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U.S. COULD FEED ASIA'S GRAIN APPETITE, IF EUROPE AGREES
The following is an article written by Dennis T. Avery and published by
BridgeNews on August 4, 2000At first glance, statistics for world grain trade show a stagnant export market. Trade in wheat and coarse grains averaged 199 million tons in 1989-1990, and only 203 million tons a
decade later in 1999-2000. Who can blame export farmers for being discouraged?
A second glance at world statistics, however, reveals that grain import demand outside the old Soviet Union has increased by 50 million tons in the last decade.
If we hadn't lost the old Soviet market for grain, there would be a strong growth trend in farm exports. The Soviets almost single-handedly created the
agricultural boom of 1974-1981 with a huge surge in imports of grain and meat.
The Soviet leaders wanted to reward workers with foodstuffs that their own collectivized farms couldn't produce. Soviet grain imports soared from very low
levels in the 1960s to 22 million tons per year in 1972 and a peak of 46 million tons in 1981.
But that was the last year of big Soviet grain imports. By 1990, the USSR was importing only 26 million tons of wheat and coarse grains. Recently, they've
imported only about 7 million tons a year, and their meat imports have collapsed as well.
Essentially, many people in the former Soviet republics have stopped eating much meat, milk or eggs. There's not much point in wishing the Russians would become
rich again.
Ukraine, right next door to Russia, has one of the world's prime stretches of cropland. The Russians will not get rich again until they reform their economy. As
they do, Ukraine will likely adopt similar reforms.
When the Russians can afford meat again, they will almost certainly buy most of it from Ukraine. Happily, that will leave the rest of the world's export farmers
with more than 4 billion affluent consumers in Asia and the Middle East, 14 times as many people as live in the former USSR.
Even better, Asian incomes has risen rapidly, and continue to rise. The people in the former Soviet republics are trapped in poverty and economic collapse.
Wheat imports have risen significantly in such countries as Algeria, Indonesia and the Philippines. Mexico has gone from about 500,000 tons of wheat imports a
year in the late 1980s to a projected 2.6 million tons for 2000.
Brazil stopped subsidizing domestic wheat and its imports doubled in the last decade, to an estimated 7.2 million tons in 2000. The Philippines more than
doubled its wheat imports, from about 800,000 tons to 2.6 million tons over the same period.
Rising consumption of meat, milk and eggs is also fueling more feed grain consumption. Algeria's feed grain imports rose from 800,000 to 2.3 million tons a year
over the past dozen years. Egypt's feed grain imports more than doubled, from about 1.8 million in the late 1980s to 4.6 million tons in 2000. South Korea's feed imports also doubled, to more than 9 million tons a
year.
The North American Free Trade Agreement has made Mexico a star among grain importers. Mexico's total grain imports jumped from 3 to 4 million tons a year to
over 11 million tons annually. Mexico is importing more U.S. wheat and more corn, mainly for feed.
Mexico's recent strong economic growth and political liberalization will mean even more imports in the future, especially feedstuffs, meat and dairy products.
The end of the so-called Asian collapse is also good news for future grain exports: Indonesia's feed grain imports rose from 1.5 million tons in the late 1980s
to a peak of 4.2 million in 1997. Indonesia slumped to 3 million tons of feed imports in 1998, but its poultry consumption is already back above pre-crisis levels and set to expand further in the years ahead.
South Korea, Thailand and Malaysia are once again seeing growth in their economies, gains in income and rising demand for high-quality diets.
China is the biggest Asian market, of course, and the Chinese economy continues to forge ahead. Economic growth is forecast at about 7 percent this year. China
will import 2.5 million tons of wheat this year and a net 3 million tons of corn.
In future, however, China's feed requirements will soar, and the Chinese government is keenly aware it's paying 40 percent more for Chinese grain than it would
pay for imports. China is likely to import considerably more grain in the next decade than it did in the 1990s.
If export farmers can overwhelm Europe's objections to liberalizing the farm trade rules of the World Trade Organization during the current round of trade
negotiations, Asian market growth could make farmers forget they ever cared about Soviet grain sales.
US COMMODITY CERTIFICATES MAY BECOME HOT TOPIC
Reuters reports: With a bumper harvest likely this fall, U.S. farmers may make
increased use of commodity certificates, their latest income support, farm group and Agriculture Department spokesmen said on Tuesday.
The certificates, mandated by Congress, became available last February as a new way for growers to redeem crop support loans rather than forfeit grain, cotton
and oilseeds pledged as collateral.
While critics say the certificates are a way to skirt limits on farm subsidy payments, they also can be a marketing tool, supporters said. They likened them to
the so-called marketing loans and loan deficiency payments that become attractive when market prices are below federal loan rates.
