22 million, reflecting a 4 percent abandonment level. For durum in Montana and North Dakota, it pegged planted acres at 1.75 million, with expected harvested acres at 1.7 million, just 3 percent abandoned. If final harvested area ratios fall to levels seen in 2002 across the region, there is another 1 million acres that need to be taken out from final production equations. This is a significant number, and some producers say it will be even higher.

Emotions are high this growing season, especially for producers in the heart of the severe drought conditions. The unexpected higher yield estimate and decline in prices since the beginning of July due to several factors has intensified these emotions. The wheat tour result is just one piece of information the markets react to. Two of the three days of the tour, the market moved higher, with analysts citing other factors as well, such as technical sell points, corn and soybean weather forecasts, and the start of spring wheat harvest impacting trends. The final harvest and yield report from producers themselves, as well as a full recognition of abandoned acres, and both domestic and international demand factors, will be the final driving forces in establishing the value of the 2017 crop.

When the full extent of the drought-impacted production areas is considered, it certainly appears the tour overestimated both spring wheat and durum yield potential in 2017. For durum, it is significant since likely two-thirds of the main region was not part of the survey routes. For spring wheat, it may not be as significant because there is strong yield potential in the eastern third of [North Dakota and] into Minnesota that will offset some, but not all, of the reduction in harvested acres in the west … Tour organizers have noted the strong negative reaction from producers from the final tour yield results. And also heard from the NDWC and producers during the tour about concerns over the lack of accounting for abandoned acres and lack of field counts in western areas. It will lead to some reevaluation of routes in future tours, or recognition of the need to weight yield counts to better account for significant crop condition difference between regions.

The tour has been conducted for more than 20 years, and has provided a great opportunity to build connections between producers in this region and some of its most important customers. This year may have added some challenges, but it also provides an opportunity to expand communication along all segments of the industry. Milers and other end-users of wheat grown in our region need to have producers be successful, for them to be successful.

3. Essential Wheat Crop Quality Analysis is Underway

Because no two crops are alike, the world’s flour millers, bakers and wheat food processors must have some assurance that the wheat they buy will meet their needs. That is why U.S. Wheat Associates (USW) and its partner organizations collect and analyze samples of all six classes of U.S. wheat, compile results and share that data around the world every year.

Legacy organizations to USW first identified the need to quickly gather and share new crop data more than 55 years ago. Now, wheat farmer checkoff dollars and Market Access Program (MAP) funding are invested to publish a complete picture of each year’s harvest. This commitment to transparency offers confidence in the data that, together with the trade service and technical support also funded by USDA Foreign Agricultural Service programs, helps differentiate U.S. wheat exportable supplies.

USW works with several wheat quality organizations to collect, grade and analyze thousands of wheat samples from local elevators and sub-lot samples from export elevators. Sampling begins with early winter wheat harvest and continues until the U.S. hard red spring (HRS) and northern durum harvests are complete, usually by early October, although if warm, dry conditions continue, that end may come early this year. The data is compiled by class and by production region with the soft red winter (SRW) class report coming first, followed by other individual class reports and a complete USW Crop Quality Report by late October. All reports are published on www.uswheat.org. The Crop Quality Report is also printed as a booklet in English, Spanish, French, Arabic and Mandarin.

USW then sends teams of its colleagues, farmers and wheat quality experts out to present that year’s data to its buyers. By mid-December, USW has presented the latest characteristics for all six U.S. wheat classes to hundreds of buyers, millers and processors in more than 25 countries. Buying decisions are made because of this effort; some are acted upon quickly. For example, with information they learned at USW’s 2015 Crop Quality Seminar, millers in Portugal imported HRS for the first time in three years.

U.S. wheat crop quality data extend what our farmers produce into competitive business information customers need. Without funding from farmers through their state wheat commissions, the MAP, and the support of federally-funded inspection and quality analysis labs, this essential service to overseas customers would not be possible.

4. Global Recognition for U.S. Wheat Baking Industry Expertise

Bakers around the world consider flour produced from U.S. wheat to be consistently high quality and versatile. That reputation is earned largely because wheat farmers grow excellent crops (supported by quality data from USW) the crops are delivered through the most efficient grain handling system in the world, and because USW invests trade service, technical support and more to serve the world’s wheat buyers and wheat food processors.

One of those technical experts is Bakery Consultant Roy Chung who, from a base in Singapore, has represented U.S. wheat for almost 40 years. He has consistently added value to U.S. wheat imports by introducing quality bread processing to the milling and baking industry across South Asia in conjunction with his USW colleagues and training program collaborators.

The association of such expertise and service with U.S. wheat’s reputation overseas is so well regarded that leading French yeast and fermentation products company Lesaffre asked Chung and USW to collaborate on an innovative publication called “Sandwich Bread in Words. A Glossary of Sensory Terms.” Lasaffre describes the booklet, published in January 2017, as a tool “to formalize a common vocabulary about sandwich bread, drawing on different cultures and incorporating a repeatable assessment method … to create a bridge to connect experts with consumers.”

