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Wheat Letter
April 17, 2014 U.S. Wheat Associates (USW) is the industrys 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. The activities of USW are made possible by producer checkoff dollars managed by 19 state wheat commissions and through cost-share funding provided by USDAs 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. Click here to subscribe or unsubscribe to Wheat Letter. In This Issue: 1. The Good, the Bad and the Ugly: Old Man Winter Takes Toll on HRW Crop 2. Winter Wheat Looks Good Outside of Central Plains 3. World Wheat Supplies Get a Lift but U.S. Stocks Look Tight 4. Dont Blame High Prices on Climate Changeat Least Not Yet 5. WTO Progress Demands Domestic Support Accountability 6. Wheat Industry News Online Edition: USW Price Report: Wheat Letter April 17, 2014 (http://bit.ly/1j8FBzi) www.uswheat.org/prices

1. The Good, the Bad and the Ugly: Old Man Winter Takes Toll on HRW Crop By Julia Debes, USW Assistant Director of Communications After promising crop conditions going into dormancy last fall, Mother Nature and Old Man Winter teamed up to blast the hard red winter (HRW) crop in the Central Plains with vicious winds, volatile temperature swings and far too little moisture. This week, USDA reported that the decline in fall-to-spring wheat conditions this year matches the modern-day record set in 1995-96 (see below). USDA National Agricultural Statistics Services (NASS) reported these conditions as of April 13 in its weekly Crop Progress report before a hard freeze struck the HRW growing region on April 14 and 15.

Source: USDA Weekly Weather and Crop Bulletin, April 15, 2014

Nationally, NASS reported that winter wheat conditions, as of April 13, declined slightly from the week before and remain similar to last year at this time with 32 percent rated very poor to poor, 34 percent fair and 34 percent good to excellent. Potential for freeze damage, however, is the story of the week. Agronomists explained that we will not know the extent of damage for a week to 10 days, but provided some initial thoughts. In a special freeze injury update on April 15, Dr. Jim Shroyer, crop production specialist at Kansas State University, noted that the hard freeze in Kansas was not nearly as severe as a freeze around this same time last year, but still could cause damage. The good news? According to Shroyer, wheat that has not jointed will show cosmetic damage almost immediately, but the growing point below the soil is better protected. For Kansas, NASS reported that as of April 13, just 31 percent of the wheat crop is jointed, close to last year, but still behind the five-year average of 47 percent. Wheat farmers in Oklahoma and Texas were not as lucky. Oklahomas HRW wheat crop reached 80 percent jointed as of April 13, compared to 52 percent last week, slightly ahead of last year at this time and slightly behind the five-year average. Winter wheat that has headed is even more susceptible to freeze damage, and NASS reported 16 percent of winter wheat headed in Texas. Rain Makes Grain, But Moisture Is in Short Supply. Marsha Boswell, director of communications at Kansas Wheat, stated that while temperatures did dip this week, the primary concern remains the need for moisture. The real issue in Kansas is the drought, she said. Almost everyone Ive talked to is more worried about the lack of moisture than the freeze. In Kansas, NASS rated topsoil moisture conditions at 69 percent very short to short and 31 percent adequate. These conditions rank worse than last year, when NASS rated 41 percent of topsoil very short to short. Subsoil moisture conditions were rated similar to last year at 70 percent very short to short and 30 percent adequate. The same is true in Oklahoma. NASS reported that the entire state had only received 55 percent of normal precipitation since March 1. According to the U.S. Drought Monitor, more than 13 percent of the state is in exceptional drought as of April 10, compared to less than 3 percent just three months ago. According to NASS, The entire state, assuredly the western portion, is in dire need of precipitation to see any progress in winter crops. Don Schieber, who grows HRW wheat near Ponca City, OK, agreed. He noted the wheat in his area, north central Oklahoma, is hanging on but hurting. He added that across the state, the farther west you go, the worse it gets.

