Volatility increases in world wheat market

BOBBIE HINKLEY writes about the volatility in wheat markets published by Farm Weekly.

THERE is already a 25 million tonne deficit in the production of wheat under consumption demands globally.

That was the message from keynote speaker and vice president of overseas operations with grain traders, US Wheat Associates, Vince Peterson, when he discussed the conflict between long-term trends in world wheat production and consumption and examined global wheat decline over the last 30 years at last week's International Grains Conference.

Mr Peterson said the huge expansion of world plantings of more profitable crops, such as maize and oilseeds, over the past half century had come at the expense of the land area historically planted to wheat.

"This has produced competing and unsustainable trends looking into the future, as we look towards feeding the increasing world population as it grows from some 6.9 billion today and approaches 9.5b by mid-century," he said.

Mr Peterson questioned whether market forces should be left to dictate wheat production or whether doing that would only open the way for further price volatility.

The conversation surrounding global food security was started at the International Grains Council meeting in London in June and Mr Peterson believed long-term trends for the world wheat industry were headed in opposite directions.

One opposing factor was the wheat production land area and the other was wheat consumption trends around the world.

"We have to look at how those things come together on the path that we're on and we have to ask is that a pathway to stability in the marketplace or is that a pathway to increased and continued volatility?" Mr Peterson said.

"It begs the question, is the wheat market more sensitive and fragile than we first thought it was and I think the last six months has probably answered that question."

Over the last 20 years the global wheat market had been a relatively stable environment which was easily navigated with price and risk management strategies.

During that time (with exception to the 1995/96 season) wheat futures in the USA had a trading range of about $75 a tonne and growers thought the market was "volatile" when there was a drop of $75/t drop during that time frame.

In comparison Mr Peterson described today's global market as unpredictable, volatile and "absolutely hostile".

"Look at the five months in late 20007/08 when wheat prices went up $280/t in a five-month period in the US," he said.

"Following that, over a two-month period prices came down nearly $200/t.

"In June and July this year wheat prices rose $115/t over five weeks.

"The instability speaks to a worldwide problem."

Mr Peterson said the new American crop in May this year bought new hope to the American market because it was set to be the third of three record yielding crops in a row.

"We were going to be adding stocks to wheat and moving forward," he said.

"Growers thought they'd be giving it away because there would be so much wheat around."

Although this was the consensus Mr Peterson said "perception wasn't always a reality."

A review since May this year revealed Russia pulled out of the market, floods in Germany downgraded quality and up to 50pc of its crop was downgraded to feed which produced limited export capacity, there had been a similar situation in the northern plains of the USA and Canada at the end of spring and the east coast of Australia had suffered a similar fate.

"It has pushed us to the situation where we have record high prices but we have a 25 million tonne deficit in production under consumption this year," Mr Peterson said.

"Instead of growing stocks as anticipated in May, June and July, now we're going to be reducing world stocks."

The movement contributed to a 60pc rise in wheat prices during the five weeks from the end of June to the start of August.

"Let me draw your attention to last week," Mr Peterson said.

"Wheat prices have been sky-rocketing and have reached new highs at this range.

"We had a four-day price increase which is equivalent to 50pc of that old 20-year trading range that we saw year in year out.

"That's volatility."

The USA had lost 9m hectares of wheat land area over the last 15 years to corn, soybeans and other oilseeds.

"There's a deficit trend in wheat production and I don't see any abatement for it under the current price and profitability scenario of all the crops the world's producing," Mr Peterson said.

"One of the major reasons for that is the yield difference gains between corn and wheat over the time period."

Mr Peterson said wheat yields had improved in the USA about 1t/ha since 1970 and in the same time corn had doubled its production capacity from around 5t/ha to more than 10t/ha.

"You can imagine the profitability for the extra 5t/ha plus the high demand for it, that makes wheat the very poor cousin when it's looking to buy land from corn and soybeans," he said.

But Mr Peterson assured the conference that the USA wasn't alone in the scenario.

"Corn and oilseed production in Canada since 1960 has moved from almost zero to nearly 9m hectares today," he said.

"Wheat has declined from about 14m down to 9m over the last 25 years or so.

"It shows the same negative trend of wheat losing out to more profitable crops."

That trend had been repeated all over the world according the Mr Peterson.

"Since 1990 North America has collectively lost 14mha of wheat growing land, or about 40m tonnes of potential wheat production," he said.

"If we had that land area, with the market being so volatile, you could imagine the difference it could have made in the market today."

Wheat had traditionally been planted in two belts across the northern and southern hemispheres at about the 25th and 55th latitudes.

"If we look at wheat, corn, soybeans and oilseeds around the world we see some cropping patterns," Mr Peterson said.

"From about 1985 onward wheat has had a down trending land area devotion and this year's land area for wheat is exactly the same as 1968 so we've made precious little progress over time which is concerning.

"The area dedicated to corn has gone up by 60pc.

"Soybeans, canola, sunflowers and oilseeds all together have gone up 400pc.

"My premise is, as we go forward there may well be more land become available for planting wheat throughout Europe, like in Russia and the Ukraine for instance, but it might not necessarily come into wheat production and it will be subject to the same financial impact, returns, patterns and decisions as the rest of the world."

Mr Peterson predicted the world population would have increased to 9.3b people by 2050 and the majority of the growth would take place in less developed countries.

"In 1950 the world wheat consumption was 229mt compared to over 660mt today," he said.

"If we project this number out with the population growth, by 2050 the world consumption of wheat will be somewhere around 900mt.

"That's an increase of 240mt from today that has got to be filled somewhere and somehow.

"These are incompatible long-term trends and something has to stop."

The highest growth in population, the highest fertility rate and the highest world hunger figures fall in a latitudinal zone largely between the two wheat production latitudinal zones.

Mr Peterson believed if the world population was to reach 9.5b by 2050 there would be an increase in population of about 300m people in Latin America, one billion people in Africa and as many as 1.8b people in Asia.

"There's very little overlap in the population growth zones and the wheat producing zones except for a small part of northern Africa, the Middle East and northern Mexico," he said.

"The growing population is largely going to have to be fed by production in the other hemispheres.

"Trade volume will grow rather than production increasing in the tropical countries."

Mr Peterson said world trade hadn't really shifted largely over the last 30 years due to the EU and the former Soviet Union's internal trade patterns.

"By 2050 we're going to double world trade to about 250m tonnes of wheat which is a lot to move," he said.

"Everyone in the world including the USA, Canada and Australia will have a piece of the action."

World Wheat Trade May Double by 2050

According to the recent U.S. Wheat Newsletter, world wheat trade may double or more by mid-century and the resulting pressure from rising demand will likely increase prices and volatility. That is the message U.S. Wheat Associates (USW) has shared with stakeholders at industry meetings across four continents since mid-November.

USW Vice President of Overseas Operations Vince Peterson discussed the question, “Wheat Outlook for 2010/11 and Beyond...Is it More Fragile than We Thought?” at several of those meetings, including the annual meeting of ALIM, the Latin American Assembly of Industrial Millers, in Cartagena, Colombia, a U.S. wheat producer meeting in Washington state and the 32nd session of the International Grains Council (IGC) in Perth, Australia, last week. USW President Alan Tracy also covered the topic at the Mideast and Africa District conference of the International Association of Operative Millers (IAOM), in Cape Town, South Africa. See Wheat Letter – November 18 for more information.

Nearly 700 people attended the IAOM meeting. Collectively, the attendees at these meetings represented about half of the world’s total wheat imports.

“This was an excellent opportunity to stimulate thinking and encourage buyers to develop closer ties with the reliable U.S. wheat industry in order to minimize future supply concerns,” Tracy said. “We started with a reminder that in spite of three record global crops and ample stocks, the Russian government’s export ban sparked an unprecedented supply and price shock.”

A broader view of the world wheat outlook reveals that such vulnerability stems from the fact that demand in regions that cannot grow much wheat is outpacing global production.

“Farmers are planting less wheat because feed grain and oilseed crops like corn and soybeans are more profitable,” Tracy said. “Higher yields offset some of this loss so wheat production is basically stable, but stable production will be inadequate to meet future demand.”

If consumption continues to grow with population alone, he said, global wheat production must increase 40 percent to 900 million metric tons (MMT) (33 billion bushels) by 2050.

“World wheat trade has been fairly stable,” Tracy added, “But a closer look shows trade is actually up by 250 percent since 1982 in less developed countries and the global trend is now moving up.”

Because wheat is grown primarily above and below the middle latitudes where population and consumption is growing, USW believes world wheat trade will have to more than double by 2050, to at least 250 MMT (9.2 billion bushels).

This is a key observation for private millers who import wheat, Tracy said.

