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California Association of Wheat Growers (CAWG)

July 15, 2005

MEXICO LIFTS TRADE BAN ON CALIFORNIA WHEAT. CAWG and the California Wheat Commission are pleased to announce that the nine-year ban on wheat exports to Mexico has been lifted. We issued the following press release on Wednesday:

 Mexico lifts nine year ban on California wheat

Woodland, Ca. – The U.S. Department of Agriculture and the Mexican Department of Agriculture have signed an agreement that will lift a nine year ban on the imports of wheat from California, Arizona and New Mexico.

 The California Wheat Commission and the California Association of Wheat Growers have been working to resolve this issue since the restriction was put place in 1996. At that time Karnal bunt fungus was found in limited areas in the Desert Southwest.

Commission Chairman, Mike Frey stated, “California wheat producers have varieties that will fit nicely into the product mix in Mexico. We look forward to working with the wheat buyers in Mexico and the grain trade in California to encourage business between these two markets. We have anxiously awaited this opportunity.”

During the past nine year period there have been many parties involved in helping to get the Mexican quarantine lifted. While the list is extensive, California Association of Wheat Growers President, Larry Hunn noted, “We are particularly appreciative of the support we have received from the California Congressional Delegation (with the leadership of Representatives Wally Herger, Bob Filner and Bill Thomas), U.S. Wheat Associates, the National Association of Wheat Growers, Wheat Export Trade Education Committee,  California Department of Food and Agriculture, the Office of the U.S. Trade Representative, and the U.S. Department of Food and Agriculture. It is not always easy to explain to producers how much effort and coordination goes into resolving a quarantine issue. Today we can show our members that these efforts can be successful.

In recent years, Mexico has become the second largest market for U.S. wheat exports. California wheat growers look forward to helping to meet the demand from Mexican consumers for this high quality product.

YOUR LETTERS, CALLS NEEDED ON RAIL COMPETITION, CAFTA. NAWG encourages you to send e-mails and to make phone calls to your U.S. Representative about CAFTA and to your U.S. Representative and your Senators about rail competition legislation, HR 2047 and S 919.  

CAFTA would eliminate tariffs on wheat going to five Central American countries and the Dominican Republic, effective immediately. This agreement has passed the Senate and will be voted on in the House by the end of the month. CAWG strongly supports DR-CAFTA and has been actively encouraging the California Congressional Delegation to vote in favor of the implementing legislation. Central America is already a good market for California wheat; the free trade agreement is likely to result in even more consumption.

Regarding rail competition, HR 2047 and S 919 would:

• require rail carriers, upon shipper request, to provide a rate quote for service;
•  prevent the creation of “paper barriers,” which restrict the ability of Class II and Class III rail carriers to interchange traffic with Class I carriers;
• allow the Surface Transportation Board (STB) to designate a state as an “Area of Inadequate Rail Competition” and would require the STB to remedy the issue; and
• allow either a shipper or a rail carrier to submit a dispute over rail rates, rail service, and other matters under the jurisdiction of the Surface Transportation Board for “final offer” arbitration.

Introduced in their respective houses of Congress, NAWG and a coalition of groups concerned with the plight of captive shippers are currently working on recruiting more cosponsors for these pieces of legislation.

Letters on both of these issues are available at NAWG’s Congressional Action Center at <http://capwiz.com/wheatworld/home/> . You can also create and send your own letter via that site. Be sure to include your personal stories and examples of how this legislation would positively affect you. 

WHEAT STOCKS UP IN JULY REPORT. On Tuesday, USDA adjusted upward its stocks estimates - both beginning and ending - for wheat in the 2005/06 marketing year, which began June 1.  Beginning stocks moved up by 13 million bushels (2.5 percent) to a total of 540 million bushels.  The production estimate was also increased by 68 million bushels, and with both domestic and export demand unchanged from the May report but down by 118 million bushels from last year, ending stocks were raised by 81 million bushels.

The price range is expected down by a nickel on the high and low end, to a range of $2.60 to $3.10 per bushel, compared to an estimated $3.40 for 2004/05. USDA also noted that foreign production is down 1.7 million tons due mostly to smaller crops in India (down 1.5 million) and Algeria (down 1.1 million).  This is partially offset by larger crops in Ukraine, the EU-25 and Canada.  Global 2005/06 wheat stocks fall slightly with the largest declines forecast for Romania, Russia, India and Algeria, which are only partially offset by increases in the United States and the EU-25.

Production is seen up in all classes except Soft Red Winter, which is down by over 17 percent.  Domestic demand for Hard Red Spring and Durum are both expected up from last year, and Durum exports are pegged up 16.7 percent from last year.  Aside from those bright spots, the news is less bullish.  Every class is expected to have a higher level of ending stocks - nearly a 30 percent total increase over 2004/05 - and total exports are projected down by more than 10 percent from last year.