In Texas, NASS reported that wheat is starting to turn blue, a sign of heat and drought stress. NASS rated topsoil moisture conditions as 75 percent very short to short, 23 percent adequate and 2 percent surplus. Steelee Fischbacher, director of policy and marketing with Texas Wheat, wrote that farmers have already abandoned some dryland fields in the Panhandle. Windy Weather Not Helping. High winds are exacerbating the potential for damage, siphoning off moisture as they blow across the Plains. Larry Flohr, who farms in the Nebraska Panhandle at Chappell, said the wheat broke dormancy in good condition, but late-planted wheat suffered from vicious winds in January and is way behind earlier planted wheat. NASS reported that high winds in combination with snow led to blizzard conditions last week in western and southern Nebraska. NASS also reported high winds in eastern Colorado and in the northern Texas High Plains. All is Not Lost. Despite the forces of Nature working against it, there is still potential for an average HRW crop in many areas if rain comes in the next few weeks. For example, Shroyer said that secondary tillers might still emerge, even if the main tillers are damaged or dead, after a freeze. This wheat will look ragged but, Shroyer noted, enough tillers might survive to produce good yields if conditions improve. Dr. Jeff Edwards, small grains extension specialist at Oklahoma State University, was less optimistic. He told the Oklahoma Farm Report on April 15 that he was doubtful that newly emerging tillers would have much yield potential in southern Oklahoma. If, and Dr. Edwards calls it a big if, conditions improve, late emerging tillers in northern Oklahoma may still have a chance at producing grain. Despite persistently difficult conditions, there are pockets of good-looking HRW in the Central Plains. Jay Armstrong farms in eastern Kansas near Muscotah, where less wheat is planted now compared to corn and soybeans. He reported that his jointed wheat received two inches of rain before the cold, which protected the plants. It may be too early, but I dont think we got hurt, he said. Wheat looks fabulous if you can find much planted. Farther west, Glenda Mostek, communications and marketing director with Colorado Wheat, reported that the 2014 crop is also in better shape overall than in 2013, while adding the disclaimer that pockets of the state are suffering and farmers there still need at least average moisture ahead to finish the crop NASS rated the Colorado crop as 33 percent very poor to poor, 31 percent fair and 36 percent good to excellent. This is substantially better than last year at this time when NASS rated the crop 44 percent very poor to poor, 42 percent fair and just 14 percent good. NASS also reported improved subsoil moisture conditions in Colorado from last year at this time at 56 percent very short to short (compared to 77 percent last year), 43 percent adequate and 1 percent surplus. Topsoil conditions are similar to last year at this time. The award for most improved wheat crop conditions to date, however, goes to Nebraska where the early-planted wheat has good potential, according to farmer Larry Flohr. NASS rated 59 percent of the states wheat crop as good to excellent, 29 percent fair and 12 percent very poor to poor. That is a marked improvement from last year at this time, when just 12 percent of the crop was rated as good, 38 percent fair and 50 very poor to poor.

