Wheat plants _ image

It’s May and the new season World Agricultural Supply and Demand Estimates (WASDE) from the United States Department of Agriculture (USDA) is out. The WASDE is the most trusted document in terms of looking at the supply and demand of major commodities, and will often move markets if it significantly diverges from expectations.

The May WASDE is of particular interest, as it gives the first official estimates of new season supply.  While some of the data was seen during the earlier conference, May is the first release of the extensive dataset.

Figure 1 shows that WASDE are expecting an increase in wheat production in 2024-25.  The increase is only 1.3%, but it equates to 10mmt.  The increase in world wheat production was due to small increases across a number of large producers.  This includes Australia, with the USDA forecasting wheat production at 29mmt.

US wheat production is the forecast that can move the market the most.  The USDA pegged US wheat production at 50.56mmt for 2024-25.  This is up just over 1mmt on last year, a marginal increase.

Wheat consumption is also expected to be higher in 2024-25, at 802.37mmt, which will outstrip production for the second year in a row.  The resultant decrease in ending stocks is forecast to be 1.6%, pushing the stocks-to-use ratio to a 12-year low of 31.6%.

While it is at a low, the stocks-to-use ratio remains well above the levels of pre-2013/14 when the market was showing plenty of volatility.  These days volatility comes more from geopolitical influences.

Corn is the other major world grain, with even more produced than wheat.  The USDA are forecasting a small decline in production, down 0.7%, or 9mmt.  Compared to the huge production of 1219mmt this level of change is minimal. 

Corn consumption is expected to rise marginally, with supply and demand to be almost matched exactly, leaving the stocks at the same level and stocks to use steady at 26%.  While not as abundant as in the 2015-2019 period, world corn supplies are still expected to be comfortable.

What does it mean?

With wheat and corn production forecast to remain around record levels, a reasonable season should keep a lid on prices. There is still plenty of time for things to turn bad for corn, but northern hemisphere winter wheat crops are nearing harvest and should shore up supplies.

Big plantings of spring wheat in areas currently having weather impacts can move the wheat market a little, but major risks in the grain space are now shifted to corn.

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Key Points

  • The May WASDE is much anticipated as it’s the first look at new season forecasts.
  • The USDA is expecting supply and demand for both wheat and corn to remain relatively static.
  • Prices will move on weather events, but major issues will need to appear to significantly cut production.

Click on figure to expand

Click on figure to expand

Data sources: USDA, Nutrien, Mecardo

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