“Production in wheat exporting countries will have to increase substantially, so wheat prices will have to rise relative to corn and other crops that compete with wheat for acreage. We’ll see more competition among buyers, more short supply years and even more price volatility,” he said. “Millers will have to put the same effort into managing risk as they put into managing their production processes, and our organization can help.

“The U.S. wheat industry has proven its commitment to supplying a wide range of high-quality wheat classes year-in and year-out,” Tracy said. “We back up that trust with trade and technical service as well as training opportunities. That is why developing a positive, long-term relationship with our reliable supply chain is a smart hedge against the challenges ahead.”

Click here (http://slidesha.re/e7F2ZZ)
to see Tracy’s complete presentation in this issue’s Online Edition. Click here to listen to an interview with Vince Peterson (http://twaud.io/q6kH) aired by the Australian Broadcast Company.

Wheat growers look for higher prices

by Brad Carlson
Idaho Business Review

Idaho wheat producers are finding their crops being held at the docks.

Four Portland exporters handle about half of Idaho’s wheat exports.

“They are so busy with corn and soybeans, we are having trouble fitting wheat into their loading schedule,” Idaho Wheat Commission Executive Director Blaine Jacobson said.

“That has tended to push the price of wheat up as well,” he said.

To make as much money exporting wheat compared to corn and soybeans, the exporter needs to raise the margin, Jacobson said. That portion does not go back to the grower but ultimately boosts the worldwide price.

High consumption of wheat worldwide is increasing prices, he said. Higher prices this year helped farmers cover fixed costs, Jacobson said.

The Kansas City Board of Trade nearby wheat futures contract price was $8.27 1/4 per bushel Dec. 8 compared to $4.62 June 8 and $5.20 1/2 per bushel Dec. 8, 2009, said Shelia Summers, marketing vice president for the board. The price is a benchmark for hard red winter wheat used to make bread, she said.

“Wheat prices are up, and have been up since August when Russia put an export ban into place,” Jacobson said. Russia banned wheat exports as drought, heat and fires cut the crop by one-third from a year earlier.

Prices were depressed early in the year, when wheat stocks were their highest in nine years, he said. Prices increased sharply after Russia imposed the export ban and now are up 71 percent from their low point in the past year, he said.

Russia wasn’t the only challenged wheat producer.

“The Canadian crop and the Australian crop had their own problems,” Jacobson said.

Canada’s planted area was the lowest in 40 years and harvest dropped about 17 percent from a year earlier, he said. Weather problems at planting and harvest reduced quality, he said.

In Australia, quantity was high but quality was reduced by rains at harvest, Jacobson. Quality problems reduced Australia’s exports to Asia, “so Asia will import more from the Pacific Northwest,” he said.

Recently high corn prices kept wheat prices high, he said. Corn prices usually are about $3 per bushel but now are about $5 per bushel, he said. About one-third of the corn crop is going into ethanol production, he said.

“The ceiling price on corn is the base price on wheat because a certain percentage of wheat can go into the feed channels,” Jacobson said. “As the price of corn goes up, it pushes the base price on wheat up.”

About 4 percent of this year’s wheat harvest will be fed in stockyards.

U.S. Closing Columbia River to Barges, May Affect Wheat Exports

Shipping on the Columbia-Snake River System, a major gateway to the Pacific Ocean for U.S. wheat and barley exports, will be halted until March as the Army Corps of Engineers replaces locks and dams built as long ago as 1957.

Barge traffic will be “effectively” stopped along a 365- mile (587-kilometer) stretch from tomorrow until March 18 as lock gates are replaced at the John Day, The Dalles and Lower Monumental dams, Army Corps spokesman Scott Clemans said. Five other dams will be repaired during the period, he said.

Traffic through the river-locking system is slowest during the winter, with five to 10 barges a day, Clemans said. Barges primarily carry grains, fuel and garbage. The four-month halt is unusual because shipping is normally closed for only two weeks a year for routine maintenance, he said. The U.S. is the world’s largest wheat exporter.

“We completely understand the impact this outage has on our navigation stakeholders, but if we do not replace these gates, these facilities eventually become unsafe to use,” Clemans said yesterday by telephone from Portland, Oregon. “The alternative to this planned, coordinated outage would be an unplanned emergency outage that might shut down the navigation locks and entire transportation system for maybe a year or more.”

The oldest of the dams, The Dalles, was built in 1957 and will be replaced with a new gate that weighs 1.5 million pounds (680 metric tons), Clemans said.

Rail, Trucks

The Pacific Northwest was second to the Gulf of Mexico for wheat exports last year, said Steve Mercer, a spokesman for U.S. Wheat Associates, an Arlington, Virginia-based trade group. The northwest ports are supplied by the river system, as well as by trains and trucks, he said.

Many importers have accelerated wheat purchases before the river closure to meet needs over the next three months, and others may rely on alternate transportation, Mercer said. Most northwest wheat exports go to Asia, Central America and South America, he said.

“The closure certainly may have an impact on getting wheat from point A to point B, but a lot of customers have bought ahead, and there are other ways to get it there other than barges,” he said.

The U.S. has exported 7.3 million tons of wheat out of Pacific Northwest ports in the marketing year that began June 1, Mercer said. Purchases have been ahead of last year’s pace as customers boosted buying before the river was closed, and as Russia’s export ban increased demand for U.S. supplies, he said. Russia, once the world’s third-largest exporter, has halted shipments through July 1 after drought this year ruined crops.

Prices for the grain have jumped 45 percent this year, touching a 23-month high in August. Wheat for March delivery closed at $7.84 a bushel yesterday on the Chicago Board of Trade.

Last year, the U.S. shipped 10.4 million tons of wheat through the Pacific Northwest, about 40 percent of total exports, Mercer said.

Written by Bloomberg reporter Whitney McFerron

Ag panel: More technology outreach needed as food demand rises

Brad Carlson from the Idaho Business Review covered yesterday's Ag Panel Discussion on Biotechnolcy. The following article was published today.

Lab-to-field breakthroughs will play a key role in food production, so agriculture and its regulatory agencies will continue to deal with the sometimes-controversial approaches.

“The food industry in general is going to have to go through a second green revolution, if you will, to feed the number of people that need to be fed,” Idaho Wheat Commission Executive Director Blaine Jacobson said.

Food producers are challenged to meet growing worldwide demand. One challenge is to get the advancements into field, feedlot or dairy soon enough and on a lasting basis given environmental and other regulatory concerns that can arise, panelists at a recent roundtable discussion on ag technology said. The Idaho Business Review co-hosted with Holland and Hart the event Dec. 7 in Boise.

Seeds that have been genetically engineered to resist weed killer and drought, and use fertilizer more efficiently, benefit farmers. But ongoing litigation over weed-killer-resistant sugar beet seeds shows the industry must keep working on solutions that satisfy regulators and the environmental community as well as producers, panelists said. Opponents in the sugar litigation fear the seed traits would spread to other parts of the food supply.

Population gains, a decreasing supply of good farmland and reduced inputs drive the need for greater yield and efficiency, said Bob Zemetra, University of Idaho professor of plant breeding and genetics. Genetic work can improve prospects for this, but getting these seeds into widespread food production takes time. He said it probably will be 10 years before the U.S. sees transgenic wheat, a plant that contains a gene or genes which have been artificially inserted instead through natural acquisition, in the food supply.

Jacobson said adoption of genetically altered wheat probably will happen first in developing countries where need is high and drought tolerance could make more land viable. In the U.S., the industry wants a defined process of approval, he said.
Worldwide wheat production will have to double in 40 years to meet demand as populations increase and standards of living improve, he said.

There is a lot of arable land in the world, but much of it is costly to bring into agricultural production, “so we are where we are in what we can produce on,” said Dick Rush, U.S. Department of Agriculture Farm Service Agency director for Idaho.
Like other ag industries, the cattle industry must do more with less, Idaho Cattle Association Vice President Wyatt Prescott said. Science’s benefits to the industry include improved breeding programs, better treatments for illness, more efficient use of feed and an increase in desirable characteristics in animals. More public outreach and education is needed about how the U.S. food supply is developed and managed, he said.

Beet growers boosted yields, as prices stayed flat, largely because of technology, said Idaho Sugar Beet Growers Association Executive Director Mark Duffin. Weed control, traditionally done by hand, was a big problem the genetically engineered seeds helped solve in the last couple of years, he said.

Goldman Sachs Predicts High Crop Prices to Stay into 2012

The current food commodities rally is to prove more sustained that the last, as strong demand mops up a big chunk of rising crop production, Goldman Sachs has said, forecasting "still historically high" prices in 2012.

While futures prices will be unable to maintain the current pace, they will remain well above levels before the latest rally kicked off in late June, the investment bank said.

