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The Wheat Sheet (January 2001)

A joint publication of the California Wheat Commission and California Association of Wheat Growers

Partnerships Increase the Value of Producer Dollars.

2001 Collaborator Program has been scheduled for Wednesday, March 28 in Sacramento. This program has been very successful in providing an open forum to discuss the potential of new varieties in the domestic market place. Growers, handlers, millers and end-users are invited. Please call the Commission if you are interested in learning more about this meeting.

The Overseas Varietal Analysis (OVA) project is an opportunity to have new varieties analyzed by overseas customers. In 2000, South American millers evaluated the Express and Brooks varieties. This year Bonus and Stander will be critiqued. The OVA is conducted through US Wheat Associates. US Wheat Associates, of which CWC is a member, is an international market development organization that represents American wheat farmers throughout the world.

100 tons of Desert Durum is presently under milling and pasta evaluation with a company in Venezuela. This program has been coordinated by US Wheat’s Mexico office.

Agriculture Research Initiative funding was received by California Polytechnic State University to conduct an "Economic Feasibility Analysis of Forming a California Wheat Growers Marketing Cooperative". This study will evaluate transportation, storage, end-use markets, and issues that growers should consider when looking for new marketing opportunities. USDA’s Rural Cooperative Service will provide matching funds. The California Association of Wheat Growers and the California Wheat Commission will provide information and support as needed. This report will be public information.

a.) USDA promotes cleaner wheat. On October 18, 2000 Agriculture Secretary Dan Glickman toughened standards for the cleanliness of U.S. wheat exports destined for overseas food aid. He lowered the maximum acceptable dockage level for wheat purchased by USDA’s Commodity Credit Corporation (CCC) and used for international food assistance from 0.8 percent to 0.7 percent. He also stated that USDA is planning to further tighten the acceptable dockage level to 0.6 percent in fiscal year 2002 and to 0.5 percent in fiscal year 2003.

As a follow up to the CCC specification, it is the understanding of the California Wheat Commission that USDA will propose that dockage should be included as a grade factor. There will be maximum limits of dockage allowable to grade US NO.1, 2, 3 etc.; the same principle that is applied to other grade factors. Once this proposal is published in the Federal Register, the Commission will write comments. Please contact the Commission with comments or suggestions about this concept. 

(Japan’s (JFA) new dockage requirements will go into effect beginning with February 4 purchases. As of that date, dockage requirements for all U.S. wheat classes will be 0.3% max (from 0.4% max). For reference, Australian wheat to Japan now averages between 0.2% and 0.3%, and Canadian wheat averages 0.15%.)

b.) Phytosanitary issues that seem to never go away. Mexico continues to ban wheat from California, Arizona, New Mexico and two counties in Texas because of Karnal bunt. This restriction has been in place since 1996. In the meantime, Mexico has become a major destination for US wheat, receiving nearly 2 MMT annually. This is a frustrating situation that has been a top priority for the Commission and the California Association of Wheat Growers.

Brazil’s reason for excluding all wheat from the States of Washington, Oregon, California, Nevada and Arizona remains a bit sketchy. Over the past few years, the Brazilians have imposed restrictions on US wheat because of concerns about TCK smut, Karnal bunt, seed gall nematode (last sighted in the US in 1975), cephalosporium stripe and flag smut. A letter was sent to Secretary Glickman expressing concerns over these restrictions and signed by the Washington Wheat Commission, Idaho Wheat Commission, Oregon Wheat Commission, North Dakota Wheat Commission, Arizona Grains Research and Promotion Council and the California Wheat Commission.

Canada has recently lifted some of their Karnal bunt restrictions on US wheat, yet has kept in place restrictions on California, Arizona, New Mexico and Texas wheat. Canada had implemented a three tiered quarantine on US wheat that would allow specific states access to their system and markets after a specific period of time and testing had occurred.

c.) Cargo Preference is the reservation of government-financed or -sponsored oceangoing cargoes specifically for US flagship. In 1985, the Merchant Marine Act of 1936 was amended to require that 75% of certain food aid be shipped on privately owned US flag vessels. Since this amendment, there has been an ongoing debate between the maritime and agriculture industries as to the effectiveness of this law. With the ever-increasing pressure on US farm program funding and the increased foreign competition for US export markets, the wheat industry will be coordinating alliances with industries and government agencies to address the usefulness of this program.

