April 15, 2010 3103 10th Street, North Suite 300 Arlington, VA 22201 Tel: (202) 463-0999 Fax: (703) 524-4399 Wheat Letter U.S. Wheat Associates is the industry s market development organization working in more than 100 countries on behalf of America's wheat producers. The activities of U.S. Wheat Associates 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. USW Helping Customers Adjust to River System Upgrade 2. Construction Continues on New PNW Export Elevator 3. U.S. Wheat Exports Set Faster Pace; New Crop Sales Strong 4. Researchers Responding to Long-Term Wheat Supply Challenge; Biotech Good for the Environment 5. Register for USW's 2010 Latin American Buyers Conference in English or en Española 6. Wheat Industry News PDF Edition: (Attached) Online Edition: Wheat Letter - April 15, 2010 1. USW Helping Customers Adjust to River System Upgrade Most U.S. wheat importers are aware that the Columbia Snake River System (CSRS) will be closed for extended maintenance above The Dalles for 14 to 16 weeks beginning Dec. 10, 2010. The U.S. Army Corps of Engineers announced in June 2009 that it would repair and renovate locks at The Dalles and John Day dams on the Columbia River and at the Lower Monumental dam on the Snake River. This forward-thinking investment assures that this critical waterway will remain operational for decades to come. U.S. Wheat Associates (USW) began informing importers about the closing soon after it was announced. Representatives of the Pacific Grain Exporters Association (PGEA) presented information on the situation to hundreds of customers at USW s annual Crop Quality Seminars late in 2009. USW representatives are now meeting with customers well in advance of the closure to help identify mutually beneficial ways to manage any interruption in grain flow. Extensive lock closures like this are very unusual, but the CSRS is poised for tremendous growth over the next fifteen years, said Pacific Northwest Waterways Association Executive Page 1
Director Glen Vanselow (See Construction Continues on New PNW Export Elevator, below). Noting that structural problems with the downriver lock gates at The Dalles last September forced an unscheduled closing, Vanselow added that this upgrade is absolutely necessary. We have started customer trade service visits specifically to develop individual plans to deal with the situation, said USW VP of Overseas Operations Vince Peterson. In general, we are focused on helping customers analyze and adjust their expected wheat needs and logistical capabilities as needed before, during, and after the maintenance. Peterson also expects strong efforts by commercial interests to circumvent the loss of barge traffic above The Dalles during this period. It is also important to remember that an unusual closure like this focuses the attention of every participant between the producer and the buyer, Peterson said. The supply chain has an incentive to do everything it can as early as it can to keep the wheat flowing without major interruption. For example, Mid-Columbia Producers, Inc., operates a terminal elevator on the Columbia River below The Dalles that will remain open through the upgrade period. Alternate logistics to barge traffic include rail and trucking. Peterson believes sourcing soft white wheat through the closure may present some challenges because so much of it is barged to export elevators in Portland. It is possible that Oregon s Willamette Valley wheat production, which is trucked to Portland, could help fill in temporary gaps in soft white availability. We take this situation seriously and USW is doing everything necessary to help our customers, Peterson said. Noting some of the more breathless media coverage of the situation of late, Peterson made a point to add that USW believes stories about trade disruptions and price swings related to the maintenance project are purely speculative. For more information, contact your local USW representative. To read more about the planned renovation, visit Wheat Life online, the official publication of the Washington Association of Wheat Growers, at http://www.washingtongrainalliance.com/images/e0177801/mar10wl4web.pdf, and the Pacific Northwest Waterways Association at http://www.pnwa.net/new/articles/csrs%20extended%20lock%20outage.pdf. 2. Construction Continues on New PNW Export Elevator Silos to store and separate several classes of U.S. wheat and other grains are built and additional construction is progressing well at the Export Grain Terminal in Longview, Washington. This joint venture between global agricultural and shipping companies Bunge North America, ITOCHU and STX Pan Ocean is expected to be completed in the third or fourth quarter of 2011. Page 2