Lasaffre’s baking ingredients and flour produced from HRS and HRW wheat classes are ideally suited for the high quality “sponge and dough” system bread products that Chung describes in the book: “The internal characteristics, like flavor, grain, texture, taste, mouthfeel … will determine if the customer returns for another loaf. The vested interest of the baker is to make the best possible looking and tasting product with the best ingredients available.”

Didier Rosada confirms that consumers around the world are looking for better tasting, more natural bread. He is a globally respected master baker and vice president of operations at Uptown Bakers, where he produces quality baked goods for food service and retail stores in Maryland, Washington, D.C., and Virginia. He is a frequent consultant with USW, particularly in Latin America.

“Baking is changing in a good way,” Rosada said. “At my bakery, my process is as natural as possible, with long fermentation time, like it used to be done, to bring back the flavor profile of a good bread, the keeping qualities and texture, etc. And the classes of wheat that we have in the U.S. are perfect for that. I am using a flour that is almost 100 percent hard red winter or sometimes combined with hard red spring wheat.”

5. New Port Worker Contract Adds Stability to PNW Export Operations

Members of the International Longshore and Warehouse Union (ILWU) are crucial workers at U.S. export grain elevators. Overseas wheat buyers in the Asia-Pacific region likely recall the challenges faced in 2015 during a lengthy contract negotiation that occasionally interrupted the West Coast supply chain. Although the dispute was finally settled with a contract through June 2019, trade organizations representing shippers like the Pacific Grain Exporters Association and transportation providers encouraged the parties to consider negotiating a longer-term agreement.

On Aug. 4, union longshore workers at 29 ports in Oregon, California and Washington ratified a new, three-year contract extension with the PMA. The contract virtually eliminates the possibility of a labor-related disruption through July 1, 2022. The contract also increases wages along with health and pension benefits.

The new contract clearly adds operational stability to Pacific Northwest ports that loaded more than 13 MMT of U.S. wheat exports in marketing year 2016/17, representing almost 48 percent of total U.S. overseas sales. Along with the U.S. government’s commitment to continuous improvement of the Columbia-Snake River System, USW believes this is very good news for overseas wheat buyers and U.S. farmers.

6. Wheat Industry News

·        Quote of the Week: “There’s a modest profit opportunity right now. Really the last month put some sunshine in the deal for a lot of people, us included. We’ll get closer to $6 Portland, and that’ll work for us.” Idaho farmer “Genesee Joe” Anderson in a “Capital Press” article about the 2017/17 soft white wheat crop.

·        Price Risk Management Option. CME Group announced the first trades of the Australian Wheat FOB (Platts) futures contract that launched July 24, 2017. This contract expands CME’s existing line up of SRW, HRW, EU wheat and Black Sea wheat futures contracts.

·        Working Together to Achieve Food Security. At a time when weather patterns are becoming less predictable and population pressures on food supply are increasing, a group of crop scientists, including from the International Maize and Wheat Improvement Center (CIMMYT), are laying the groundwork for an international crop network to systematically tackle threats to global food security. More information is posted online.

  •    Registration for the 2017 Borlaug Dialogue International Symposium Oct. 18 to 20, 2017, is now open. This year’s theme, “The Road out of Poverty,” reflects the vision of 2017 World Food Prize Laureate Dr. Akinwumi Adesinato to treat agriculture as a business, promote good nutrition and education, and embody the lesson he learned from Dr. Norman Borlaug to “take it to the farmer.” More information is posted online.

    ·        Better Wheat Nutrition. Arcadia Biosciences, Inc. and Dow AgroSciences LLC, have announced a collaboration to jointly develop an improved, non-GMO wheat quality trait in North America. Company executives said the work will help improve wheat’s nutritional profile and quality while helping farmers receive more value from the crop. More information is posted online.

·        Information About Future “Wheat Letter” Distribution. Starting with the Sept. 7, 2017, issue, you will receive “Wheat Letter” using a new service, Emma Email Marketing. To help ensure that you continue receiving our newsletter using the new service, please add communications@uswheat.org to your contacts list.

·        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.

Nondiscrimination and Alternate Means of Communications
USW prohibits discrimination in all its programs and activities based on race, color, religion, national origin, gender, marital or family status, age, disability, political beliefs or sexual orientation. Persons with disabilities who require alternative means for communication of program information (Braille, large print, audiotape, etc.) should contact USW at 202-463-0999 (TDD/TTY – 800-877-8339, or from outside the U.S., 605-331-4923). To file a complaint of discrimination, write to Vice President of Finance, USW, 3103 10th Street, North, Arlington, VA 22201, or call 202-463-0999. USW is an equal opportunity provider and employer.

 

 

Source: U.S. Wheat Associates