Supplies will remain under pressure from firm consumption from biofuels plants and livestock farms, both in the US and emerging markets, with American soybean inventories potentially on course to fall to 4.0%, as a proportion of use, the lowest since the 1960s.

"Although we expect a supply response to the current tight balances in the 2011-12 crop year, the concurrent tightening across all major crop balances and the continued strong demand from feed and fuel will likely limit the recovery in inventories," Goldman said.

"As a result, our outlook for the 2011-12 crop year points to sustained elevated crop prices, and we introduce 2012 crop price forecasts only slightly below our 2011 forecasts."

Acreage battle

Soybean prices appeared the best-placed for gains, requiring a move "sharply higher" to some $14 a bushel to "limit acreage loss" in the US, the oilseed's biggest producer, in the spring and lift sowings in South America to meet resilient demand.

Forecasts for continued strong Chinese economic growth in 2011 and 2012 imply "further remarkable strength of Chinese soybean consumption, supported by rising protein consumption and surging animal feed [needs]," Goldman said, adding that South American demand was expanding fast too.

"In particular, biodiesel demand in Brazil is growing strongly, supported by the steady increase in required biodiesel mix into diesel."

Chicago soybeans for November 2011 delivery offered an "appealing entry level", the bank said, rating the contract a "buy".

'Strong feed demand'

Corn prices, which stood above $5 a bushel for less than nine months in the 2007-08 rally, were set to remain at some $5.85 a bushel into late 2011, and average $5 a bushel even in 2012.

"Our expectation for continued recovery in developing market and growth in emerging market protein consumption points to continued strong corn feed demand in 2011-12," Goldman said, noting that cattle placements on US feedlots had remained larger than expected, given firm feed prices.

Even if a tax credit on blending corn-based ethanol into forecourt fuel is rescinded at the end of this year, gasoline price forecasts suggest that biofuel groups will remain in profit as long as the grain does not top $6 a bushel.

Weakest link

Wheat faced the worst prospects of the big-three traded crops, facing "some supply response" in 2011-12 on the "return of normal weather and some acreage gains".

"We expect that still large inventories combined with the supply response to current high wheat prices will generate a small increase in stocks-to-use levels both at the global and US level," Goldman said.

"This outlook points to lower new crop wheat prices."

The bank forecast wheat falling from $7 a bushel next year to $6.25 a bushel in 2012.

However, Goldman added that a range of factors could potentially upset its forecasts, notably the impact of the ongoing La Nina weather pattern on South American crops, the course of US biofuels policy and the lifting, or implementation, of export bans.

Agronomic success: How to evaluate yield data from trials

Written by: Robert Mullen, Ohio State University

Now that crop harvest is winding down, many companies that conduct field experimentation will be getting out and sharing their success stories, so how can you weed through the information to find the truth?

The first thing I often say as it relates to fertilizer products (but this likely extends to other agronomic products/practices) is “if it sounds too good to be true, it likely is.”

The first thing to look for when evaluating yield data from field trials is to look for some information regarding how field experimentation was done.

This does not require you to have a statistical background.

Simple questions like - “Was the study replicated?”, “How many locations were utilized?”, “Were there any locations that did not respond positively (environmental interactions)?”

To my knowledge, no agronomic practice (within reason) results in a yield increase every time it is evaluated. So if someone states, “we conducted field research on 50 fields, and we saw a yield increase every time,” be suspicious.

View split field research data cautiously. Back in 2006 we prepared a CORN Newsletter article that shared our concerns regarding the use of split field experiments to direct agronomic decisions (2006-37). Split field comparisons can reveal yield differences, but our ability to determine how confident we are that the differences are due to an actual treatment effect and not just shear random chance (or due to some other underlying factor) is negligible.

Inquire why a specific treatment resulted in a supposed yield difference. This can be critical. If the explanation does not make sound agronomic sense, then you have your answer as to whether or not it would be beneficial on your farm.

Along this line, determine if the salesperson is marketing something specific to your situation (soil test level, agronomic practice, insect pest, disease pressure, etc.) or just selling something that everyone should use. Many non-traditional approaches to nutrient supplementation can be beneficial, but they are only beneficial in specific instances. Are they telling you it works everywhere, or just under a certain set of circumstances?

Ag marketers/salespersons are important to the introduction of new products that you as a producer benefit from annually. Our goal at Ohio State Uni-versity is to provide you tools that allow you to make better decisions. Your ability to separate good information from a marketing ploy is simply another tool in your arsenal.

Forecast Trends Mixed For Wheat

DTN's Bryce Anderson looks at weather trends and how its impacting wheat. The U.S. winter wheat crop is off to its weakest start in 20 years with a good-to-excellent rating in the mid-40-percent range.

Eastern Midwest wheat areas have a good chance for winter precipitation, but Plains wheat country has a less-favorable outlook. (DTN photo by Katie Micik)That's a far cry from the 64 percent good-to-excellent total put on by the crop a year ago. Ratings also indicate 17 percent of the winter wheat crop is rated as "poor" or "very poor" -- almost triple the 6 percent total of those two categories in November 2009.

While the wheat crop still has a long season to go, traders will look at the condition of the crop and upcoming weather trends as they evaluate what they think will happen to the world wheat supply.

DTN Analyst John Sanow noted that short-term fundamentals for world wheat supply and demand are bearish for immediate needs, but pose a question looking ahead to the second, third and fourth quarters of 2011. That places the overall wheat market weather factor at neutral.

Smaller world supplies than a year ago, due to drought in Russia and West Australia, along with flooding in Canada, bring an increased sense of urgency to the market's view of weather in U.S. wheat areas going into next year.

"Near-term fundamentals remain bearish for wheat, but traders will watch continued dryness in the Southern Plains closely along with other parts of the globe," Sanow said. "The market can ill-afford a large drop in world production for a second straight year. The situation grows less bearish longer-term, as indicated by the weaker carry in deferred futures spreads. This points to concern by the commercial side over future supply."

AgResource sees 2011 global wheat output rebound

Reuters reported today that global wheat output could recover to 661.5 million tonnes in 2011/12, up from 639.8 million tonnes this year, mainly boosted by a rebound in production in the former Soviet Union, analyst AgResource said on Wednesday.

In its first estimate for next year's crops given to Reuters on the sidelines of a global grain conference, the analyst pegged the 2011 harvest for the 12 so-called "FSU" countries at 96.80 million tonnes versus 82.70 million in 2010. Of this, Russia would produce 52.3 million tonnes, up from 41.0 million tonnes this year after drought ravaged its crop, which prompted the country to close its door on exports. Despite the rise in output, global wheat stocks would fall to 156.29 million tonnes by June 30, 2012, against 169.88 million tonnes estimated at the end of the current campaign, AgResource President Dan Basse said.

The analyst pegged the 2011 corn production at an all-time record of 848.99 million tonnes, versus 818.52 million tonnes this year, due to a larger area sown in the United States and hopes that China would also expand production. He did not have
regional forecasts for corn output. World corn stocks were expected to fall next season, to 112.07 million tonnes versus 129.16 million tonnes in 2010/2011,
due to an expected spike in demand notably in China and Russia.

AgResource did not provide 2011 production estimates for other crops such as soybeans.

Wheat Condition Improves Slightly

Eighty-seven percent of the nation's winter wheat crop had emerged as of Sunday, Nov. 14, according to USDA's weekly crop progress report. That's 9 percentage points ahead of last year and 2 percentage points ahead of the five-year average.

The condition of the wheat improved slightly from last week, with the amount of the crop rated good to excellent increasing by 1 percentage point. Keep in mind, though, there is no statistical correlation between fall ratings and final yield.

The following are highlights from weekly crop progress reports issued Monday by National Ag Statistics Service offices in individual states. To view the full reports from each state, visit http://www.nass.usda.gov/Publications/State_Crop_Progress_and_Condition/index.asp

Industry, Growers Push Seed Companies to Ramp up Wheat Research, Development

Progressive Farmer Editor Kurt Lawton writes that wheat growers have pleaded for years for greater investment in public and private breeding programs and genetic improvements. Yet there has been little incentive to do so.

Growers are reluctant to buy certified seed and wheat continues to lose ground, literally, to corn and oilseeds in the United States.

Planted acres in 2010 dropped by 4.8 million acres from last year, bringing the total to 54.3 million acres -- the lowest total since 1971.

But it appears wheat farmers' pleas are finally being heard. "The good news is we've seen some major wheat research investments made last year and this year, and we're very excited," says Jim Bair, vice president of the North American Millers' Association (NAMA).

"For the first time in a long time, major private companies are working to develop both conventional and biotech varieties."

MOVES BY MONSANTO

The biggest efforts regarding improved wheat research have come from Monsanto. The biotech giant acquired Montana-based WestBred wheat breeding business in 2009.

In June 2010, they announced a partnership with Kansas State University, allowing both entities to share germplasm and technology.