USW Vice President John Oades recently told The Capital Press that the new facility has a larger rail and barge off-load capacity, more storage and faster vessel-loading capacity than other elevators on the Columbia Snake River System where port load-out capacity has been at or near maximum levels. Oades told Capital Press writer Matthew Weaver that the additional capacity also helps the Pacific Northwest industry to further address wheat segregation and loading needs to meet the increasing quality and consistency demands of international buyers. Oades also noted that with additional renovations and expansions planned for several other elevators, the Columbia River channel deepening project intended to allow vessels to load up to 60,000 metric tons, and major lock upgrades, the region's ports will become even more efficient. Read the Capital Press article at http://www.capitalpress.com/content/mw-longview-grain-terminal-032610-art. 3. U.S. Wheat Exports Set Faster Pace; New Crop Sales Strong by Chad Weigand, USW Market Analyst The U.S. Department of Agriculture (USDA) increased the MY 2009/10 U.S. export forecast by 1.1 million metric tons (MMT) in its April World Agricultural Supply and Demand Estimates (read the latest report at http://www.usda.gov/oce/commodity/wasde/). This puts the new export forecast at 23.5 MMT, which would be the lowest since MY 2002/03 (23.1 MMT). The previous estimate, at 22.5 MMT, had exports pegged at their lowest level since MY 1971/72. USDA noted that the boost in recent grain shipments was partly responsible for the increased projection. Commercial sales data shows that the United States exported 5.3 MMT of wheat between Jan. 1, 2010, and March 31, growing the total volume for the year from 16.1 MMT to 21.4 MMT. The 5.3 MMT sales increase during the January to March time frame is the second highest in the past five years, following only 2007 when sales increased by 6.5 MMT (see chart). A quicker pace of sales also applies to new crop sales for the next marketing year (NMY). Current NMY sales total 956,300 MT, 21 percent greater than NMY sales this time last year. Although current NMY sales are two percent lower than the five-year average of 970,800 MT, the five-year average contains a major outlier. In March 2008, NMY sales reached 3,000,000 MT when global supplies were limited and other major exporters restricted sales to ensure domestic supplies. Removing this outlier, the average is 459,700 MT, well below March 2010 NMY sales. The largest buyers of new crop sales to date are Nigeria, the Philippines, and Mexico. Nigerian NMY purchases total 316,000 MT, compared to only 12,000 MT a year ago. Hard red winter makes up the bulk of Nigeria s new crop purchases at 280,000 MT. HRW sales for delivery in MY 2010/11 currently total 368,000 MT, which is more than double from last year s NMY sales of 158,100 MT. The Philippines has booked 200,400 MT of exclusively soft white wheat. White wheat NMY sales, at 292,900 MT, are up 64 percent from last year. Mexico has bought 182,200 MT, of which 103,500 MT is soft red winter. NMY SRW sales currently total 165,700 MT. Page 3
4. Researchers Responding to Long-Term Wheat Supply Challenge; Biotech Good for the Environment There is no denying the obvious. World wheat supply today is in good shape. Not many businesses that rely on wheat, however, can forget that two years ago that supply was at record low levels down to only about 21 days in the United States. The resulting price spike was a huge problem for the industry. The fact is farmers around the world are planting less wheat over time because they can make more money planting other crops (see Wheat Industry News below). Research investment in improved wheat varieties is also falling behind other crops. Unless something changes, we see smaller supplies of wheat, produced only in areas where profitable alternatives do not exist or on marginal acres where crop failures are more likely. Declining production is a long-term concern to millers, bakers and food businesses. The U.S. wheat industry believes that biotechnology provides one platform for new solutions to meet the challenges to commercial viability. The support for moving forward with the technology is already spurring new investment in conventional breeding and biotechnology research. Meanwhile, evidence is mounting that advanced plant breeding and crop production technology is good for the environment. One of the latest examples is a recent announcement that Syngenta and the International Maize and Wheat Improvement Center (CIMMYT) are forming a cooperative venture for research and development in native and biotechnology traits, hybrid wheat, and in the combination of seeds and crop protection to accelerate plant yield performance. The two organizations are already working together on Ug99 stem rust resistance research. Page 4
Noting that global wheat demand growth is outpacing total production increases, organization leaders echoed the need to equip producers around the world with the tools to produce the food needed for a rapidly growing population. The partners asserted that public-private collaboration is essential for advancing agriculture to meet global challenges such as food security, climate change, natural resource depletion, and access to technology. Read more at http://www.cimmyt.org/english/wps/media/syngenta-cimmyt-partnership.htm or http://www2.syngenta.com/en/media/mediareleases/en_100406.html. Also, a new report from the National Research Council indicates that many U.S. farmers who grow genetically engineered (GE) crops are realizing substantial economic and environmental benefits -- such as lower production costs, fewer pest problems, reduced use of pesticides, and better yields -- compared