The August ‘World Agricultural Supply and Demand Estimates (WASDE) was released last week, and it yet again gave us a tightening picture for wheat stocks. The market isn’t terribly interested in tightening stocks, as pricing continues to track sideways at the bottom of the recent range.
As
mentioned in Friday’s Weekly Comment, the United States Department of
Agriculture (USDA) again tightened world wheat stocks in its latest WASDE.
The USDA
increased beginning stocks for the 2024-25 year by 2mmt and production by 2mmt. There was a 1mmt increase in Australia, 2mmt in Ukraine and 1.5mmt in Kazakhstan. These increases were partially offset by a small
cut in the US and a 2mmt decline in the EU.
The biggest
change in the report was a 4mmt increase in wheat consumption. Higher consumption was spread around, but it
did mean that despite increasing beginning stocks and production, ending stocks
were cut by 0.6mmt.
World corn
production was cut by 5mmt, thanks largely to a 3.5mmt cut in the EU. The fact that US production was increased
meant the market largely ignored the wider cuts and continued to track lower,
albeit slightly.
Figure 2
shows corn production and consumption almost in balance for the coming year,
which is unlikely to give the market any impetus for an increase without some
weather issues.
Oilseed
production received yet another increase in projected production, with the USDA
adding 4.5mmt to its already record forecast.
The WASDE also cut oilseed use, resulting in a 6mmt or a 4% increase in
ending stocks. Figure 3 shows oilseed
ending stocks will also be at a record high.
The US is
set to produce a soybean crop that is 10.5% larger than last year, thanks to an
increase in plantings and yield forecasts in the August WASDE. Since the release of the report we’ve seen
soybean futures lose 5%, to set new 4-year lows in price.
What does it mean?
If the crop continues to develop as planned, and risk premiums are removed, prices will tend to track lower still. Wheat might have some life in it due to tight stocks, which creates upside potential, but feed grain and oilseed stocks are looking rather comfortable at an international level.
Key Points
- The USDA again tightened wheat stocks in its WASDE, largely due to increased consumption.
- Corn and oilseed production is forecast to be strong, keeping a lid on prices.
- Significant price rises will require some production issues in major production areas.
Click on figure to expand
Click on figure to expand
Click on figure to expand
Data sources: USDA, Nutrien, Mecardo
