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California Association of Wheat Growers (CAWG)

December 15, 2006

FINAL HOURS BRING PROGRESS ON VIETNAM, AREA 181. The 109^th Congress finished its work early on December 9^th with a continuing budget resolution and a massive tax and trade bill that included action on a number of important issues for wheat growers.

Most notably, Congress passed legislation allowing permanent normal trade relations for Vietnam. This legislation will provide American sellers access to the Vietnamese market of more than 83 million people. The United States and Vietnam signed a bilateral market access agreement on May 31. Legislation to provide PNTR status to Vietnam was introduced to the U.S. Congress on June 3.

Legislation to allow for energy exploration in Area 181, about 8.3 million acres in the eastern Gulf of Mexico, was also included in the tax and trade package. NAWG has supported the opening of Area 181 to increase the supply of natural gas, a key component of fertilizer, which has spiked in price in the most recent growing seasons.

In addition, the Senate confirmed Mark Keenum, former chief of staff for Sen. Thad Cochran (R-Miss.), as under secretary for Farm and Foreign Agricultural Services.

One policy area that did not find favorable resolution in the final legislative package was the issue of particulate matter, including dust. A measure was included in the tax and trade package that would prohibit the Environmental Protection Agency from regulating dust produced because of agricultural activity. However, that measure was pulled out of the final bill. While disaster assistance was the top priority for many Members and, of course, wheat growers, Congress did not act on that issue before adjourning. This issue will likely be brought up early in the 110^th Congress.

USDA CUTS WHEAT EXPORT PROJECTION BY 25 MBU. USDA released two reports this week that cut its projection of wheat exports by 25 million bushels and raised ending stocks by 20 million bushels, with the 5 million bushel difference estimated to go into increased domestic food use.

The WASDE and Wheat Outlook reports cited “increased competing supplies and the slow pace of sales” in making the change. The new number was caused by increased global production, which is expected to pressure global prices and reduce U.S. exports. USDA also narrowed the price expectation range on the top end to $4.15-$4.55 per bushel. Even with the lower exports, U.S. stocks are down 27 percent from last year and are at the lowest level since 1995/96.

The higher production estimates are coming from improved prospects in Russia, Romania and Ukraine, as well as 1 million bushel increases in both Canada and Argentina. These gains more than offset further drought-related declines in the EU-25, Brazil and Australia; the Australian crop is now estimated at only 10.5 MMT.

The supply and demand picture for 2006/07 is one of the more interesting scenarios in recent memory. Intense acreage competition between major field crops in the United States is supporting prices, with pressure from ethanol demand and a wheat industry that is facing the prospect of needing to buy acres.

On the supply side, planted acres are on the rise in some parts of the country – USDA expects production in SRW to rise by 81 million bushels from last year – but down in others. Production of HRW is projected down 150 million bushels from last year (a bit of a surprise) and durum is down by half from last year. As anyone who has followed wheat for any length of time knows, the crop can go from bumper to disaster several times and back again between Christmas and harvest time. Much of the wheat belt is trying to recover from years of successive drought and does not have full soil moisture profiles.

UPDATE ON SCAB, GENOME, RESEARCH PRIORITIES. This week featured a full itinerary of wheat research meetings in Raleigh, N.C. The major event was the annual conference of the U.S. Wheat & Barley Scab Initiative (USWBSI), a gathering of researchers and stakeholders to review progress and outline goals for future work. Connected to the USWBSI meeting were a meeting of the eastern region wheat scientists working under the Marker Assisted Selection Coordinated Agricultural Project grant project; a steering committee meeting for the Graingenes bioinformatics database; and the annual meeting of the National Wheat Improvement Committee (NWIC).

Wheat representatives included Laird Larson of the South Dakota Wheat Commission; Calvin Haile of the Virginia Small Grain Association; and Daren Coppock of NAWG.

USWBSI: The USWBSI is now 10 years old, and is making steady but slow progress toward potential solutions for the scab problem. The pest has been remarkably difficult to counter, as there are very few resistance genes within the wheat genome, and they are of limited effectiveness. Similarly, fungicide controls are effective but expensive and cannot offer complete control.

A new fungicide, Prosaro, expected on the market from Bayer CropScience in 2007, has shown improved results over competing products in much of the test trial data reported at the USWBSI meeting. Syngenta continues to test its transgenic trait for fusarium control but has not made a decision to commercialize it; other efforts to locate transgenes are not very far along the track.

