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07/22/2008

U.S. Government Wheat Stocks Collapse

By Benjamin Gisin

Quietly, the last of the U.S. government�s wheat reserves, held in the Bill Emerson Humanitarian Trust, were sold in late May onto the domestic market for cash. The cash was put in a trust for food aid. With no other government wheat holdings, U.S. government wheat stocks are now totally exhausted.

The following recent statements by Rebecca Bratter, director of policy for U.S. Wheat Associates, provides insights:

�While the U.S. wheat industry strongly supports the administration�s goal of maintaining current food aid programs to prevent rampant hunger worldwide, there is concern regarding the impact of selling reserve wheat on the domestic market and over the lack of commitment from the administration to replenish the Bill Emerson Humanitarian Trust.

�U.S. Wheat Associates has shared these concerns with high officials at USDA and on the President�s staff and has asked about the Administration�s intent regarding replenishment of the Bill Emerson Humanitarian Trust. Staff from the office of the President�s Special Agricultural Assistant noted that while there is no commitment at this time, the administration intends to replenish the Trust once the supply and price scenario stabilizes.�

(Note: U.S. Wheat Associates works in 90 countries promoting U.S. wheat exports.)

The Bill Emerson Humanitarian Trust was established in 1980 by an act of Congress and is authorized to hold up to 4 million metric tons of wheat, corn, sorghum and rice, as a reserve for global food crises. The wheat is purchased and managed by the Commodity Credit Corporation and included in the total amount of wheat owned and held by the U.S. government. Holdings by the BEH Trust for corn, sorghum and rice are also zero.

For the decade of the �80s, government wheat holdings (including those in the BEH Trust) averaged 358 million bushels. For the decade of the �90s, government wheat holdings averaged 133 million bushels. Since 2000, government wheat holdings dropped steadily until recently when the last of the government-owned wheat was sold.

With no formal plan for wheat stocks by the U.S. government, wheat stocks have defaulted to the arena of the private free-market sector. Unfortunately, the private sector has no plans for any kind of minimum wheat stocks that would protect the American public from a price and/or availability standpoint.

Private wheat stocks are divided into two major categories � on-farm wheat stocks owned by farmers, and off-farm wheat stocks owned by warehouses and grain companies. These two together held 305.6 million bushels of wheat as of June 1 (or roughly 1 bushel per person living in the United States) the lowest level in 60 years.

Of these stocks, on-farm wheat stocks are at 25.6 million bushels, the lowest level of on-farm wheat stocks since the USDA started keeping tabs back in 1934. So as you are driving in rural America before wheat harvest, the farmer�s bins have never been so empty.

The USDA, projects America to have a bumper wheat crop in 2008, producing 2.43 billion bushels and consuming and exporting 2.30 billion bushels. This leaves a meager 133 million bushels (5.5 percent of production) as a margin for error. Globally, the USDA projects wheat production to be 24.36 billion bushels, consumption to be 23.74 billion bushels for a relatively smaller margin of 622 million bushels or 2.6% of production.

The recent wheat crises in America was sparked by the nation exporting more wheat than it produced. This means the true 2008 wheat margin for Americans is really the global margin of 2.6%. Any decline from global projections could precipitate greater wheat exports from America and further draw down already low domestic and global wheat stocks.

Food security is emerging as a global focal point. With the U.S. government and the private sector lacking visions for stocks, food security is poised to grow as a grass-roots issue around the nation.

For more information visit www.touchthesoil.com.

Benjamin Gisin has visited hundreds of farms in his agricultural banking, farm consulting and publishing careers. Today he writes and lectures extensively on the promise of local food systems, agricultural sustainability and food security.



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