1. Bill Knudson East Lansing, March Accelerating innovation for our industries, businesses and entrepreneurs

2.  Background  The U.S. wheat market  The Situation in Michigan  The market for different wheat based products  Some preliminary results and next steps

4. To assess the state of the industry in Michigan and to determine what are the areas of most potential for wheat producers

5.  U.S. wheat acreage is declining. Farmers have been substituting corn and soybeans instead of wheat

8.  Conventional Wisdom is that wheat markets are segmented.  However wheat prices tend to move together, there appears to be some ability to substitute between the different wheat classes

11.  As a general rule about half the wheat produced in the U.S. is exported.  About two thirds of the white winter wheat is exported although most of it that comes from western states  In Michigan much of the white wheat remains in the state  Good state export numbers are difficult

13.  From 2009 to 2013 yields increased from 68 bushels per acre to about 75.  This may be due to more farmers growing more red winter wheat  Improved management may also be a reason for increased yields

14. MI Wheat: The Facts MI ranks 8 th in US wheat production. (KS #1) MI white wheat acres decreasing, red wheat up. 1993, ratio white to red: 70:30 2011, ratio white to red: 40:60 MI wheat yield, all classes = 40 mill. bu./Acre MI avg. = 81 bu./A. (‘15) / US avg. = 47.2 bu./A. (‘12)

15. IndustryValue of Shipments ($1,000s) Wheat Flour Made in Flour Mills151,783 Wheat Mill Products Excluding Flour74,462 Breakfast Cereal1,096,632 Bread (including frozen)208,144 Rolls, including Muffins, Bagels and Croissants78,850 Soft Cakes6,753 Frozen Cakes, Pies, and Other Pastries253,717 Prepared Flour Mixes (including refrigerated and frozen dough)139,728 Dry Macaroni, Spaghetti, and Egg Noodle Products3,705 Tortillas19,791 Total2,033,565

16. IndustryNumber of Establishments Flour Milling9 Breakfast Cereal Manufacturing6 Retail Bakeries227 Commercial Bakeries76 Frozen Cakes, Pies and Other Pastries Manufacturing7 Cookie and Cracker Manufacturing7 Dry Pasta, Dough, and Flour Mixes Manufactured from Purchased Flour21 Tortilla Manufacturing7

17. Wheat is used for a wide variety of products Bread, rolls, biscuits Breakfast cereals Breakfast and snack bars Cakes, cookies and pies Pasta Crackers Baking and Dessert Mixes

18.  Many of these product categories and mature and are substitutes for one another  Growth in in the U.S. is constrained by population and income growth  Increased immigration could increase demand

20.  Whole grains  Non GMO  Healthy/complex carbohydrates

21.  Michigan is a major craft beer state and craft brewers like to use wheat (Bell’s Oberon)  In-store bakeries

22.  Develop products for wheat germ?  Industrial uses for straw?

23.  Conduct interviews with supply chain participants to determine their needs with respect to wheat varieties  Determine the level of interest in industrial applications  Project should be done by June 1