In July, Monsanto and BASF announced they have nearly doubled their investment in an already established joint venture to develop biotech crops -- and have now included a focused effort in wheat.

And in August, Monsanto purchased a 19.9 percent share of Australia's leading wheat breeder and germplasm developer, InterGrain.

"We're obviously still concerned about wheat acres, as research doesn't bring immediate results. It'll be several years before we see yield improvement, with biotech wheat varieties probably not available for quite some time," Bair says.

"With the introduction of drought-resistant corn coming in the next few years into the drier areas of the High Plains where wheat has been best suited, we'll probably see acreage losses get worse before it gets better," he adds.

REGULAR VARIETAL IMPROVEMENTS FIRST

Monsanto's purchase of WestBred gives the company well-established and successful breeding programs in key geographic areas and in key classes of wheat, says Sean Gardner, global commercial wheat lead for Monsanto.

"While the introduction of biotech traits such as drought tolerance, nitrogen-use efficiency and higher yields will eventually be incorporated into the WestBred germplasm platform in the next decade, our short-term emphasis is to produce better varieties.

"We want to give growers more and better choices to improve their wheat profitability."

Monsanto will also explore herbicide-tolerant and disease-resistant biotech traits, but does not plan to further develop its first-generation Roundup Ready trait in wheat.

Gardner says a combination of factors led Monsanto back into the wheat business. "Much of the U.S. wheat industry value chain -- from growers to processors -- desire seed companies such as ourselves to invest in wheat.

"As we looked at the potential synergy between wheat and the biotech efforts we have going in corn ... we're confident we can provide products of increasing value to growers," he says.

The company has been busy working with WestBred to achieve better varieties more quickly using technologies that Monsanto currently uses in corn and other crops.

"We're getting very serious about adopting doubled haploid technology to dramatically shorten the variety development time. In fact, we plan to open a new doubled haploid wheat research facility in Wichita, Kan., over the next few months."

(Doubled haploids are genetically pure inbred plants, which can now be achieved in one year through special techniques, but which used to take five to eight generations to develop in the field. This cuts variety development time significantly.)

Along with doubled haploid technology, wheat breeders at Monsanto will expand their use of molecular marker-assisted selection to find and flag beneficial traits.

This also allows scientists to screen millions of data points with high throughput analysis technology -- like they are using in other crops. And their partnership with BASF will further improve their biotech work.

WHEAT GENOME WORK

The next big step coming within five years will be a complete mapping of the wheat genome -- which will usher in a new era of wheat improvement.

Recent announcements by a British research team who claim to have sequenced the genome of Chinese spring wheat as a reference variety is incomplete.

The International Wheat Genome Sequence Consortium says the claim is premature as the sequences have yet to be ordered, annotated and aligned so the position of the genes along the chromosomes is known.

Bayer CropSciences, Syngenta, Pioneer, Limagrain and others are focusing varied efforts in wheat. The industry is also seeing advanced plant breeding service companies start up.

One such company is Heartland Plant Innovations in Manhattan, Kan. -- a for-profit venture that will conduct contract research to help discover and commercialize new products for public and private research clients.

"Initially we're collaborating on research with Kansas State University and the University of Kansas to develop biotech solutions for wheat and sorghum, along with finding novel new products from native plants," says Forrest Chumley, president and CEO of the company. "We also plan to help private seed companies with specific biotech research services."

WHEAT MARKET HURDLES

Buying certified wheat seed every year is one hurdle the industry must overcome. "Our job is to provide varieties that add value to a wheat grower, in order to make our case for certified seed," Monsanto's Gardner says.

"Consistent use of certified seed tends to correlate with yield and profitability, which is why we see higher certified seed use in the Pacific Northwest and East wheat markets compared to lower use in the High Plains," he adds.

"Growers are not ideologically opposed to using certified seed. The decision is a reflection of best choices for each operation's business model. So we're optimistic that we will provide increased value."

U.S. 2011 Wheat Carryover Reduced

Wheat carryover on June 1, 2011, was projected at 848 million bushels, down 5 million bushels from 853 million bushels forecast in October and down 128 million bushels, or 13%, from 976 million bushels in 2010, the U.S. Department of Agriculture (USDA) said in its Nov. 9 World Agricultural Supply and Demand Estimates.

USDA projected 2010-11 carryover numbers were below trade expectations of 869 million bushels for wheat.

U.S. all-wheat production was estimated at 2.208 billion bushels in 2010, down 16 million bushels, or 1%, from October and down 10 million bushels from 2.218 billion bushels a year earlier. U.S. 2010-11 wheat imports were projected at 110 million bushels, up 10 million bushels from October but down 9 million bushels from last year. Total wheat supply was projected at 3.294 billion bushels, down 5 million bushels from October but up 301 million bushels, or 10%, from 2.993 billion bushels in 2009-10, the USDA said.

Exports of U.S. wheat for 2010-11 were projected at 1.250 billion bushels, unchanged from October but up 369 million bushels, or 42%,from 881 million bushels in 2009-10.

The USDA projected domestic food use of U.S. wheat in 2010-11 at 940 million bushels, unchanged from October but up 23 million bushels, or 3%, from 917 million bushels in 2009-10, and seed use at 76 million bushels, also unchanged from October but up 7 million bushels from 69 million bushels last year. Feed and residual use was projected at 180 million bushels, unchanged from October and up 30 million bushels, or 20%, from 150 million bushels in 2009-10.

Total use was projected at 2.446 billion bushels, unchanged from October but up 428 million bushels, or 21%, from 2.018 billion bushels in 2009-10.

The average farm price of U.S. wheat in 2010-11 was projected to range from $5.25-$5.75 a bushel, compared with $5.20-$5.80 projected in October and with $4.87 a bushel in 2009-10 and $6.78 a bushel in 2008-09.

On a by-class basis, the USDA projected June 1, 2011, carryover of hard winter wheat at 323 million bushels, down 15 million bushels from October and down 62 million bushels from 385 million bushels in 2010. Soft red winter wheat carryover was projected at 183 million bushels, up 25 million bushels from October but down 59 million bushels from 242 million bushels in 2010.

Hard spring wheat carryover on June 1, 2011, was projected at 211 million bushels, down 21 million bushels from October and down 23 million bushels from 234 million bushels in 2010.

White wheat carryover was projected at 88 million bushels in 2011, unchanged from October but up 8 million bushels from 2010.

Durum carryover on June 1, 2011, was projected at 43 million bushels, up 6 million bushels from October and up 8 million bushels from 35 million bushels in 2010.

World wheat ending stocks for 2010-11 were projected at 172.51 million tonnes, down 2.51 million tonnes from October and down 22.89 million tonnes, or 12%, from 195.4 million tonnes in 2009-10. Global 2010-11 wheat production was projected at 642.89 million tonnes, up 1.45 million tonnes from October but down 39.81 million tonnes, or 6%, from 682.7 million tonnes the previous year. Global wheat use was projected at 665.79 million tonnes, up 2.48 million tonnes from October and up 13.16 million tonnes from 652.63 million tonnes in 2009-10. World exports were projected at 127.23 million tonnes, up 1 million tonnes from October but down 8.09 million tonnes,or 6%, from 135.32 million tonnes in the prior year.

“Global wheat supplies are projected slightly higher for 2010-11 as higher world production offsets lower carryin, mostly reflecting higher 2009-10 wheat feeding in China,” the USDA said.

Wheat Prices Go Up

KTVB's Nisha Gupta covers the recent increase of wheat prices which have benefited Idaho wheat growers and Idaho's economy. In an interview with Farm Bureau's Jake Putnum, viewers learn how Russia's drought impacts wheat prices across the globe.
http://www.ktvb.com/news/Wheat-prices-go-up-good-for-farmers-bad-for-consumers-106733943.html

October U.S. wheat prices surge above $6

Worldgrain.com reports the preliminary national average price received by farmers for all wheat in October was $6.08 per bushel, up 25¢ from $5.83 in September and up $1.61 from $4.47 in October 2009, the U.S. Department of Agriculture (USDA) said in its latest Agricultural Prices report.

The average price paid for winter wheat in October was $5.98 a bushel, up 18¢ from $5.80 in September and up $1.71 from $4.27 in October 2009. The average price paid for durum was $5.54 a bushel, up 84¢ from $4.70 in September and up 68¢ from $4.86 in October 2009. Spring wheat other than durum averaged $6.35 a bushel, up 35¢ from $6 in September and up $1.35 from $5 in October 2009.

Wheat Research Takes Coordinated Effort

Past investment into wheat research has given farmers new wheat varieties, disease and insect resistance and agronomic improvements, plus improved quality for millers and bakers throughout the world. For more than 50 years, Idaho farmers - and other wheat producers from across the nation - have supported research from land-grant universities and the USDA through each state's wheat checkoff program. In the last few decades, however, state and federal dollars towards wheat research have been dramatically reduced, leaving checkoff funds to pick up the slack.