"They (certificates) are going to be with us through this farm bill," said Gene Rosera of the Agriculture Department. The certificates were authorized
for use on crops grown from 1998-2002 and put under USDA loan.
Growers can purchase a certificate to redeem their crops, calculated at USDA's "posted county price," which approximates local prices, when it is
lower than the loan rate. The result is similar to the marketing loan because the grower pockets the difference between the two rates and has control of the crop.
USDA has not reported on commodity certificate usage. Officials said inquiries point toward possible use this fall, when storage was expected to be tight and
prices still low.
An American Farm Bureau Federation official also reported interest among growers in the certificates. "When one looks at these price levels, I suspect
there is going to be some use of this program in the fall," said Jim Miller, an economist with the National Farmers Union.
Certificates could speed the flow of grain to market, dampening prices, because farmers do not have to wait for their loans to mature, Miller said. "In the
end, it's more a way to get around the payment limitation."
Under the 1996 farm law, growers are limited to $75,000 from marketing loans or loan deficiency payments except for 1999 crops, where Congress doubled the
limit.
While certificates would be especially useful to farmers likely to exceed the payment limit, since they do not count toward it, certificates are available to
all growers, two officials said.
One approach for growers, said one person familiar with USDA's programs, would be to seek certificates on early-harvested crops and plan on using LDP on later
crops that might not be able to go into storage. A crop must be stored before USDA will issue a loan or a certificate.
The certificates are available only for immediate payment of a USDA crop loan. They cannot be used as payment for other USDA obligations or to acquire USDA
inventories.
WHEAT TOUR INDICATES POSSIBLE GOOD YIELDS
Sources from a three-day field tour organized by the US Wheat Quality Council indicate
US hard red spring wheat yields should be better than previously thought, possibly reaching levels not seen since the 1992-93 crop year. Tour participants applied yield formulas to 355 hard red spring wheat fields
across Minnesota, North Dakota and South Dakota and found plant populations and kernel counts resulting in a weighted-average yield estimate of 36.5 BU/AC (2.45 MT/HA). Sources suggest this figure was 6.0 BU/AC
(0.40 MT/HA) higher than their 1999 calculation and was, in fact, the highest yield forecast since 1993. Participants pointed to better weather (less spring rain) and improved farm management methods, which caused a
marked decline in the incidence of scab disease, as the catalysts for the optimistic production outlook. One source suggested spring wheat farmers increased their use of fungicides this year, hoping to do a better
job of controlling leaf diseases and scab. Furthermore, the tour stopped at 113 durum wheat fields, calculating weighted-average yields of 26.6 BU/AC (1.79 MT/HA). This figure is above last year's projections of
23.2 BU/AC (1.56 MT/HA), but below the 29.0 to 29.4 BU/AC (1.95 to 1.98 MT/HA) projected for Minnesota and North Dakota by USDA last month. On Friday, private commodity analyst Sparks Cos. forecast the 2000-01 US
all wheat crop at 2.26 BB (61.6 MMT), which would be 20.0 MB (544 TMT) above the USDA's July forecast but down from the 2.3 BB (62.6 MMT) forecast in 1999-00. Sources suggest Sparks pegged 2000-01 US winter wheat
production at 1.58 BB (43.0 MMT), down from the USDA's latest estimate of 1.59 BB (43.3 MMT) and 1.7 BB (46.3 MMT) produced last year. Moreover, other spring wheat production for 2000-01 was estimated at 550 MB
(15.0 MMT), up from USDA's July forecast of 526 MB (14.3 MMT) and the 1999-00 final production figure of 503 MB (13.7 MMT). Finally, Sparks pegged 2000-01 durum wheat production at 134 MB (3.6 MMT), also up from
USDA's July report of 128 MB (3.5 MMT) and 99.0 MB (2.7 MMT) in the previous year.
SEVERE DROUGHT IN EAST AFRICA
According to newswire sources, USDA Secretary Dan Glickman indicates the drought in East Africa is
so severe that the region may need more food aid to keep it going through this year. Glickman spent last week traveling through the countries of Nigeria, Kenya and South Africa. Moreover, Glickman suggested the USDA
would provide $9.0 million in credit guarantees for Nigeria, mainly to purchase US wheat. In addition to food aid, USDA officials indicate many African nations also need supplemental investment into port
improvements and expanded transportation capacity. Furthermore, Glickman suggests the long-term goal of US assistance in Africa is to encourage economic development so that African states can grow more of their own
food and buy US farm commodities.
USW URGES "NEW THINKING" FOR FOOD AID TO NORTH KOREA
U.S. Wheat Associates, the industry's export market development
organization, is recommending a new approach in developing a food aid package for North Korea. Recognizing that the lack of infrastructure in the impoverished country impedes the utilization of large amounts
of wheat, USW is urging USDA to map out a "market development avenue" while assisting North Korea.