Significant discussion at the Scab Forum is likely to lead to a restructure of the effort. For most of its history, USWBSI has been organized into scientific disciplines – a research advisory committee and funding allocation for pathogen genetics, host genetics, food safety, plant breeding, variety nurseries, etc. While this structure has allowed each of the scientific disciplines to examine many possible avenues of control, the communication between the various groups has been limited and has not been conducive to prioritizing efforts.

The consensus of the discussion at the Forum seemed to support the idea of reorganizing into regional multi-disciplinary structures, where all of the scientists in a particular region/market class would collaborate on a single larger grant to address the over-arching goals set by the steering committee. Part of the reorganization would be moving to a longer time frame for projects (three or more years) with funding committed over the entire project, subject to annual progress reports.

Details remain to be worked out, but the new structure should provide greater accountability and stronger focus on deliverable end products. USDA’s Agriculture Research Service, the funding agency for the Initiative, will require a detailed action plan with measurable progress milestones.

Federal Research Priorities: The National Wheat Improvement Committee (NWIC) covered a lengthy agenda, including beginning the process of setting 2007-08 federal wheat research priorities. NWIC and NAWG work together each year to assemble a joint list of priorities and, as a result of the September Wheat Summit, they’re reaching out to other wheat industry interests to create an industry-wide set of priorities.

NWIC also received a sobering update on the Ug99 strain of wheat stem rust that is spreading across eastern Africa. Potential yield losses from an unchecked spread of this disease are substantial. Anticipated spread patterns predict that the disease will spread north from Ethiopia into the Middle East and possibly east to India, Pakistan and China. Up to 75 percent of wheat varieties in each of these areas are believed to be susceptible to Ug99.

Two potential sources of resistance have been found within wheat, and varieties with those genes are being screened in African nurseries now. One of the genes (Sr24) is prevalent in a number of U.S. varieties already, but some of the plants with this gene in the screening nurseries are showing rust infections; testing is being done to see if these infections are from Ug99 or a different strain of stem rust. If the Sr24 gene fails to protect from rust, approximately 80 percent of U.S. wheat varieties would be considered susceptible to Ug99. Another resistance gene, Sr36, is also present in some U.S. wheat varieties, but reliance on a single gene for resistance raises concerns about how long that resistance will last.

Transgenic resistance sources have not yet been characterized. However, there is some previous data strongly suggesting that glyphosate has a suppressive effect on plant diseases like scab and possibly stem rust. In other words, a RoundUp Ready line might provide both weed control and stem rust suppression through application of glyphosate, though this hypothesis has yet to be tested.

CREATE-21: NWIC also discussed a proposal from land grant universities called CREATE-21. This proposal is a successor to the Danforth proposal for a National Institute for Food and Agriculture (NIFA), and its stated intent is to increase resources available for agricultural research and provide more integration between federal and state research programs.

CREATE-21 proposes to eliminate Congressional research earmarks and instead transfer all of the allocation authority to the CREATE-21 director, who would be appointed by the President.

NAWG and Mike Davis from the National Barley Improvement Committee expressed reservations about this approach, as in recent years the Administration has eliminated all of the directed wheat research projects from the budget, and organizations like NAWG, NBIC, NWIC and the National Barley Growers Association have had to go to Congress and reinstate the funding. While the 110^th Congress is likely to reform the earmark process, the extent of that reform is unknown. The source of money necessary to increase resources is also unknown; expanding the research authorization in the Farm Bill under a fixed budget would result in tradeoffs in other titles.

Another question about the proposal is the future role of USDA mission agencies. A chart in the CREATE-21 proposal summary shows ARS, USDA’s Economic Research Service, USDA’s Cooperative State Research Education and Extension Service and the Forest Service research branch in the “current” structure, but replaces all of those with a “university-based” structure for the new model. The USDA representatives at the NWIC meeting did not comment on the proposal, but several others in the room questioned what would happen if the proposal were only partially funded. If the net effect were to transfer program and budget resources from USDA mission agencies to universities, the benefit of this outcome is open to question.

NAWG is supportive of increased research funding and better integration, but has not taken an official position on the CREATE-21 proposal.

CAWG officers will be discussing the urgent need to develop more rust-resistant wheat varieties when they visit Washington, DC next month. Stripe rust has knocked out several varieties popular in California, leaving growers with limited options.