with conventional crops. The report also notes concerns about how producers can better manage an emerging issue with weeds developing herbicide resistance. The new report is the first broad analysis of how the technology affects farmers. The researcher who led the National Research Council s work said on a National Public Radio story about the study that farmer perspectives are crucial because they are the ones using this technology and, while having much to gain, are also taking risks to use the technology. This analysis follows several previous Research Council reports that examined the potential human health and environmental effects of crops with biotech traits. For more information, visit http://www8.nationalacademies.org/onpinews/newsitem.aspx?recordid=12804. Read the National Public Radio story at http://www.npr.org/templates/story/story.php?storyid=125906838. Additional information Taking Stock of Biotech is available from The Consultative Group on International Agricultural Research (CGIAR), following a biotechnology conference held recently in Guadalajara, Mexico, by the Food and Agriculture Organization (FAO) of the United Nations, at http://www.cgiar.org/monthlystory/march2010.html. 5. Register for USW's 2010 Latin American Buyers Conference in English or en Española USW will hold its biennial Latin American Buyers Conference (LABC) June 23-25, 2010, at the Fairmont Turnberry Isle in Aventura, Florida. Conference and hotel registration (special rates available for a limited time) is now available in English and en Española on the USW Web site at http://www.uswheat.org/newsevents/meetings/doc/cf0cfc01b15c736b852576e2006d5070? OpenDocument#. Contact your USW representative for more information and look for more information about the conference in future issues of "Wheat Letter." 6. Wheat Industry News Corn, Oilseeds Beat Wheat Income in Ukraine. Agrimarket.Info reported on April 9 that corn (maize), sunflower and soybeans will become the most profitable crops planted this year in Ukraine (http://www.agrimarket.info/). USW VP of Overseas Operations Vince Peterson has examined the relative planting rates of corn and oilseed crops compared to wheat in every major wheat production region. The news that other crops will be more profitable Page 5
than wheat in Ukraine does not surprise us, he said. In fact, it is an established or emerging trend everywhere wheat is grown. Nigerian Millers to United States. Flour milling executives from Nigeria are traveling to the United States soon to tell the story of how a partnership between the U.S. government and wheat producers has helped them build the second largest industry in the West African nation. U.S. Wheat Associates (USW) is sponsoring the trade visit including stops in Washington, DC, Kansas, and Texas. Nigeria buys more U.S. hard red winter wheat every year than any other country and will likely be the largest U.S. wheat buyer in the world in MY 2009/10. Since 2001 when USW opened a technical service office in Lagos, average annual wheat sales to Nigeria have doubled from about 1.5 MMT to almost 3 MMT. KSU-IAOM Resident Milling Program. Two Kansas State University-IAOM Resident Milling Short Courses will be offered in June at the International Grains Program Conference Center in Manhattan, Kansas. The courses include: Mill Processes I: Basic Milling Principles -June 14-18, and Mill Processes II: Advanced Milling Principles - June 21-25. Developed by the International Association of Operative Millers (IAOM) and K-State's Department of Grain Science and Industry, these courses offer hands-on training at the Hal Ross Flour Mill and the Shellenberger Mill. Participants will gain a broader understanding of the milling process, become better decision-makers and learn to effectively integrate their job into the goals of their organization. Click here to read more: http://www.iaom.info/courses%20&%20workshops/residentcourses.htm. NCI Pasta Short Course. Twenty participants from the United States and Japan are attending the Pasta Production and Technology Short Course that runs from April 13 to 15 at Northern Crops Institute (NCI), Fargo, North Dakota. We have offered this course every year since 1984, and of the participants in this year s course, most of them come from companies that have been represented at the course in the past, says NCI Director Brian Sorenson. Food companies see this course as an good opportunity to increase their personnel's understanding of durum and pasta quality, Sorenson says. Click here to read more: http://www.usda.gov/oce/commodity/wasde/. In Our Thoughts. USW extends sincere sympathy to our colleague Linda de Hoog, Regional Program and Administrative Manager in the European Regional office in Rotterdam, The Netherlands, on the death of her mother. Nondiscrimination and Alternate Means of Communications U.S. Wheat Associates prohibits discrimination in all its programs and activities on the basis of 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 U.S. Wheat Associates 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, U.S. Wheat Associates, 3103 10th Street, North, Arlington, VA 22201, or call 202-463-0999. U.S. Wheat Associates is an equal opportunity provider and employer. Page 6