Continued development of wheat varieties and technologies is crucial to the long-term viability of wheat production in the United States, and the effort has gained a boost with the recent entry into wheat variety and technology development by several private firms.

Sorting through research priorities from public and private entities falls at the feet of Jane DeMarchi, director of government affairs for research and technology for the National Association of Wheat Growers. DeMarchi joined NAWG in June, filling a new position dedicated to tracking current research, reviewing funding needs and developing research priorities throughout the entire wheat industry. NAWG has set a goal of increasing wheat yields for U.S. wheat producers at least 20% by 2018; to reach that goal, the collaborative efforts of private and public wheat researchers is necessary.

"We are looking for the private investment to be additive to the overall research picture," DeMarchi says. "We've done a good job of communicating to the technology providers what we'd like to see in future innovation for wheat. We have to make sure that all the research going on right now is directed towards moving the crop forward."

DeMarchi, who spoke to wheat growers at the annual Fall Meeting of NAWG and the U.S. Wheat Associates in Minneapolis last week, says many state wheat commissions have committed to working together on variety development and other research proposals. This is one step toward leveraging research resources; another is to bring the private firms into the fold.

"I do think there is an opportunity for greater collaboration between the researchers themselves or between states on a regional basis, to make sure that money spent is spent as efficiently as possible so that everyone can learn from the research that's being done," DeMarchi says. "We don't need every program doing everything. We need to focus where the best research is being done and then on a regional basis have people being able to take advantage of that."

Research priorities in coming years include the introduction of biotech traits to wheat varieties, an industry-wide effort to solve the Ug99 stem rust disease and continued yield, quality and agronomic improvement of varieties. These efforts require the combined effort of public and private, state and federal researchers and funds.

Cargill CEO Expects U.S. Grain Output to Rise in 2011

Bloomberg reporters Andra Timu and Irina Savu write that the U.S., the world’s largest grain shipper, may increase production next year if weather conditions are favorable as farmers invest in fertilizers and high-quality seeds, Cargill Inc.’s Chief Executive Officer Greg Page said.

The 66 percent gain in corn prices from June lows and a doubling in wheat have bolstered U.S. farm revenue and will spur investment in technologies to increase output, Page said today in an interview from the southern Romanian town of Calarasi.

“Production in 2011 in the U.S., if we have good weather, I would expect it to increase based on the behavior of farmers, which is to purchase more fertilizer and be very careful to use the very best seeds,” Page said.

Rising farm income and spending contrasts with a slowing U.S. economy, where growth eased to an annualized 1.7 percent in the second quarter from 3.7 percent in the previous three months. While agriculture accounts for just 1 percent of the $14.3 trillion economy, the impact of surging prices may be 10 times more once spending on equipment, seeds, grain handling and food production are added, said Jason Henderson, an economist at the Federal Reserve Bank of Kansas City, on Oct. 18.

By contrast, the European Union grain harvest is estimated to fall 4 percent this year to 284.9 million metric tons, the bloc’s weather-monitoring unit said on Oct. 13.

Stable Demand

Grain consumption in Europe will be “quite stable,” Page said. “We have been impressed in many countries with the stability of the world’s diets in 2009 and
2010,” compared with other crisis periods, he said.

Grain prices rose this year as drought in Russia, flooding in Canada and parched fields in Kazakhstan and Europe ruined crops. Russia, once the third-biggest wheat exporter, banned overseas sales in August. Ukraine, the largest barley shipper, said Oct. 12 it would introduce grain quotas. Corn, wheat and soybeans jumped the most allowed by the Chicago Board of Trade on Oct. 8 after the U.S. Department of Agriculture predicted less supply.

“All the statistics are not completely compiled, but that reduction in production in Russia will probably represent far less than 1 percent of the world’s grain production,” Page said. “That small reduction in production has led to an enormous change in price.”

Cargill, the Minnetonka, Minnesota-based grain handler and the largest closely held company in the U.S., said Oct. 12 that its 64 percent stake in Mosaic Co. and farm-price volatility drove a 68 percent gain in profit in the most recent quarter.

Page, speaking at the opening of a grain-storage facility in Calarasi, said Cargill plans to expand its Romanian business and increase working capital at the unit to $100 million by 2015.

Those Amber Waves Are Fueling Exports

Bloomberg Businessweek reporters Whitney McFerron, Jeff Wilson, Shruti Singh and Elizabeth Campbell write that just a few years ago, who would have guessed that farms would turn out to be a bright spot in the U.S. economy? Farmers were fretting about falling prices and mounting competition from Russia and Ukraine. Today drought has withered much of the Russian and Ukrainian crops, and the world needs more grain—and soybeans and pork—than ever. The best place to get it: the fertile soil of the U.S. Midwest and South, home to some of the most productive farms on earth.

In the first eight months of 2010, U.S. agricultural exports increased 14 percent, to $69.8 billion, from the same period a year earlier, according to the most recent U.S. Agriculture Dept. data. Joseph Glauber, chief economist for the USDA, says farm exports in the year that began on Oct. 1 may top the 2008 record.

This cornucopia is providing an unexpected boost to President Barack Obama's drive to double exports by 2015. China's need for cotton, pork, corn, and soybeans will make it the second-biggest U.S. agricultural trading partner in 2011, the USDA estimates. Shipments of farm products to China will total $15 billion, compared with Canada's $16.8 billion and Mexico's $14.6 billion. Corn prices are up over 60 percent since June, while wheat as much as doubled. "It's going to be the best year American farmers have had in two and a half decades," says Dennis Gartman, an economist and editor of The Gartman Letter in Suffolk, Va.

The cash that farmers are fingering in their pockets is boosting companies at home as well. While agriculture accounts for just 1 percent of the $14.3 trillion U.S. economy, the actual impact of surging prices may be 10 times more once spending on equipment, seeds, grain handling, and food processing is added, says Jason Henderson, an economist at the Federal Reserve Bank of Kansas City.

Sales of farm equipment are correlated to growers' cash receipts, which should increase 24 percent, to $118.4 billion, for major crops in the 2010-11 season, Ann Duignan, an analyst at JPMorgan Chase (JPM) in New York, said in an Oct. 8 report. That's good news for Moline (Ill.)-based Deere (DE), the world's largest farm-equipment maker as well as rivals Amsterdam-based CNH Global (CNH) and Duluth (Ga.)-based Agco (AGCO), she says.

Deere's per-share profit will more than double, to $4.25, in the current fiscal year, according to the mean estimate of eight analysts surveyed by Bloomberg. Cargill, the giant grain handler and food processor, said on Oct. 12 that thanks to price volatility and the performance of its affiliate, fertilizer producer Mosaic (MOS), profit for the latest quarter rose 68 percent.

Back in the 1980s, falling prices, record-high interest rates, and too much farmland bought on credit prompted a wave of farm bankruptcies. Now low interest rates are amplifying the boom, says Tom Neher, vice-president for AgStar Financial in Rochester, Minn. The bank issued twice as many farm-equipment loans as expected in a recent promotion. "I've seen more brand-new combines bought than I've seen for a long, long time," says Neher, who helps manage $2.1 billion in grain-related loans and leases for AgStar. "When you can get a machinery loan for 4 percent interest, that's about as low as it ever gets."

There are limits to how much cash will trickle down to the Main Streets of rural America, says Ernie Goss, an economics professor at Creighton University in Omaha: "You have fewer and fewer farms, and fewer and fewer farm families, so it hasn't spilled into small businesses like the drugstore or the shoe store." Farm prices have been supported by a lower dollar, which boosts exports, and not by rising domestic demand, says Goss. Small businesses "are mystified by all these reports about how wonderful the rural economy is. That's because they're selling in Greeley, Neb., and the farmer out there is selling in Beijing."

Still, the mix of foreign demand and a weak dollar is the best news farm country has had for decades. "It is a perfect situation for U.S. farmers, the best since the early 1970s," says Bill Adams, a trader at ACT Currency Partner, a currency and commodity specialist in Zurich. "There will be quite a few Cadillacs sold in the Midwest this Christmas."

The bottom line: Farm exports from the U.S. are rising fast. That's benefiting farm-equipment makers, fertilizer companies, and other suppliers.

Grainy Season: Engineering Drought-Resistant Wheat

NPR's Dan Charles reports that wheat prices spiked this past summer as a record drought and heat wave wreaked havoc on Russia and ruined one fourth of the country's crops. Russian Prime Minister Vladimir Putin ordered a ban on exports of Russian grain. A self-propelled combine harvests a field in a village south of Moscow on Aug. 15.