and northern parts of the state so a significant drop in production was already expected. However, she emphasized, The wheat we do harvest will be very good quality. California plants five of the six wheat classes, almost entirely under irrigation. Oregon. In Oregon, NASS rated soft white (SW) winter wheat conditions at 47 percent good to excellent, 48 percent fair and 5 percent poor. Idaho. Blaine Jacobson, executive director of the Idaho Wheat Commission, reported that two-thirds of Idahos wheat crop is irrigated and replenished reservoirs this spring bode well for those fields. Growing conditions in northern Idaho continue to be favorable, so were anticipating another good crop from that area, he said, adding that the less than 5 percent of dryland acres in far eastern Idaho continue to suffer from dry conditions. NASS rated winter wheat conditions at 88 percent good to excellent, 11 percent fair and 1 percent poor. Washington. Scott Yates, director of communications and producer relations with the Washington Grain Commission, said moisture is a concern in the state of Washington. He reports all areas are running behind in seasonal precipitation, with some areas receiving as little as 69 percent of normal rainfall. Some wheat farmers in eastern Washington reported losing their entire SW wheat crops to winterkill, but relative to the whole state, the loss was limited, Yates said. NASS reported that winter wheat crops in southeast Washington were looking good for the most part. NASS rated winter wheat conditions in the state at 35 percent good to excellent, 45 percent fair and 20 percent poor to very poor. 3. World Wheat Supplies Get a Lift, but U.S. Stocks Look Tight By Casey Chumrau, USW Market Analyst Following its quarterly Grain Stocks report last month, USDA, as expected, increased its estimate for both 2013/14 world and U.S. ending wheat stocks in its April World Agricultural Supply and Demand Estimates Report. That means additional supply will be available to meet demand moving into 2014/15 before new crop wheat is available to the market. Despite the increase, year-end supplies remain tighter than average. USDA estimates 187 million metric tons (MMT) of wheat will be left in the worlds bins at the end of May, up 2.87 MMT from last month and 10.1 MMT more than last year. A 2.07 MMT reduction in wheat used as feed (133 MMT), mostly in China, accounted for most of the ending stocks increase. If realized, global wheat stocks will fall 7 percent below the five-year average and put the stocks-to-use ratio at 26.9 percent, down from the five-year average of 27.3 percent. USDA estimates global wheat consumption will reach a record 702 MMT. U.S. wheat supplies are even tighter than world supply. Domestic production of 58.0 MMT in 2013/14 was down from 61.7 MMT the previous year and 5 percent lower than the five-year average. At the beginning of the marketing year, USDA expected U.S. wheat exports to fall from 2012/13 because of larger harvests in the Black Sea countries. But, U.S. exports have already exceeded last years sales with high demand from Brazil and China. USDA expects total U.S. wheat exports at the end of the year will be 17 percent greater than last year at 32.0 MMT, up 12 percent from the five-year average. USDA projects domestic U.S. wheat demand combined with total exports to exceed production in 2013/14, meaning fewer reserve stocks will carry into the new marketing year 15.9 MMT compared to the five-year average of 21.5 MMT. The stocks-to-use ratio of 23 percent will fall well below the five-year average. If realized, it will be the smallest ending stocks and lowest stocks-to-use ratio since 2007/08 when tight U.S. and global supply sparked record prices.

Looking at individual U.S. wheat classes, supplies of HRW, SRW and white wheat are particularly tight. Brazilian purchases have bumped total 2013/14 HRW exports up 20 percent compared to 2012/13 on top of a smaller-thanaverage crop. HRW ending stocks could be about half of the five-year average and, at 19.7 percent, HRW stocksto-use will be 47 percent below its five-year average. Chinas purchases in 2013/14 have pushed SRW sales to their largest level since 1989/90 and helped push down the anticipated SRW stocks-to-use ratio to 21.7 percent. That is 49 percent below the five-year average. Steady export demand for white wheat combined with much higher domestic use will put ending stocks at 1.33 MMT, the second lowest on record behind 1.01 MMT in 2007/08. The white wheat stocks-to-use ratio will also be the lowest since 2007/08 at 17.2 percent, if realized, or 36 percent below the five-year average. U.S. farmers and private exporters continued to meet demand in 2007/08 when U.S. supplies were very low, and they will continue meeting demand in 2014/15. However, tight supplies bear watching as they may be a catalyst for higher prices, especially if crop conditions across the Northern Hemisphere deteriorate.

4. Dont Blame High Prices on Climate Changeat Least Not Yet By Alan Tracy, USW President One of the primary findings in a recently released summary report of the United Nations (U.N.) Intergovernmental Panel on Climate Change is that there is a considerable risk to the world's food supply from continued global warming. That is no doubt a legitimate and serious concern. However, a number of news stories about the report have taken that concern a bit too far by blaming recent agricultural commodity price increases on climate change. Perhaps the most egregious example was an April 11 story in London's Financial Times headlined "Climate extremes inflate food prices, by Emiko Terazono. While headlines can often be misleading, the story is even more unjustified in this case. It blames increased volatility in agricultural markets on climatic change and claims that "The frequency of agricultural shocks caused by extreme weather events has risen sharply over the past decade, and [my emphasis] the resulting surge in food commodity prices has hit ... everybody..."

