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January 19, 2012
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.” The activities of USW are made possible by producer checkoff dollars managed by 19 state wheat commissions and through cost-share funding provided by USDA’s Foreign Agricultural Service. For more information, visit www.uswheat.org or contact your state wheat commission. Original articles from Wheat Letter may be reprinted without permission; source attribution is requested.
In This Issue:
1. Abundant World Wheat Supplies Pressure Prices
2. Winter Wheat Seedings up Overall, But Too Early to Tell Potential
3. USW Helping Millers and Bakers Build Whole Wheat Product Business
4. Dick Prior to Retire but USW Welcomes Back Mark Samson
5. Wheat Industry News
Online Edition: Wheat Letter – January 19, 2012 (http://bit.ly/wOaIp0)
PDF Edition: (See attached file: Wheat Letter – January 19, 2012.pdf)
1. Abundant World Wheat Supplies Pressure Prices
By Casey Chumrau, USW Market Analyst
There is a lot of wheat in the world. More, it seems, each month. For the seventh month in a row, the U.S. Department of Agriculture (USDA) increased its 2011/12 global wheat supply estimate as part of its monthly World Agricultural Supply and Demand Estimates (WASDE) report. In the report released Jan. 12, USDA estimates global supplies at a record 891 million metric tons (MMT), up 2.7 MMT from last month. Markets reacted negatively to the bearish report last week, even though it only reconfirmed previous estimates.
World production is a major contributing factor to such large global stocks, setting a record for three of the last four years. This year, USDA expects a new record of 692 MMT global production. Total production estimates increased 2.5 MMT from last month, including a 1.5 MMT increase in Kazakhstan to 22.5 MMT due to nearly perfect growing season weather. Modest production increases in Russia and Brazil accounted for the rest of the increase. USDA now estimates total Black Sea production at 114 MMT, up 175 percent from last year when major drought greatly cut production. Ample supplies remain despite four consecutive years of record demand. Total world consumption estimates are up 4 percent from last year to 681 MMT, including a record 131 MMT in feed wheat demand. The only change in consumption estimates this month was an additional 1.0 MMT of feed wheat usage in Kazakhstan and a 500,000 metric tons (MT) reduction in U.S. domestic consumption.
With so much wheat available and such high demand, it follows that world exports are also strong. USDA expects total world trade to reach 139 MMT, which would be the second largest on record if realized. A 500,000 MT drop in Australian exports offset a Russian increase of the same amount, putting estimates for those countries at 21.0 MMT and 19.5 MMT, respectively. Estimated U.S. exports increased 700,000 MT raising the current projection to 25.9 MMT. Higher sales expectations for hard red winter (HRW), hard red spring (HRS) and soft red wheat (SRW) more than made up for reduced sales expectations for white wheat.
Such abundant supplies of wheat pressured prices and weighed on the futures markets last week. In the two days following the report’s release, March futures contracts dropped between 2 and 6 percent. The drop is consistent with a historical trend in which wheat markets have difficulty sustaining prices when the global stocks-to-use ratio (ending stocks divided by total use) is greater than 30 percent. The current global stocks-to-use ratio stands at 31 percent.
The January WASDE did not contain any new or surprising information with regard to wheat. The supply and demand situation has been bearish for wheat all year, but outside factors have created market rallies. Tight corn stocks, the fluctuating strength of the U.S. dollar and uncertainty in global financial markets all have been major influences on wheat markets so far this marketing year. While price movements will remain unpredictable in the coming months, the large amount of wheat in the world and increasing wheat usage is certain.
2. Winter Wheat Seedings up Overall, But Too Early to Tell Potential
By Julia Debes, USW Communications Specialist
USDA’s first look at planted winter wheat acreage gave mixed reports for the different winter wheat classes (HRW, SRW and white wheat), but farmers coast to coast caution that the crop remains vulnerable until harvest.
USDA upped its estimate for total winter wheat seeded area to 41.9 million acres for 2012 in its Jan. 12. Winter Wheat Seedings report. The increase is 3 percent above 2011 and 12 percent above 2010, which USDA’s National Agricultural Statistics Service attributed to higher prices and an acreage rebound in Kansas, Oklahoma and Texas.