Last summer's drought in Russia pushed wheat prices to their highest levels in years, and the fallout is a reminder of how much humanity depends on the rain. Now, scientists are searching for novel approaches to make wheat less vulnerable to drought.

Some efforts are trying to replace the genes that made possible the dramatic boost in wheat harvests in the latter half of the 20th century in India known as the Green Revolution.

Few people can see the accomplishments of the Green Revolution more clearly than Kulvinder Gill, who grew up in a village in India where, half a century ago, some predicted catastrophe because food production wasn't growing as fast as the population. "It was a common belief that this world is going to end because of the starvation," Gill said. "People are going to fight for food and kill each other."

But scientists such as Orville Vogel at Washington State University bred new varieties of wheat that included a mutant gene that kept the plant short. When you gave these plants lots of fertilizer and irrigated them, they didn't just get tall and fall over like ordinary wheat — they produced more grain. A lot more.

"These dwarfing genes came and almost tripled yields, at least in Punjab area," Gill said.

So Gill left his village in Punjab and became a wheat geneticist. He now occupies the Orville Vogel Endowed Chair in wheat breeding at Washington State.

Searching For A New Wheat Gene

And he's hoping to not only repeat what Vogel did, but improve on it. That's because the dwarfing genes of the green revolution — which are now in 90 percent of all the wheat that farmers grow around the world — have an unfortunate side effect, he says: They make it harder for the plant to thrive when water is scarce.

For instance, when it's dry, farmers have to plant seeds deeper because that's where the moisture is. "And these semi-dwarfs don't do too good pushing out of 6 inches of soil," Gill says.

So he's now on the hunt for a different and better dwarfing gene. He knows exactly what he's looking for: It's a mutation that already exists in corn and sorghum. It doesn't shrink the whole plant the way the green revolution genes do. Instead, it blocks the normal flow of a crucial growth hormone.

"So the plant reduces in height, but at the same time, the cob is bigger, the stem is thicker and stronger, and the plant looks great," Gill says.

To create this kind of wheat plant, Gill and a group of collaborators have treated thousands of seeds with a chemical that makes random changes in DNA. Now these mutant wheat plants are growing in the greenhouse, and Gill has to see if any of them have the one change he wants.

"It is very difficult to know at this point if the mutant is the one — the kind we are looking for," he says.

A Global Effort To Reprogram Crops

Gill's project is just one small part of a global campaign to reprogram crops genetically so they can survive water shortages. People are trying everything from low-tech traditional crop breeding to high-tech gene splicing.

One approach, somewhere in the middle, involves looking for useful genes in wheat's ancestors. Scientists are retrieving seeds from the refrigerated vaults of gene banks and taking a fresh look at those plants. Thousands of years ago, three of them somehow combined in the wild to form modern wheat.

David Bonnet, a wheat geneticist at the International Maize and Wheat Improvement Center based in Mexico, says scientists can re-create that merger in the laboratory.

"So we can go back and bring in more genetic variation for a whole range of traits, but certainly drought tolerance is one of them," Bonnet says.

But the approach that's getting most of the attention and most of the money these days is genetic engineering.

Agricultural giant Monsanto has inserted a gene from bacteria into corn and it says this variety yields 8 to 10 percent more under drought conditions. The gene is called a transcription factor — a kind of master gene that activates many others when the plant is under stress.

The company says if it gets a green light from regulators, it will start selling the corn within two years. Monsanto has also donated the gene to a group of government-supported research institutions in Africa that are starting greenhouse trials of corn-containing the gene this year.

The Potential Of Genetic Enhancement

In the scientific community, there's a lot of curiosity about the Monsanto product and some skepticism that it will work as advertised.

But many of them, including Mahyco, a leading seed company in India, also are looking for genes to splice into crops.

"In our program, we are looking at transcription factors from drought-tolerant crops — sorghum, acacia trees or other crops that are known to be drought-tolerant," says Usha Zehr, Mahyco's chief technology officer.

And geneticist Bonnet says there's no shortage of genes that seem like they might possibly help a plant use water more efficiently.

"We have access to quite a lot of candidates ourselves, and we think they have as much or more potential as what Monsanto has," he says.

Actually realizing that potential may become increasingly important as the globe warms up. Climate models predict that many parts of the world — including major crop-growing areas — will see more droughts in the coming years.

Tight Corn Supplies Drive Wheat Prices Higher

Chad Weigand, USW Market Analyst reports in the recently released Wheat Letter that "Back in the July 21 issue of Wheat Letter, we wrote about world wheat prices surging with news of the Russian drought. We also suggested that it would be a good idea for wheat buyers to watch the corn market, noting that the run-up in wheat futures actually began after the U.S. Department of Agriculture (USDA) reported a tightening in corn stocks. An additional decrease in corn stocks from any future weather issues or continued demand growth from China could push corn prices higher and pull wheat along with it,” we said.

USDA’s corn market assessment in its Oct. 8 World Agricultural Supply and Demand Estimates (WASDE) has had exactly that effect on wheat prices. USDA surprised the trade by projecting 2010/11 U.S. corn ending stocks at 22.9 million metric tons (MMT), falling well below average trade estimates of 29.2 MMT. If realized, this would be a 47 percent decline from last year and the lowest level since 1996/97. Global ending stocks are also expected to decline, falling 11 percent from last year to 132 MMT. With the ever-growing corn demand projected at a record 835 MMT, the global stocks-to-use ratio stands at 16 percent, the second lowest level since 1974/75. The stock situation in the U.S., which accounts for roughly 40 percent of global output, is especially tight. USDA projects the U.S. corn stocks-to-use ratio at eight percent, the second lowest level on record.

The bullish reaction in corn has spilled over into wheat, a market that was already factoring in increased overseas demand for U.S. wheat. Corn supply and demand remains a major factor for wheat. In its daily “Commodity News for Tomorrow,” CME yesterday quoted an analyst saying, "The only reason that wheat is up is because corn is up. We don't have a shortage of wheat." Between the WASDE report on Oct. 8 and Oct. 20, corn futures prices climbed 12 percent to $5.73/bu and wheat gained nearly five percent. The CBOT December wheat contract closed at $6.83/bu yesterday. The spread between corn and wheat in the U.S. cash markets is even tighter. While feed demand for wheat could increase locally, if the spread stays narrow up to corn planting time in 2011, the long-term competition for acres between corn and wheat would take on more weight.

Writing for World Perspectives, Inc., this week, analyst Mike Krueger estimated that 2011 corn planted area will have to reach 95 million acres (38 million hectares), assuming a yield of 160 bushels per acre (about 10 metric tons per hectare), if U.S. ending stocks are to reach a more comfortable level of 33.0 MMT. This would translate to the largest corn planted area since 1944 and increase the chance that the 2011/12 and 2012/13 wheat crops will lose planted area to corn. Krueger is President of The Money Farm, a grain marketing advisory firm based in Fargo, ND.

Idaho’s All Wheat Production Up from 2009

All wheat production in Idaho is up 9 percent from 2009 to 108 million bushels. The winter wheat yield, at 82.0 bushels per acre, is up 1.0 bushel from last year. Winter wheat production totals 58.2 million bushels from 710,000 harvested acres, up 3 percent from last year’s 56.7 million bushels.

The 2010 winter wheat production is estimated to be 76 percent white and 24 percent hard red. Spring wheat yield, at 79.0 bushels per acre, is up 2.0 bushels from a year ago. Idaho’s spring wheat production totals 48.6 million bushels from 615,000 harvested acres, up 19 percent from 2009’s 40.8 million bushels.

The spring wheat crop is estimated to be 50 percent white and 50 percent hard red. Yield for durum wheat is estimated to be 65.0 bushels per acre, down 16.0 bushels from last year. Durum wheat production in Idaho totals 1.30 million bushels from 20,000 harvested acres, down 320 thousand bushels from last year.

IGPA Leader Chosen for Prestigious National Program

Idaho Grain Producers Association (IGPA) member of the Board of Directors, Robert Blair, was recently named as an Agriculture Fellow for the prestigious Eisenhower Fellowship program.

Blair was chosen as one of two farmers from a competitive nationwide pool of applicants for the 2011 program chaired by retired U.S. General Colin Powell. His work to tout the benefits of precision technology as a new frontier in production agriculture caught the attention of the Eisenhower Fellowship.

Blair, a family farmer from Leland, Idaho, serves as the Nez Perce County representative on the IGPA Board of Directors and chairs the Congressional, Legislative, Tax and Transportation Committee.

“The IGPA is extremely proud, but not surprised, of Robert’s selection”, said IGPA President Scott Brown. “Robert follows in the footsteps of IGPA past President Duane Grant who was also selected for this great program. We are fortunate to have such talented leadership among Idaho’s wheat and barley farmers.”

