Weather More Important than Politics, US Wheat President saysWed, 21 May 2014 18:27:09 CDT
The social unrest in the Black Sea region is concerning for wheat farmers. Ukraine is one of the world's top wheat exporters in the world, so what happens in Ukraine, could dramatically change the outlook in the US. US Wheat Associates President Alan Tracy says so far the political unrest in Ukraine has had little impact on the global wheat market.
"I think it has been a little overblown so far Ron, cause most of Ukraine's wheat is winter wheat," Tracy said. "About 90 percent of it is winter wheat, so it was planted before all this stuff started, so it's still going to come off and its still going to going to go somewhere."
"Meanwhile there exports of all of their grains have continued at near record pace through all this time, so when they get this new wheat crop off about the same time we get whatever wheat crop we're going to get out of Kansas, they're going to be back in business again," Tracy said.
"So, it's a little dry there, but no near as bad as it for you guys, but there are some customers that are little unsure about future commitments from Ukraine, about buying from there, but overall I don't think it changes the picture nearly as much," he said. "I think the price increase that we've had here has largely been at the expense of you guys in the southern plains, and a little bit on the politics, but even in Ukraine I think that the precipitation is more important than the politics yet."
"It varies dramatically from place to place, he said. "If you go to Taiwan or to Japan when the buying is all done at a single source, it causes the millers problems in they have to try to raise the price of the flour and sometimes that hard to do but all their competitors in-country are in the same boat, so that is very different."
Tracy says other markets where they buy individually are much more price sensitive.
In working with global customers, Plains Grain is a very important partner for US Wheat in providing customers with quality crop information.
"It's been particularly useful in Mexico, where they've been able to come up and pick and choose what they want," he said.
"For a lot of the other exporters, its just harder," Tracy said. "They just have to take what they can get at the port, they can do what they can with specifications and it does help them to know what specific specifications are available."
"We've worked with them, helped to pay for the quality information that is put together and of course we do a lot to disseminate it," Tracy said. "They have done some work directly in Mexico, but worldwide we publish the crop reports in six languages and distribute them through our 14 offices outside the United States in over a 100 countries."
With half of the US wheat crop export, US Wheat also closely watches trade deals, like the Trans-Pacific Partnership, especially with key trading partners like Japan.
"Our negotiators need to stand firm right now, cause Japan really does need some reform, they need their economy pick up and they need to open their markets more generally.
Japan is typically the America's number one customer for wheat. This past year was the exception when Brazil and China stepped into the market as the top importers. With TPP negotiations, Tracy says everything needs to be on the table.
"I would like to see for instance them open up on dairy," Tracy said. "It sounds silly to have a wheat guy talk about dairy perhaps, you know if they don't open up on dairy, then Canada gets a pass on it on their dairy program, which would really be an opportunity for our guys, then all of the other TPP countries all have sensitive items that they would protect."
"So I think this Japanese bilateral negotiation is really important to set the standard for TPP," Tracy said. "We'd like to see a really strong TPP that can pass Congress, and that can be an important factor in improving the growth and security of the whole Pacific region, because that's where 40 percent of exports go now."
While these countries are right next store to Australia, Tracy says these countries are demanding spring wheat and hard red winter wheat.
"They're buying both to help make some of the higher quality products they need for their rapidly improving economy," Tracy said.
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