Let's wait just a minute. Yes, we have had relatively high and considerably more volatile grain prices, in particular for the last half dozen years, following decades of relative price stability. But, is it because of climate change or even because of weather? The facts do not support the author's claims. Let's look at global production of major grains during the last six years. It turns out that the world corn crop has enjoyed record production five of the last six years. Wheat and soybean production have set new records four of the last six years. Rice set new records in every one of those years. Just where is the production shortfall caused by extreme weather ... caused by climate change?! It simply does not exist. The weather is less than ideal at least somewhere in the world every year, but we have managed to produce a string of record crops. The author backs up her price assertions by citing some recent year-on-year price increases, such as for coffee, apparently unaware that coffee is simply rebounding from several years of depressed prices caused by wait for it overproduction. The other key factor affecting prices is, of course, demand. And, as you might surmise from the fact that food commodity prices have indeed been relatively high and considerably more volatile recently, demand has been at record levels. In fact, global consumption of each of those same top four grains has set a new record every one of the past six years. Now, that is newsworthy! Consumption growth for wheat and rice has roughly tracked with global population growth, while corn and soybean demand growth has been higher, reflecting the growing middle classes in developing countries and their propensity to spend more money on meat, the production of which consumes corn and soybean meal. That demand growth has boosted prices. And, from some perspectives, thankfully so, as the world's agricultural producers have responded to the price incentive by increasing production to meet global needs. The world will need to increase its investment in agricultural technology and infrastructure to keep up with that continued demand growth and to adapt to any further climate change. The U.N. report documents the pronounced warming trend of the last three decades and evaluates risks to the planet if the trend continues as they project it will. The Financial Times author goes awry in confusing correlation (global warming and higher commodity prices occurring at about the same time) with causality. While she correctly points out that there remain serious future risks to our food production, her blaming high prices on climate change and her failure to recognize the remarkable success of agriculture in meeting the world's burgeoning needs thus far underestimates modern agriculture and is a disservice to this respected newspaper and to its readers. 5. WTO Progress Demands Domestic Support Accountability By Shannon Schlecht, Vice President of Policy Member countries of the World Trade Organization (WTO) have about nine months to develop a work plan or agenda for negotiations following the WTO ministerial conference last December. Even with a deadline and process in place, we have concerns that a few recalcitrant members could drag multilateral trade progress to a near stop by not acknowledging the many changes that have occurred over the past decade. For example, several countries are not meeting their obligation under the Uruguay Round to notify WTO of their domestic agricultural support levels. A March 2014 WTO Agriculture Secretariat report showed that only 42 percent of domestic support notifications have been submitted, much lower than for reporting on market access at 86 percent and export competition at 61 percent. The process needs much more transparency to move forward in the agricultural pillars of domestic support, export competition and market access with a shared goal to begin making trade-offs on reducing domestic and export subsidies while increasing market access. "It is essential that our work in these areas is well-informed by the latest data, said Deputy U.S. Trade Representative Michael Punke at a recent WTO Trade Negotiations Committee meeting. We must understand who is subsidizing today and how. This starts with required and, in many cases, long-overdue notifications. Members who clamor for progress in Doha but fail to meet this basic obligation will have little credibility." India and Turkey are among the worst offenders. Indias last WTO notification about its domestic agricultural support level covered for 2003 while Turkey has not reported support spending on a crop since 2001. A look at the

publicly available information provides a compelling case for why these countries do not want to share that information. A recent Cairns Group study indicated that India doubled its trade distorting between 2001 and 2008 from $8.2 billion to $16.4 billion. A 2011 DTB Associates report illustrated that Turkey is also vastly exceeding its WTO commitments on trade distorting domestic support. Specifically for wheat, India and Turkey have significantly increased minimum support prices for their farmers since the Doha Round was launched (see charts). It is a remarkable change and needs to be taken into account if the WTO negotiating arm is to move ahead for agriculture. It is helpful to compare their support levels to a freely reported U.S. wheat target price that has changed little since 2001. The Cairns Group study found that U.S. trade distorting support fell roughly one-third from 2001 to 2011 while EU support fell by 71 percent. USW remains committed to multilateral negotiations under the WTO and encouraged by the increasingly loud call to improve transparency and provide a clear picture of actual world agricultural policies. Only then will the WTO be able to make meaningful progress toward reducing trade barriers and increasing market access for all its member countries.

