Talk is cheap

The USDA recently held their global outlook forum, a two-day conference to release forecasts for domestic US and global supply, demand, and prices. Word on the street is that prices across the ag complex will remain under pressure for 2024.

 

Among the raft of data, some of the key takeaways are:

 

·         US tipped for record yields and building stocks.

·         US corn stocks seen at their highest since 1987/88.

·         French wheat stocks highest in 5 years.

·         Russian wheat production upped to 93.6mmt (per SovEcon).

·         The rise and rise of Brazil as an agricultural powerhouse.

 

The price signals, especially for corn, are weak. Reuters reports that US farmers will sow 91m acres in 2024, down from 94.6m last year. The lost acres will be replaced by soybeans.  This is also reflected in Ukraine where the Agriculture Ministry reports a 7% swing away from corn due to poor economic returns, but also a 6% decrease in sown winter crops, mainly wheat and canola.

 

The main catalyst to turn this ship around will stem from demand. Last night Egypt tendered for wheat. They were offered 1.8mmt and bought 120kmt. The ‘winners’ of the tender were Romania and Ukraine who outbid Russia for the business. The Ukrainian tender was super sharp, US$222 FOB compared with the Russian offer of US$245. It shows that the market may still have some work to do to find the floor.

 

In the short term, there is little to get really enthused about. The price outlook estimates released by the USDA are just that. The only practical thing they can be used for is the US Federal insurance crop scheme. The crop hasn’t been planted yet, weather (La Niña?) and crop economics will play a part in determining the final sown area.