HRW Acreage Up
For Kansas, the largest HRW producing state, USDA reported winter wheat acres increased 8 percent to 9.5 million acres. Like many farmers in western Kansas last year, Dighton farmer Ron Suppes had a failed wheat crop. He reports that he planted more HRW this year to take advantage of the fertilizer he applied to last year’s crop. Bill Spiegel, director of communications for Kansas Wheat, added that many farmers with failed corn, soybean and sorghum crops planted those fields to wheat, further incentivized by the relatively high federal crop insurance target price at the time.
Across the state in Muscotah, KS, farmer Jay Armstrong explained that his wheat acres were up slightly only because of the size of fields planted this year compared to last, noting that farmers in northeast Kansas do not plant much wheat.
For Texas, USDA increased winter wheat acreage 11 percent to 5.9 million acres, putting planted acres back on track with the historical average according to Steelee Fischbacher, communications director at the Texas Wheat Producers Board and Association. She explained that moisture remains a critical factor in translating planted acres to harvested acres.
“Winter precipitation in key wheat-growing regions helped ease drought conditions, but it is still too dry,” she said. “It is going to take significant rainfall throughout the growing season to make an average crop.”
Overall, USDA increased seeding estimates of HRW 6 percent to 30.1 million acres, despite limited planting in South Dakota due to dry fall conditions and record low seedings in Nebraska, where USDA estimated an 8 percent drop in seedings to 1.4 million acres. Larry Flohr, who farms near Chappell, NE, said farmers there were switching from wheat to corn. He said, “With dryland corn moving west into the Wheat Belt, we’re losing some rotational acres that are being taken out of wheat fallow and put into corn.”
Total SRW Acreage Down
In contrast to the bump in HRW planted acres, USDA dropped total seeding estimates of SRW wheat 2 percent to 8.37 million acres as a late row crop harvest delayed plantings in the Corn Belt and Northeast.
For Ohio, USDA reported that the wet soil conditions in the fall of 2011 resulted in a record low 580,000 acres planted to wheat.
“Recognizing the tremendously wet fall we had in Ohio, it was a serious challenge to get into our wet fields to harvest fall crops and plant winter wheat,” Jack Irvin, director of research and community affairs at the Ohio Corn & Wheat Growers Association, said. Paulding farmer Doug Goyings planted 17 percent less SRW wheat than last year and explained that with poor stands from very wet conditions, growers may plow up more wheat fields come spring.
To the east in Maryland, USDA bumped winter wheat acreage up 12 percent to 290,000 acres. Jason Scott, who farms on the Delmarva Peninsula in Maryland near Stevensville, reported that he planted close to the same amount of SRW that he did last year. He said with good weather, area farmers were able to plant most of the wheat they had intended.
White Wheat Acreage Lowered Slightly
USDA also dropped planted acreage of white winter wheat 3 percent to 3.49 million acres.
USDA reported winter wheat acreage in Washington dropped 2 percent to 1.72 million acres, mostly due to regular crop rotation. Like other farmers in his area, Randy Suess, who farms near Colfax, WA, has limited rotation options and reports that he planted his traditional acreage of soft white (SW) wheat this year.
USDA also reported winter wheat acreage down 2 percent in Oregon to 810,000 acres. Bob Newston farms in northeastern Oregon near Helix and reports his acreage was down, but mostly due to crop rotation with canola and spring barley.
For Idaho, USDA estimated winter wheat acreage down 5 percent to 780,000 acres. Ririe farmer Gordon Gallup had a late fall that prevented him from planting before the crop insurance deadline. He reported that the high contract price of malt barley and demand for contract potatoes and sugar beets in his area have some farmers talking about plowing up their winter wheat come spring.
Overall, USDA reports the winter wheat crop is in good condition. At the end of November, USDA rated the winter wheat crop at 52 percent good to excellent, compared with 47 percent the previous year. However, Nat Webb, who farms near Walla Walla, WA, warned that there is still a lot of time until harvest.
“We still have time to receive additional precipitation, so things could look better before harvest,” he said. “Then again, things could also deteriorate and look worse later in the year.”
