The United States Department of Agriculture (USDA) released its World Agricultural Supply and Demand Estimates (WASDE) late last week with increasing supplies of wheat and corn, while marginally cutting soybeans. The report was a little bearish and added to the negative tone markets saw last week.
World wheat
production was increased by six million tonnes on the back of a 3.5mmt increase
in the US and some small increases in other countries (figure 1). Interestingly, the USDA didn’t move on Russia
or Ukraine production, having cut last month.
The USDA held Australian wheat production at 29mmt. The latest Australian Bureau of Agricultural and
Resource Economics and Sciences (ABARES) has wheat pegged at 29.1mmt.
Global
wheat production is now forecast to increase by 8mmt on last year, making it a
record world production year.
The USDA increased
wheat consumption by 1mmt, which will be a 6mmt decrease on 2023-24 but is
still 3mmt higher than production. This
has left ending stocks at 257mmt, a 1.5% decrease, dragging stocks to use back
to 32.2%. Figure 1 shows the stocks to
use will still be at an 11-year low, which should be a little bullish for
prices.
Global corn
production was increased by 4mmt, with the biggest increase coming from the US,
who are forecast to see a 6mmt increase in production. Some of the increase in corn production has
come from a shift in acreage away from soybeans, along with favourable growing
conditions.
The other
big corn producers, Brazil and Argentina, had production remain steady,
although that crop won’t go in the ground until the southern hemisphere spring.
Corn consumption
was kept steady on last month, and as such the ending stocks saw a small 1mmt
increase, and a slight bump in stocks to use.
Corn stocks to use are now back at the same level as last year. Figure 2
shows corn stocks are still historically tight.
What does it mean?
Markets reacted to the increasing supply estimates by losing ground. After having steadied after losing all its May gains, wheat took another leg lower, passing the lows set in March. The market is certainly comfortable with supply at the moment, despite the reported issues in the Black Sea region.
Key Points
- The USDA lifted production estimates for global wheat and corn stocks in its July WASDE.
- The USA did much of the work, with favourable seasonal conditions boosting production estimates.
- Prices took another leg lower as markets adjusted to the increase in supply.
Click on figure to expand
Click on figure to expand
Data sources: USDA, Mecardo