Source: Turkish Grain Board

Source: Government of India

6. Wheat Industry News Market Development Funding Awarded. U.S. Agriculture Secretary Tom Vilsack announced April 16 that the USDA Foreign Agricultural Service awarded funding through the 2014 Farm Bill to more than 60 U.S. agricultural organizations, including USW, to help expand commercial export markets for U.S. agricultural products. Visit www.fas.usda.gov to learn more about the Market Access Program, the Foreign Market Development program and other FAS programs. President Obamas Letter Supports Biotechnology. In an April 11 letter to Julie Borlaug, President Barack Obama shared his pleasure in celebrating Dr. Borlaugs birthday centennial. The President said he also shares Borlaugs belief that investment in enhanced biotechnology is an essential component of the solution to some of our planet's most pressing agricultural problems. Borlaug is the granddaughter of the late Dr. Norman Borlaug and associate director for external relations at Borlaug Institute for International Agriculture, Texas A&M University. She shared this link to the letter through her Twitter page: http://twl.sh/1m6f3oC. Nebraska Wheat Research Center to Start Construction. The University of Nebraska-Lincolns Henry J. Stumpf International Wheat Center broke ground on March 21 and construction will start in May. The center, which should be open in December, will feature a quarter with a center irrigation pivot in addition to dryland plots. For more information, visit http://bit.ly/1hGabny. Syngenta Acquires Italian Durum Seed Company. Syngenta announced it has acquired Societ Produttori Sementi, one of Italys oldest seed companies and a leader in durum wheat breeding. The company also has a commitment to sustainable agriculture through its From Seed to Pasta initiative, which complements Syngentas The Good Growth Plan. For more information, visit http://bit.ly/RmxEQI. WMC Cookie and Cracker Technology Short Course. The WMC will hold its Cookie and Cracker Technology Short Course May 12 to 16, 2014. For more information or to register, visit http://www.wmcinc.org.

IGP Milling Courses. The IGP will have its Basic Milling Principles Short Course June 3 to 6, 2014 and its Advance Milling Principles Short Course June 10 to 13, 2014. For more information or to register, visit http://www.grains.ksu.edu/igp/. NCI Advanced Grain Procurement Course. The NCI in Fargo, ND will hold its Advanced Grain Procurement Strategies Short Course May 19 to 23, 2014. For more information or to register, visit http://www.northerncrops.com/. World Conservation Agriculture Meeting in Winnipeg. The sixth World Congress on Conservation Agriculture will bring together agricultural experts in Winnipeg June 22 to 25, 2014 to discuss sustainable intensification, climate resilient systems and innovation adoption. For more information, visit http://www.ctic.org/WCCA. Welcome to Curt Alt, new Field Crops and Forest Products Branch Chief in USDAs Foreign Agricultural Service Office of Trade Programs. Alt has been a market specialist with FAS for four years. Congratulations to Ernesto Custodio, driver/messenger in the USW Manila Office, on his 10 anniversary working for USW on April 28. Thank you for your service! Congratulations to Jason Scott, USW Secretary Treasurer elect, and his wife Casey on the birth of their daughter, Sloan Elizabeth Scott, on April 6. Best Wishes to Kara Rowe, who left her position as director of affairs & outreach at Washington Wheat Growers as of April 16. Thank you for your service and good luck with your future endeavors! 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. Nondiscrimination and Alternate Means of Communications USW 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 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.
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