3. USW Helping Millers and Bakers Build Whole Wheat Product Business
By sharing expertise and experience, U.S. Wheat Associates (USW) is helping its customers overcome challenges to take advantage of the growing whole wheat product market and demonstrating why U.S. wheat is an ideal source for high-quality, tasty whole wheat products.
Scientists are uncovering more and more evidence that whole grains, including whole wheat, are very healthy. They are an important source of antioxidants, fiber, B vitamins, vitamin E, magnesium, iron and other vitamins, minerals and phytonutrients. As part of a healthy diet, whole grains may reduce the risks associated with heart disease, stroke, cancer, diabetes and obesity.
Yet, as BakingBusiness.com recently noted, millers and bakers must adjust to the practical aspects of making whole wheat products (read more about “Working with Whole Grains” at BakingBusiness.com). Flour blends must be developed and tested and production equipment must be adjusted to accommodate rough and heavy doughs. Without proven production guidelines, these changes may result in inferior products that do not appeal to consumers in spite of their perceived health benefits.
USW is helping millers and bakers develop and promote the best industry standards and production protocols for high-quality whole wheat products. In 2011, for example, the USW Seoul Office, the Korean Master Bakers Association (KOMBA) and Korea Flour Mills Industrial Association (KOFMIA) organized five whole wheat baking seminars. These seminars included lectures on whole wheat flour characteristics, nutritional value and application technology for bakery products.
Back in the United States, a Korean team of two flour millers, a master baker and a research scientist—sponsored by USW—gathered at the Wheat Marketing Center in Portland, OR. There, the group developed production protocols for breads made with whole grain flour, specifically using U.S. HRS, SW and HRW wheat. Additional courses testing whole wheat flour blends are planned for 2012.
Dr. Gary Hou, technical director and Asian foods specialist with the Wheat Marketing Center, traveled to China last year as a USW consultant to attend the inaugural Whole Grain Foods Development International Forum. He presented the technical aspects of producing whole wheat flour products to nearly 200 participants. Along with Andy Zhao, country director in the USW Beijing office, Dr. Hou visited four flour mills to discuss how U.S. SW wheat could help maintain the bright white color preferred by Chinese consumers and how the stronger gluten content of U.S. HRW or HRS wheat could address technical challenges of using whole wheat flour.
USW’s work has also earned the opportunity to help government officials promote whole wheat products. The Taiwan Bureau of Standards, Metrology and Inspection has specifically invited USW to help establish national standards for whole wheat flour and whole wheat baking products. USW’s efforts to promote whole wheat products even encouraged the Taiwan Department of Health to set up a guide to encourage consumers to eat whole wheat products as part of at least one meal a day.
When it comes to taking advantage of baking trends such as the rising demand for whole wheat foods, USW is there to help with technical know-how and personalized trade servicing, backed by the highest quality, most reliable source of wheat in the world.
4. Dick Prior to Retire but USW Welcomes Back Mark Samson
After 22 years managing wheat export market development in the Middle East, East and North Africa for USW, Regional Vice President Dick Prior has announced that he will retire later this year. Prior will be replaced by Mark Samson, who is returning to USW after serving in Singapore as Regional Vice President, South Asia, from 1997 to 2009.
“Dick Prior and his team in our Cairo, Egypt, and Casablanca, Morocco, offices are doing excellent work in a large but competitive wheat export region,” said USW Vice President of Overseas Operations Vince Peterson. “Our standards for Dick’s replacement were very high and in Mark Samson we have definitely found the person who meets them. We are pleased that he agreed to come back to work for our organization and the wheat farmers we represent.” Samson has already started his transition back to USW and will begin work in the USW Cairo Office around May 1.
“We have worked hard to demonstrate that there is a profitable market in this region for better quality wheat foods using U.S. wheat,” said Prior, who was raised on a farm in central Washington and has worked in the Middle East for 31 years. The key to continued success, he believes, will be innovation and patience.
“While price is still the primary factor in buying decisions, a supply of reliable and consistent quality is starting to carry more weight in many regional markets to meet a growing trend toward automated baking lines that need consistent quality,” Prior said. “That will help increase U.S. wheat demand in the region.”
