OWGA disscusses top issues
By Jennifer M. Latzke
Once again, cinnamon rolls and good conversation heralded the Oklahoma Wheat Growers Association annual convention, Dec. 13, in Oklahoma City. And, for many producers, the top issues of the day were trade and biotech wheat.
Global wheat markets
President of U.S. Wheat Associates Alan Tracy began the morning with an update on the status of the global wheat market. In a price-driven market, recent global production topped 682 million metric tonnes, due to higher prices at planting time last year. All of the major wheat exporters around the world showed increases in production, except for Argentina, Tracy said. Still, there is strong global demand for wheat.
"The year showed about a 40 percent bump in U.S. exports," he said. Milling use is strong, and buyers are not worried about the supply of U.S. wheat.
Tracy explained that declining oil prices will drive the price of commodities down, and added that the corn and wheat price spread stopped narrowing in June.
"We've just had seven or eight years where consumption was greater than production globally, and stocks were tight," Tracy said. "Producers responded with 682 million metric tonnes." The wheat price will respond to stocks, and a tight stocks-to-use ratio should increase prices. The good news is the demand for U.S. wheat is rising, he added. U.S. wheat accounts for one-third of all global trade.
The trading range in the coming year will be difficult to predict. Prices, he said, may drop, but they won't be nearly as low as they were before last year's peaks. "Long term, we may see $6 or $8 per bushel, and we may not ever see $2 per bushel again," he said.
Trade agreements are another topic on the radar of U.S. Wheat, Tracy said. The Colombian Trade Promotion Authority is a hot issue for U.S. agriculture. The agreement would immediately drop tariffs on U.S. goods, such as wheat, from 35 percent to zero, and even the playing field with Colombian imports already at zero. Canada has been a strong competitor in this arena, and has signed its own agreement with Colombia. This brings some uncertainty to the status of U.S. wheat exports to Colombia, Tracy said.
Another Latin country has also caught U.S. Wheat's attention in recent years-Cuba. For years agricultural producers have been pressing to open up trade with the island nation, and under President George Bush it was gradually opened. Tracy said U.S. Wheat is optimistic that under the leadership of President Barrack Obama trade with Cuba could be even more open.
"We are really optimistic that something will happen soon, with a new president coming in," Tracy said. There was legislation introduced in the House and Senate that would allow for fewer travel restrictions to Cuba, and allow remittances from Cuban immigrants in the United States to their families still in the country. Most importantly, the legislation would have allowed true cash sales of wheat, rather than the "cash in advance" sales currently allowed. "Conference committees tossed it out because they were unable to make a stand," he added.
Because half of all Oklahoma wheat is exported, Oklahoma producers have a stake in open markets. And, they should also take some of the credit for the reputation of U.S. wheat in the global market.
"U.S. wheat is often not the lowest in price, but we have demand because of our quality," Tracy said. He gave the example of Nigerian millers that had the opportunity to buy cheaper hard red wheat from a competing country, and they found that the quality was lower than what they were used to with U.S. wheat. Even though U.S. wheat was more expensive, those millers switched back to U.S. wheat due to the quality issue.
As the topic of the conference was genetic improvement of wheat, Tracy touched on the subject of the industry's support of biotech wheat.
"We are working with technology providers and the National Association of Wheat Growers," he said. While a commercially viable biotech wheat variety is still many years away, Tracy said U.S. Wheat staff are already talking with our export markets to introduce them to the concept.
"In every country where we work, our staff have to create marketing plans each year," he said. "And, we encourage them to establish tolerances for biotech wheat, or just stop buyers from saying 'never.'"
Jerry McReynolds, the second vice president of the National Association of Wheat Growers, continued on the message of biotech wheat.
"We need to increase our wheat yields by 20 percent by 2018, and if we are to do that, we need biotech wheat," McReynolds said. "Wheat, on the research side, is four times behind that of corn." He stressed that research funding must not be allowed to fall on the chopping block if biotech wheat is to be a commercial reality.
As the policy arm of wheat producers, NAWG has been particularly vocal in the debates over the 2008 farm bill. McReynolds told producers in 2009 NAWG will continue to defend the bill as it goes through the appropriations process.
Jennifer M. Latzke can be reached by phone at 620-227-1807, or by e-mail at email@example.com.