The stated goal of the Eisenhower Fellowship is to “engage emerging leaders from around the world to enhance their professional capabilities, broaden their contacts, deepen their perspectives, and unite them in a diverse, global community”.

Blair and the other selectees will travel on a 4-5 week individualized professional program to meet leaders in agriculture and related fields. Robert’s specific mission will be to engage and exchange ideas with South American nations regarding the benefits of precision agriculture.

For more information, contact the Idaho Grain Producers Association office at (208) 345-0706.

U.S. 2011 wheat carryover down 5% from September

World Grain reports that U.S. wheat carryover on June 1, 2011, was projected at 853 million bushels, down 49 million bushels, or 5%, from 902 million bushels forecast in September and down 123 million bushels, or 13%, from 976 million bushels in 2010, the U.S. Department of Agriculture (USDA) said in its Oct. 8 World Agricultural Supply and Demand Estimates.

U.S. all-wheat production was projected at 2.224 billion bushels for 2010-11, down 41 million bushels, or 2%, from September but up 6 million bushels from 2.218 billion bushels a year earlier. Total wheat supply was projected at 3.299 billion bushels, down 39 million bushels, or 1%, from September but up 306 million bushels, or 10%, from 2.993 billion bushels in 2009-10, the USDA said.

Exports of U.S. wheat for 2010-11 were projected at 1.25 billion bushels, unchanged from September but up 369 million bushels, or 42%, from 881 million bushels in 2009-10.

The USDA projected domestic food use of U.S. wheat in 2010-11 at 940 million bushels, unchanged from September but up 23 million bushels, or 3%, from 917 million bushels in 2009-10, and seed use at 76 million bushels, also unchanged from September but up 7 million bushels from 69 million bushels last year. Feed and residual use was projected at 180 million bushels, up 10 million bushels, or 6%, from September and up 30 million bushels, or 20%, from 150 million bushels in 2009-10. Total use was projected at 2.446 billion bushels, up 10 million from September and up 428 million bushels, or 21%, from 2.018 billion bushels in 2009-10.

The average farm price of U.S. wheat in 2010-11 was projected to fall in a range of $5.20-$5.80 a bushels, up from $4.95-$5.65 in September and compared with $4.87 a bushel in 2009-10 and $6.78 a bushel in 2008-09.

On a by-class basis, the USDA projected June 1, 2011 carryover of hard winter wheat at 338 million bushels, down 11 million bushels from September and down 47 million bushels from 385 million bushels in 2010. Soft red winter wheat carryover was projected at 158 million bushels, down 21 million bushels from September and down 84 million bushels, or 35%, from 242 million bushels in 2010.

Hard spring wheat carryover on June 1, 2011 was projected at 232 million bushels, down 17 million bushels from September and down 2 million bushels from 2010.

White wheat carryover was projected at 88 million bushels in 2011, up 2 million bushels from September and up 8 million bushels from 80 million bushels in 2010.

Durum carryover on June 1, 2011 was projected at 37 million bushels, down 2 million bushels from September but up 2 million bushels from 2010.

Global 2010-11 wheat production was projected at 641.44 million tonnes, down 1.57 million tonnes from September and down 40.71 million tonnes, or 6%, from 682.15 million tonnes the previous year. Global wheat use was projected at 663.31 million tonnes, up 2.12 million tonnes from September and up 12.35 million tonnes, or 2%, from 650.96 million tonnes in 2009-10. World exports were projected at 126.23 million tonnes, up 200,000 tonnes from 126.03 million tonnes in September but down 9.09 million tonnes, or 7%, from 135.32 million tonnes in the prior year. World wheat ending stocks for 2010-11 were projected at 174.66 million tonnes, down 3.13 million tonnes from September and down 21.87 million tonnes, or 11%, from 196.53 million tonnes in 2009-10.

"Global wheat supplies for 2010-11 are projected 1 million tonnes lower, mostly reflecting lower production in the United States," the USDA said.

Alan Guebert: Gravest strategic issue you never heard of

Before anyone smiles too broadly about today's grain prices, they might want to take a peek at fertilizer prices. If so, they'll discover, as DTN reporter Russ Quinn recently did, that the only price rising faster than either corn or wheat's is fertilizer.

“Six fertilizers have seen double-digit increases in price compared to one year earlier,” noted Quinn on Sept. 21. “Leading the (way) higher is DAP, which is up 48 percent, followed by anhydrous at 47 percent, MAP at 43 percent, UAN28 at 37 percent, UAN32 at 26 percent, 10-34-0 at 15 percent and urea at 10 percent.”

While no one is forecasting a return to the smash-mouth prices – $1,200 anhydrous and $1,000 potash – seen in 2008, the last high-grain price year, no one has ruled 'em out, either. After all, higher grain prices seem to breed higher fertilizer prices like tougher times seem to breed more bank robbers.

There are, however, two reasons for today's upward prices. First, rising demand because of previous cutbacks (largely due to those lunar, 2008 prices) and two years of wet weather that has washed most fertilizer reserves down the creek is kicking up demand, squeezing supplies and fueling prices.

The second factor is ever more basic: cartels. Like crude oil or water, fertilizer is increasingly a “name-your-price” game where a handful of super ag Big Boys control production, marketing and, to a great extent, pricing.

Four weeks ago this space examined the $38.6 billion hostile takeover attempt of Potash Corp. of Saskatchewan, Inc., a Canada-based firm that controls 30 percent of the world's potash production, by BHP Billiton. The deal remains in limbo.

While the wooing continues, though, BHP continues to claim that if it wins Potash it takes the firm out of Canpotex, the cozy export cartel between Potash and its two biggest North American competitors, Mosaic, a Cargill-run firm, and Agrium.

Think about that for a second. BHP pays $38.6 billion for a company that has a third of the world's potash reserves and a marketing plan – built largely on an export cartel – that has delivered a return on investment of 40 percent or so over the last three years and it's gonna' drop that incredibly profitable formula for something better?

What's better than a 40 percent ROI and an export cartel?

The phosphorus market, that's what, offers C. Robert Taylor, the Alfa Eminent Scholar and an ag economist at Auburn University. Taylor spent most of the past year examining the global phosphorus market and says that it “is the gravest strategic issue facing the United States that you never heard of.”

In short, writes Taylor for the Daily Yonder (http://www.dailyyonder.com), the severity of a phosphorus shortage in the next 20 years – at current usage rates, the U.S. supply “will be exhausted in 15 to 30 years” – might “flip from one that revolves around... oil reserves to one based on who owns, and controls, phosphorus reserves.”

Even more worrisome, notes Taylor, is that Morocco and China hold 60 percent of the world's known phosphorus reserves while the U.S., South Africa and Jordan hold most of the rest. Wisely, though, China, “has imposed a 100-175 percent tariff to curtail phosphorus exports, yet the U.S. continues to export to”– wait for it – “China.”

“Troubling, ain't it?” asks Taylor.

Moreover, “Trade in phosphorus is dominated by three corporations,” he continues, “Mosaic (Cargill), Potash Corporation of Saskatchewan and OCP, a Moroccan-sanctioned, privately traded monopoly.”

Gee, two of the same key players as the potash market. Hmm, maybe BHP wants Potash Corp. more for its phosphorus and that cartel than potash and the other cartel.

Either way, there's little doubt why the fertilizer kings are whacking you with higher prices now: because they can.

Alan Guebert: Phosphorus market: Gravest, strategic U.S. issue you’ve never heard of

Before anyone smiles too broadly about the grain prices, they might want to take a peek at fertilizer prices. If so, they’ll discover, as DTN reporter Russ Quinn recently did, the only price rising faster than either corn or wheat is fertilizer.

“Six fertilizers have seen double-digit increases in price compared to one year earlier,” noted Quinn.

While no one is forecasting a return to the smash-mouth prices — $1,200 anhydrous and $1,000 potash — seen in 2008, no one has ruled ‘em out. After all, higher grain prices seem to breed higher fertilizer prices like tougher times seem to breed more bank robbers.

There are, however, two reasons for today’s upward prices.

First, rising demand because of previous cutbacks (largely due to those lunar 2008 prices), and two years of wet weather that has washed most fertilizer reserves down the creek. Both of these reasons are kicking up demand, squeezing supplies and fueling prices.


The cartels

The second factor is even more basic: cartels.

Like crude oil or water, fertilizer is increasingly a “name-your-price” game where a handful of super ag big boys control production, marketing and, to a great extent, pricing.

Four weeks ago, this space examined the $38.6 billion hostile takeover attempt of Potash Corp. of Saskatchewan, a Canada-based firm that controls 30 percent of the world’s potash production, by BHP Billiton. The deal remains in limbo.

While the wooing continues, BHP continues to claim that, if it wins Potash, it will take the firm out of Canpotex, the cozy export cartel between Potash and its two biggest North American competitors, Mosaic and Agrium.