Samson’s experience in wheat export promotion and international business is ideally suited for his management role in a USW region serving 32 countries and competing with wheat supplies from the Black Sea area, Europe and Australia. After completing graduate work in agricultural economics at the University of Idaho, Samson served as assistant director in the Washington, DC, office of Western Wheat Associates, a legacy organization to USW. He was a senior accountant with an international construction firm serving in several overseas assignments, including in Saudi Arabia.
Samson was administrator of the Idaho Wheat Commission from 1985 until 1996 and the Idaho Grain Producers Association named him “Wheat Industry Man of the Year” for 1996. In his senior management role with USW, Samson directed all market development activities in 13 countries in South Asia and the Indian Subcontinent. He moved from the USW Singapore Office to Idaho in 2009 and most recently was consulting with Pacific Northwest state wheat commissions on market assessments and other export-oriented market development projects.
5. Wheat Industry News
- Winter Wheat Conference Next Week. Wheat growers and wheat organization staff will head to Washington, DC, next week for the annual Wheat Industry Winter Conference. The conference will include a full complement of committee and Board sessions for both the National Association of Wheat Growers (NAWG) and USW, along with a joint meeting of the two Boards and a meeting of the NAWG Foundation. For more information, visit http://bit.ly/zOeBqc.
- Idaho Wheat Commission and Limagrain Cereal Seeds Make Research Endowments. The Idaho Wheat Commission will create two faculty research endowments with $2 million to the University of Idaho’s College of Agricultural and Life Sciences. In addition, Limagrain Cereal Seeds has agreed to collaborate with the college on breeding new wheat varieties for Idaho and the Pacific Northwest. For more information, visit http://idahowheat.org/.
- OSU hires Idaho Wheat Breeder. Oregon State University has hired a wheat breeder from Idaho to head its internationally recognized wheat variety development program. Robert Zemetra, a professor of plant breeding and genetics at the University of Idaho, will start May 23. Aside from developing winter wheat varieties, Zemetra’s research has focused on applied biotechnology, including work related to disease resistance. He’s working with OSU scientist Carol Mallory-Smith to study gene flow between wheat and jointed goatgrass. For more information, visit http://bit.ly/z46r5J.
- NAMA Establishes KSU Instructor of Milling Position. The North American Millers’ Association ( NAMA) has committed $300,000 to the Kansas State University department of grain science and industry to establish the NAMA Instructor of Milling Award. Fran Churchill, a K-State alumna with more than 20 years of milling industry experience, joined the faculty on Jan. 3. For more information, visit http://bit.ly/zbRd14.
- GFF Stresses Importance of Folic Acid in Birth Defects Prevention. This January, as part of National Birth Defects Prevention Month, the Grain Foods Foundation has partnered with the Spina Bifida Association to remind all women of childbearing age of the important role folic acid plays in preventing neural tube birth defects. For more information, visit http://bit.ly/wLTGEC.
- WFC Helps Sponsor Whole Grains Summit 2012. The Wheat Foods Council will partner with the Grains For Health Foundation for a “Whole Grains Summit 2012” next May in Minneapolis, MN. The event will convene scientists, industry experts and health professionals from around the world to discuss research on whole grains, dietary fiber and functional grain components. For more information, visit http://bit.ly/yv1lOr.
- MGEX Changes HRS Contract. MGEX will remove the U.S. origin from its HRS contract effective with the September 2012 contract month. Further, the Exchange announced the addition of a DON specification and a change in storage rates. For more information, visit http://bit.ly/zo6nEC.
- Tom Mick to Retire. After 25 years, Tom Mick, chief executive officer of the Washington Grain Commission, announced he will retire June 30. Tom spent eight years as director of the USW Singapore Office and two years in the USW Headquarters Office. Thank you, Tom, for your service. For more information, visit http://bit.ly/A6VFoX.
- Condolences to Cymantha Fredrickson, assistant director of the California Wheat Commission, on the death of her father.
- Follow USW Online. Check out 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, additional photos at www.flickr.com/photos/uswheat, plus video stories at http://www.youtube.com/uswheatassociates.