The United States Department of Agriculture (USDA) released its November World Agricultural Supply and Demand Estimates (WASDE) report late last week, and Donald Trump was elected President. While these two events are not directly related, both are moving markets here and overseas.
Since we last had a close look at the WASDE the USDA has tightened stocks
of both wheat and corn. Regular readers might remember that wheat supplies have
been tighter this year than last, and indeed, the last ten years since the
first projections were released in April.
Expected abundant corn supplies were keeping a lid on wheat pricing, but
now corn production is slowly shifting lower.
The November WASDE saw the USDA cut US corn production by 1.5mmt, largely
due to lower yields. World corn
production was revised higher by 2mmt, but the countries that contributed to
the increase were not major exporters, and as such global exports were down
0.6mmt. The USDA lifted corn consumption
by 6mmt, outstripping production increases and leading to a fall in ending
stocks of 2.3mmt.
Figure 1 shows corn stocks to use are now expected to finish 2024-25 at
24.7%, a ten-year low. Corn prices saw a
small lift on the back of the tighter supplies, with the Dec-24 contract now
back at the peaks of October.
There was little change in this report for wheat, with small increases in
some countries offset by declines in others.
Figure 2 shows the supply and demand picture for wheat remains
relatively tight, but the market would tell us supplies remain in the
comfortable range.
Wheat prices were steady to slightly lower after the WASDE. Wheat has
been trading in an unusually narrow range for three weeks, as the market waits
for the next major production issue.
The most significant moves in grain and oilseed markets have been in
canola since Trump won the election. As outlined in the weekly comments on
Friday, tariffs on used cooking oil would increase demand for canola seed and
oil from Canada, and Australia. Plans to implement a higher biodiesel blend
mandate in Indonesia are also supporting the oilseed demand outlook.
ICE Canola has gained $20/t, 3%, from pre-election levels. In Australia,
canola prices have gone through $800/t on a port basis. GM Canola is still
lagging around $60 behind conventional, but this reflects the difference
between European and Canadian markets.
What does it mean?
With global corn and wheat stocks tightening year on year, and plenty of uncertainty surrounding the geo-political landscape, we might have expected more volatility. There won’t be too many canola growers complaining about Trump getting in, at least in the short term, with the boost to prices coming at just the right time.
Key Points
- World corn and wheat supplies are both now expected to be tighter than last year.
- Prices found support, but little upside impetus on the back of the WASDE.
- Canola prices have rallied based on one of Trump’s expected tariff increases.
Click on figure to expand
Click on figure to expand
Data sources: Reuters, Bloomberg, USDA, Nutrien, Mecardo