Think about that for a second. BHP pays $38.6 billion for a company that has a third of the world’s potash reserves and a marketing plan — built largely on an export cartel — that has delivered a return on investment of 40 percent or so over the last three years and it’s gonna’ drop that incredibly profitable formula for something better?

What’s better than a 40 percent rate of investment and an export cartel?


Phosphorus vanishing

The phosphorus market, says C. Robert Taylor, the Alfa Eminent Scholar and an ag economist at Auburn University.

Taylor spent most of the past year examining the global phosphorus market and says that it “is the gravest strategic issue facing the United States that you never heard of.”

The severity of a phosphorus shortage in the next 20 years — at current usage rates, the U.S. supply “will be exhausted in 15 to 30 years” — might change priorities to “flip from one that revolves around… oil reserves to one based on who owns, and controls, phosphorus reserves.”

Even more worrisome, notes Taylor, is that Morocco and China hold 60 percent of the world’s known phosphorus reserves while the U.S., South Africa and Jordan hold most of the rest.

Wisely, China, “has imposed a 100 to 175 percent tariff to curtail phosphorus exports, yet the U.S. continues to export to China. Troubling, ain’t it?” asks Taylor.

Moreover, “Trade in phosphorus is dominated by three corporations,” he continues, “Mosaic (Cargill), Potash Corporation of Saskatchewan and OCP, a Moroccan-sanctioned, privately traded monopoly.”

Gee, two of the same key players as the potash market. Hmm, maybe BHP wants Potash Corp. more for its phosphorus and the cartel than potash and the other cartel.

Either way, there’s little doubt why the fertilizer kings are whacking you with higher prices now: Because they can.

Ukraine imposes quotas for grain exports

Worldgrain reports the government of Ukraine accepted the decree on imposition of quotas for exports of grains from Ukraine in order to support the food security of Ukraine, declared Gregory Kaletnik, the head of the relevant committee on agrarian policy and land relations issues of the Verkhovna Rada of Ukraine, APK-Inform said on Oct. 6.

According to Kaletnik, acceptance of the decree will completely secure the requirements of the country in forages, and provision with bread products.

Market participants also said that the Cabinet accepted the decision on imposition of quotas for grain exports. The government is discussing the order of quotas distribution, including the variant of selling the export rights through auction trading.

Previously Nikholay Azarov, the prime minister of Ukraine, entertained the possibility of imposing a grain export quota system in Ukraine. After receiving the final data on grain stocks, the government planned to make a decision concerning the accepted volumes of grain exports.

Also, during the visit to Japan, Boris Kolesnikov, the vice-prime minister of Ukraine, announced that Ukraine would possibly impose grain export limitations. He said Ukraine should sell the grain export quotas through the auction.

Ag Exports at a Tipping Point

DTN's Marcia Zarley Taylor reports on the precarious world stock situation -- particularly for corn -- could be the norm for global agriculture over the next decade, not the exception, speakers told 600 attendees at the annual Soya and Oilseed Summit being held here this week. But that fine balance between supply and demand spells good news for grain prices long-term and U.S. producers who act as the world's shock absorber in times of scarcity.

The world is used to turning to the U.S. in times of grain shortages and in order to keep fulfilling that role a world-class transport system is necessary. "The world is one short crop away from real tension in supply and demand," said Soren Schroder, CEO of Bunge North America when outlining his five- to 10-year vision for global ag exports and U.S. competitiveness. "God forbid we have one [short crop] in this country."

Not only could global corn stocks reach the tightest levels since 1995-96 this season, but USDA and other experts have consistently underestimated demand for soybeans in four out of the past five years. Some analysts believe that will set the stage for another acreage battle between those crops in 2011, much as it did in 2008.

Earning a reputation as a reliable export supplier sounds obvious, but consistent U.S. grain and soybean production has been critical to food security three times in less than a decade, Schroder added. He cited the U.S.'s ability to fill gaps when drought hit Argentine soybeans last year, Australian wheat in 2007/08 and the latest catastrophic damage to Black Sea wheat production this season. He expects current U.S. corn exports to match the 2007/08 record of 61 million metric tons due to surging global demand and the shortfalls in Former Soviet Union feed wheat supplies.

"The U.S. will increase its share of global exports over the next decade in corn, soybeans and wheat," Schroder said, adding that strains like the Black Sea region's 2010 drought could be the norm given shrinking stock levels globally.

Fueling this demand is that between 2000 and 2030, the world will add 770 million people to the middle class who earn $10 to $20 per day. That's the income segment that will spend more of its budget to improve its diet by consuming more meat, Schroder noted.

Bunge's Schroder expects China to boost net corn imports significantly, perhaps reaching 14 MMT by 2019-2020, up from nothing prior to 2009-2010. But instead of a gradual increase in demand, he sees the country's needs ramping up to possibly 10 MMT "very quickly" between now and 2015. Most of that new demand will need to be filled by the U.S. since its corn technology and infrastructure give it a competitive advantage in moving large volumes of grain to port.

Mike Steenhoek, executive director of the Soy Transportation Coalition, said he feels like "we're attaching a garden hose to a fire hydrant" given the volumes of grain and oilseeds that will be needed to meet world food demand.

At the moment, Americans aren't the world's lowest cost producers at the farm gate, but gain on Brazil and Argentina in low-cost transport, taxes and port handling. For example, Steenhoek says it cost $64.27 per ton to ship soybeans from Davenport, Iowa, to Shanghai, vs. $138.03 per ton from Mato Grosso, Brazil to Shanghai. That gives Americans almost $100 per ton advantage, when other costs are counted.

But no one in the grain industry is taking that advantage for granted. Some road and port improvements in Brazil could shave $30 per ton off Mato Grosso's export cost within the next three years. Meanwhile, parts of that U.S. infrastructure are fraying and in critical need of investment, Schroder and Steenhoek emphasized. More than 1,500 U.S. river barges have been taken out of service in the last decade while trade volumes grew, replaced by more efficient capacity. But the bottleneck is the nation's river locks which average 60 years of age, 10 years beyond their design life. Several on the Ohio River have experienced mechanical failures recently, Steenhoek added.

"The American river system needs investment and lots of it to do what we need it to do in the next 10 years," Schroder said. What's more he sees a need for more storage so both hemispheres can use rail systems year round, rather than congesting traffic just at harvest.

Prices will have to be above the historical average to meet the expected surge in global demand, Schroder added. "There aren't enough stocks on hand to match this growth cycle."

"Everyone feels a little bit on edge. With current stock levels [of corn, wheat and soybeans], we're only one crop away from real price pressure. And the buffer to match demand is getting smaller," Schroder said.

Oregon-Idaho Grains Convention

The Idaho Grain Producers Association (IGPA) and the Oregon Wheat Growers League (OWGL), along with wheat and barley producers from throughout the Pacific Northwest will converge upon the Doubletree Lloyd Center Hotel in Portland, Oregon for this year’s Oregon-Idaho Grains Conference. The theme of the December 1-3 Conference is “Keys to Success – Partnerships, Education and Networking”.

The wheat and barley industries in Idaho and Oregon are undergoing many changes and continual challenges due to a number of issues including: increased input costs, crop insurance reforms, extreme volatility in the global grain marketplace, radical changes to federal farm policy, and increased regulatory pressure on farming operations. These topics among many others will be addressed by a wide variety of top notch speakers.

Keynote speakers for the Conference include:

Jim Miller, USDA Undersecretary for Farm and Foreign Agricultural Services.
Undersecretary Miller oversees the administration and operations of federal farm payment, trade, and crop insurance programs for the U.S. Department of Agriculture. Mr. Miller served as president of the National Association of Wheat Growers (NAWG) in 1987. He will discuss the development of the 2012 Farm Bill and the USDA’s administration of today’s top farm priorities.

U.S. Senator Larry Craig (Ret.), Idaho
With a combined 28 years in the United States Senate and House of Representatives, Senator
Larry Craig became recognized nationally as a voice of common sense advocating for conservative solutions to problems of our nation. A specialist in issues specific to the West, Senator Craig will provide his insight into the congressional elections results, including farm, energy, and environmental policy.

Damian Mason, Humorist & Entertainer
Keying off the theme, “Humor for the Heart of Agriculture”, Damian Mason has been a professional speaker, corporate event entertainer, and author since 1994. Damian brings his quick wit and a willingness to glean humor from all sources.

The public is welcome and encouraged to participate in the Conference. Full and single-day registrations are available. The annual Conference provides a terrific opportunity for the public and the agriculture industry to engage in meaningful dialogue regarding the top issues facing the grain industry.

Conference registration and full details can be accessed at www.idahograin.org or by contacting the IGPA office at (208) 345-0706.