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California Association of Wheat Growers (CAWG)

June 15, 2006

CALIFORNIA WHEAT COMMISSION WEEKLY UPDATE.

Research: Three weeks worth of samples have been collected in the falling number project. We have noticed grain moisture has increased since last week in this field and a couple of others we are collecting from. We need to look at temperature and humidity differences in the weather over the period we are sampling.  As a reminder, the intent of the project is to look at wheat maturing in the field and determine if there may be a correlation between falling numbers and moisture (and maturity). This is the second year of the project. Please call or e-mail Sam Huang, CWC Laboratory Director, for further information (530.661-1292, shuang@californiawheat.org). We are glad to publish any comments or questions you may have regarding the study or the data.

New Seed Varieties: According to a report from Bob Baglietto, Baglietto Seeds, Stockton CA, two varieties grown out this year have done very well, with no signs of stripe rust or septoria. The supply is limited, maybe 150,000 to 250,000 lbs. each.

• Otis – Hard white spring wheat. Last year this wheat went 2.64 ton to the acre and had no irrigation, so I expect the yields to improve considerably this season. Intended use: Grain (though is similar in height and leaf structure to Louise and could also be used for forage)     
• Louise – Soft white spring wheat. Last year we were only able to see this variety in small scale plots but other states have raved on its success and seeing it again this year I can see why. Both of these varieties have been extremely healthy for two years now. Intended use: Forage 
• Clear White – Hard white spring wheat (UC Variety). This wheat has excellent milling qualities and good yield potential but has shown signs of septoria which may be a problem. It hasn’t affected yields the last two years. Intended use: Grain.

DISASTER AID REBUFF STRENGTHENS NAWG RESOLVE. Congress passed and President George W. Bush signed this week a war and hurricane relief supplemental bill that did not include crop disaster assistance or energy compensation for farmers. 

NAWG had led a charge for this funding, making the case that farmers’ inability to pass along higher fuel and fertilizer costs not only translated into higher costs for farmers on their purchases, but also meant farmers have to pay everybody else’s transportation surcharges as those charges flow backwards to the segment in the chain that has no pricing power.

The Senate version of the bill included $4 billion in agricultural assistance, but this package was removed in conference under strong pressure from fiscal conservatives in the House of Representatives and opposition from the Bush Administration, though many members of the Administration continue to assert publicly that the economy and federal revenues are strong. But, the Senate provision – 4.2 percent of a $94.5 billion supplemental - was removed because it cost too much, leaving only agricultural assistance for areas directly hit by hurricanes. The rest of the country’s impacts from drought, flood, freeze and exorbitant energy prices were left unaddressed.

NAWG’s officers met via teleconference Thursday and made clear they do not intend to give up this fight.  As harvest creeps north across the Great Plains, the condition of the crop continues to worsen.  News articles are cropping up everywhere with stories of wheat growers who are thinking about shutting down, either voluntarily or under extreme financial pressure.  NAWG’s leadership remains committed to making every effort to provide something to devastated wheat growers in the months before the 2006 elections.  We’ll be working with the state associations to make sure the message is heard loud and clear in Washington, and at home during the August Recess.

What else beyond federal assistance is being pursued?  Plenty.  NAWG, in cooperation with the North American Millers’ Association, U.S. Wheat Associates and WETEC, released a paper last week on wheat competitiveness. The paper has attracted a great deal of industry and press interest, and the concerns raised in the paper have been echoed by a number news organizations (see story below).  Industry recognition of our collective condition is broadening, and we believe it will translate into momentum to turn the trends around. 

Note to CAWG members: let us know how you feel about this issue. We supported it in March in Washington, DC and can work on it over the summer if our California growers feel strongly.

COMPETITIVENESS PAPER DRAWS PRESS ATTENTION, DISCUSSION. A paper addressing the crisis of wheat competitiveness has caught the attention of some in the agricultural community. The NAWG office has fielded a number of calls requesting interviews or more information on the subject, and news reports about the plight of wheat and wheat growers are increasingly showing up across the country. Stories have appeared in AgriPulse and Red River Farm Network’s FarmNetNews, in a Reuters story and on a number of Web sites. NAWG CEO Daren Coppock has also done a number of radio interviews.

One goal of the paper, titled “Addressing the Competitiveness Crisis in Wheat,” was to encourage this conversation about the problems wheat is facing and possible solutions. The paper was jointly authored by the National Association of Wheat Growers, the North American Millers’ Association, U.S. Wheat Associates and the Wheat Export Trade Education Committee. To read the paper, go to:

http://www.wheatworld.org/pdf/Wheat%20Competitiveness%20Paper.pdf

WHEAT STOCKS TO HIT HISTORIC LOWS, PRICES REMAIN HIGH. (U.S. Wheat Associates)

USDA reports released last week revised U.S. 2006/07 production down again, now anticipated to be 8 MMT or 14 percent below the 2005/06 harvest. A weak outlook for production in other major producing countries is expected to send world stocks to the lowest level in 25 years and the world stocks-to-use ratio to the lowest level reported by USDA. In the June release of its World Agricultural Supply and Demand Estimates (WASDE), USDA forecasts the marketing year weighted average farm gate price in the U.S. to rise from $3.42/bushel ($126/MT) to a range of $3.60 - $4.20/bushel ($132 - $152/MT).

In its crop production report USDA’s National Agriculture Statistics Service downgraded production estimates for the current HRW harvest by another 8 percent, now estimated 29 percent lower than last year’s crop. The drought’s devastation is forecast to lead to production declines in Kansas of 23 percent (2.4 MMT), Oklahoma by 47 percent (1.6 MMT) and Texas by 66 percent (1.7 MMT). Lack of rain has also led to year over year crop declines in Montana of 19 percent (500,000 MT), Nebraska of 18 percent (300,000 MT) and Colorado of 13 percent (200,000 MT). Initial harvest reports indicate very high average protein levels for the HRW crop of 13.8 percent compared to 12.2 percent last year, but the anticipated lack of supply has led to dramatic price rationing in the futures markets. HRW futures prices rose to the highest level in 10 years late in May, exceeding $5.22/bushel ($192/MT). In May 2005 HRW futures were at $3.10/bushel ($114/MT).

The expected 7.4 MMT decline in HRW production makes up the lion’s share of the all class total 8 MMT U.S. production decline this year. Industry sources indicate that U.S. domestic millers are prepared to substitute HRS supplies for HRW this year if prices indicate. Although USDA will not release its spring wheat forecast until next month, private forecasters expect HRS production to rise by 10-15 percent this year from last year’s well below-average crop.

International importers typically turn to Argentine wheat as a substitute for HRW due to its similar milling and baking characteristics. However, lack of moisture in Argentina during planting has led to lower than average planted area and production. The June WASDE cut 1.5 MMT off of the Argentine production forecast, leaving the expected harvest there below average, although better than last year. With limited world supply availability, HRW prices are expected to remain firm this year.

Link to WASDE: http://usda.mannlib.cornell.edu/usda/reports/waobr/wasde-bb/2006/wasde435r.pdf