The plan would assist North Korea in feeding its population while the U.S. wheat industry awaits the day that the country becomes a viable commercial partner.
"Let's step out of the box and think about ways to make this food aid more responsive to the needs of more people," said Alan Tracy, USW president.
Under the initiative as envisioned by USW, an informal partnership would be developed between U.S. wheat farmers, the USDA, the South Korean milling industry,
the government of South Korea and, of course, the people of North Korea.
In a letter this week to officials at the U.S. Department of Agriculture, Tracy urged USDA to consider shipping North Korea's donational wheat to South Korea
for milling and bagging. The flour would be shipped to North Korea and the South Korean flour millers could receive the bran as payment for the milling services.
"We understand that the South Korean mills would like to become more involved in the North Korean market," said Nelson Denlinger, vice president of
government affairs, pointing out that it appears that North Korea has only one mill at the moment. "They will need added milling capacity down the road," Denlinger explained, but right now "having
South Korea as a 'way station' on the route to North Korea makes sense."
Denlinger also noted that the South Korean government seems to be looking for avenues to develop closer ties with the North, and suggested that perhaps the
South Korean government could cover the cost of shipping the flour to North Korea.
In recent years, until FY 1999, food aid donations to North Korea consisted largely of corn, cornmeal, corn soy blends and rice. Humanitarian workers have
reported that, lacking milling capacity, some previous donations of corn have been simply soaked and eaten whole. In FY 1999, wheat and wheat flour were added to the donation package and USDA announced earlier this
year that the FY 2000 donations would include a total of 83,000 metric tons of wheat. The USW plan would ensure that donated grains could be utilized for wholesome food products.
In September 1999, President Clinton announced his decision to ease some of the unilateral sanctions in place against North Korea. In June, the Department of
Commerce issued proposed rules to implement the President's decision. Isolated and financially destitute, however, North Korea is more a candidate for food aid than a viable commercial market for U.S. wheat at
this time. The Food and Agriculture Organization of the United Nations indicates that this year's food emergency operations, of which the USDA donation is a part, "aims to save lives and counter the emergence
of famine."
"South Korea has been a great U.S. wheat market," Tracy said. "Someday, perhaps, North Korea will follow suit. In the meantime, since it is
likely that the U.S. will continue to provide food aid to North Korea, we'd like to see the donation program develop a potential market as well as meet humanitarian needs."
With 17 offices worldwide, U.S. Wheat Associates, representing wheat growers in 17 states, maintains and develops export markets in over 100 countries.
HEAVY RAINS IN GERMANY CAUSE CONCERN IN WHEAT QUALITY
Heavy rain in Germany last week, coupled with warm temperatures, has caused
further concern about the overall quality of their new crop wheat. Newswire sources suggest the 2000-01 wheat crop will almost certainly be of lower "quality" than the 1999-00 crop. Incidents of increased
sprout damage and low falling numbers are the main fear of the European wheat community. "For mills, the supply situation is precarious because the wheat they are being offered from France is showing similarly
weak quality characteristics", said one European flour miller.
MARKETING THE Y2K CROP: STRATEGIES FOR PRICING YOUR GRAIN
Wednesday, September 13, 2000
Kelly Inn, 3800 Main Ave, Fargo, ND
Registration: 4:30 p.m.
Supper: 7:30 p.m.
Wrap-up: 8:00 p.m.
Check out the metal at the big farm show, then check the mettle of your grain selling plan at this timely marketing seminar. Review post-harvest selling
strategies for wheat and barley. Fine-tune your pre-harvest selling plan for corn, beans, and other late-season crops. Get up-to-speed on key factors that affect your grain sell/store decisions, including LDPs, the
60-day PCP lock, and your local basis. Learn more about (legally) circumventing the $75K limit on marketing loan gains.
Speakers:
Ray Grabanski, President, Progressive Ag Marketing-Ray will focus on the market outlook for wheat, corn and soybeans, and outline strategies
to get the most out of this year's markets. He'll also touch on using the Internet to improve profits.
Mike Lockhart, Producer and Market Club Leader- From an easy-to-follow producer's perspective, Mike will reveal strategies that many farmers are discussing and
implementing in the five marketing groups that he leads.
George Flaskerud, NDSU Extension Crops Economist-George will explain a handy tool that will enable growers to estimate expected net prices for wheat, corn, and
soybeans for any given months in the future, thus helping to plan grain sales.
The evening meal and marketing seminar are free.
Sponsored By: Minnesota Association of Wheat Growers, North Dakota Grain Growers Association
This event made possible in part by a risk management education grant provided by the USDA Risk Management Agency
USDA RELEASES WEEKLY WEATHER AND CROP BULLETING
08/08/00
http://usda.mannlib.cornell.edu/reports/nassr/field/weather/2000/w
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