Global wheat and corn supplies edging lower.

We already knew the US was on track to post its smallest wheat harvest since 1971, and with the release of the WASDE on Friday there was a little more shrinkage.  The USDA cut planted acres and expected yields as some areas struggle with dry conditions.  On July 5^th 59% of wheat had been harvested, which was ahead of average.  Analysts should be getting a good idea of how yields are progressing now.

The cut in US wheat production only came to 0.2mmt, but use remained steady, and ending stocks were pegged 0.6mmt lower.  Compared to last year US wheat production is forecast to be down 13mmt and stocks down over 6mmt.

Figure 1 shows world wheat supply, demand and stocks, and it has changed little since we last looked at it.  Wheat stocks are expected to shrink, which should mean we have higher prices than last year, which we have at the moment, at least marginally.  As outlined in the weekly comment on Friday, the issue is that cheaper sources of wheat have plenty, and some major importers have grown more this year, decreasing demand for Black Sea wheat.

So, despite the US having less wheat, they still have an exportable surplus, which had to compete in some markets with cheaper wheat from other countries.

Global corn production forecasts were decreased by 6mmt, with 3mmt of that in the US.  This gave corn prices a bump, which dragged wheat higher.  Wheat and corn are substitutes in feed markets, so lower corn production is good for wheat prices. 

Figure 2 shows global corn stocks and stock to use are expected to hit a 14-year low.  Corn prices have rallied in July, but unlike wheat, are not yet under harvest pressure.