d.) Section 301 investigation into the discriminatory and predatory pricing practices of the Canadian Wheat Board. Upon information presented by the North Dakota Wheat Commission, the US Trade Representative has agreed to investigate unfair trade practices of the Canadian Wheat Board. This effort has gained the support of the US producer groups and will likely be high on the radar screens of this industry during 2001. The producers are suggesting a wide range of remedies for fundamental reforms and disciplines to the CWB that would prevent further trade distortion in the US and third-country export markets, including the "1. Elimination of both the supply and export monopolies of the Canadian Wheat Board, 2. National treatment for any US wheat entering Canada, including full and equal access to Canada’s grain marketing system and transportation system. 3. Tariff rate quotas on imports of Canadian durum and non-durum wheat into the United States."

In the comments that were filed with the US Trade Representative on December 20, 2000, not everyone was in favor of this petition. Members of the milling and processing industry take issue with this trade case, stating their need to have high quality wheat available to them on a year round basis.

e.) The Farm Bill is an important tool for international market development. The discussions for the next farm bill (2002) have already begun. While a great deal of the discussion will be centered on a "safety net" or "counter cyclical" package, it will be important to recognize all of the issues that the farm bill covers, including the trade title. US wheat producers export nearly half of all their production. US wheat trade associations, such as the Wheat Export Trade Education Committee and US Wheat Associates (both of which the Commission is an active member) have already begun to evaluate the current export programs and are looking for ways to develop new programs. The current trade title includes US food aid programs that, when combined with wheat producer check off dollars, allows the US to be the world’s largest exporter of wheat. However, competition has grown fiercer. The European Union for example spends more on Market Development in the US than the US does for the entire world.

f.) Sanctions - Where do we stand? As signed into law last fall as part of the FY 2001 Agricultural Appropriations legislation the new federal sanctions policy states, " …., the President may not impose a unilateral agricultural sanction or unilateral medical sanction against a foreign country or foreign entity b.) Existing Sanctions - The President shall terminate any unilateral agricultural sanction or unilateral medical sanction that is in effect as of the date of enactment of this ACT."

Basically all current sanctions on agriculture products have been lifted. However, the legislation also states that "Notwithstanding any other provision of the law, no United States Government assistance, including United States foreign assistance, United States export assistance, and any United States credit or guarantee shall be available for exports to Cuba or for commercial exports to Iran, Libya, North Korea or Sudan. The President may however grant a waiver for Iran, Libya, North Korea or Sudan, but not Cuba." Unfortunately, Cuba’s 1.2 MMT market could be one of the US wheat growers’ best shots at significant sales in formerly sanctioned markets.

It is interesting to review the current market situation of countries that were off limits to US wheat producers before sanction reform. Libya is a 1.5 MMT wheat market that US producers were shut out of for 15 years. Total sales year to date of 165.5 TMT of which 64.2 is HRW, 51.3 SRW and 50.0 durum. North Korea is a relatively small market at 250 TMT and any movement of wheat in the near future will likely be done as food aid. Sudan can be up to a 1 MMT market. The market is probably the best success for U.S. wheat in formally sanctioned countries. The U.S. exported 153 TMT to Sudan in 1999. Iraq continues to be sanctioned multilaterally and is not subject to the new legislation. Wheat is moving into Iraq via the Oil for Food program.

California Wheat Commission. Wheat growers voted to establish the California Wheat Commission in 1983, expressly to develop and maintain domestic and international markets for California Wheat and support research that improves California wheat quality and marketability. The Commission, operating under the California Food and Agriculture Code, is funded by wheat growers and is guided by a board of fifteen wheat farmers, two handlers - each with an alternate member and one public member.

California Association of Wheat Growers. CAWG is the voice of California wheat growers in Washington and Sacramento. We are a membership organization of wheat producers and support businesses selling goods and services to the wheat industry. CAWG tracks actions by state and federal agencies and others that can affect California producers’ ability to grow and market their products at an effective price, and we speak for the California wheat farmer in seeking to ensure those decisions are made with their best interests in mind. CAWG is a member-supported organization, with grower dues ranging from $100 for Foundation Level to $1000 for the California Gold level. Industry Supporter dues range from $125 for the Supporter category to $1000 for Gold Partner.

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