This USDA WASDE report was a very important one, notably on Wheat: would the fundamentals back the need of a rally or would market come back to a reality? June USDA WASDE report saw Wheat closing at 445.75 cents on N7… It peaked last week to 556 cents, this is +24.74% in a matter of weeks. The fears are focused on Spring Wheat and over the same period Minneapolis Wheat rallied by +34.62%, spiking to 816.50 cents last week on N7. There will be for sure a cash premium issue next season but is the wheat market needs to be on fire?
Old crop Wheat, no major change, world ending stocks were increased by +1.62MT. US balance sheet is becoming heavier as the total use was lowered by -1.14MT (this was offset by greater exports, +0.55MT). And now, US old crop stock to use ratio is above 100% to 101.74%! On the new crop, world production is cut… Less than anticipated! It’s now pegged to 737.83MT (-1.70MT). US is taking a -1.75MT (-2MT was the average of the estimates) hit to 47.89MT, this is still a -23.81% hit from one crop to another and US stocks are going to take a serious hit, -6.70MT from one crop to another. USDA has acknowledge wheat was suffering and overall yield has been decreased by -1.1 bushels per acre to 46.2 bushels per acre, planted area were cut by -0.86% and harvested area just stood above 38M acres to 38.acres, -1.04% from June report. However, this is still 80.11% of their use, there might be quality issue but there’s no quantity issue in the US. Otherwise, there was not much change really: Australian crop is cut by -1.5MT to 23.5MT, Chinese crop cut by -1MT to 130MT, Ukrainian crop also cut by -1MT to 24MT but Russian crop is raised by +3MT to 72MT (Sovecon pegged it yesterday at 72.9MT). Russian feed usage is increased by +1MT. World ending stocks are therefore not drastically moving, -0.59MT to 260.6MT, this is 35.44% of the use, 35.32% of the production. This is a very comfortable buffer. It’s 3MT above the estimates, market was clearly over pessimistic (but mind you, season is far from being over). However, still to be noted, 54% of the stock is held by China. Not even talking about the transparency issue, the stock is ageing and what can actually be done with it is still uncertain. EU crop was cut by -0.75MT (to 150MT) and ending stocks managed – just – to stay above 10MT to 10.08MT. If there’s a last minute issue, this will start to be problematic for EU, but every day without an issue is good news, not long till the harvest is running flat out! Wheat in Chicago fell by -2.43% so report seems to have released some of the pressure even if it’s only moderately bearish and bottom line, despite a fall of 16.48MT from one crop to another, stocks are still set to raise (+2.55MT), the world is well supplied in wheat for sure. But for sure, quality will be a challenge!
On Corn, last minute good news on the old crop as Argentinian crop was raised by +1MT to 41MT. Ukrainian use was cut by -1MT, US use cut by -1.9MT. Therefore, world ending stocks were raised by +2.92MT to 227.51MT. On the new crop, nice surprise in the US: market was betting on 53.7MT of ending stocks… Actual 59.06MT! Nice miss. Production is bumped up by +4.2MT to 362.09MT, in other words +1.35%. No yield change, still 170.7 bushels per acre. This is due to the acreage, +1% planted to 90.9M acres, +1.33% on the harvested to 83.5M acres. It was obvious from cumulated planting data that there was still a bit of room and farmers waited for the last minute to make crop arbitrages. This is basically the story of the report, and Corn N7 falling -4.08% yesterday is the testimony. Nothing much more really. World stocks are now back above 200MT to 200.81MT, 18.88% of the use and 19.37% of the production, still pretty ample even if this is the tightest balance sheet of the 3 major crops! Market was betting on a number with a 195 handle, so this is clearly a bearish report.
Finally on Soybeans, on the old crop, bits and bobs here and there, world ending stocks were increased by +1.57MT to 94.78MT. US exports were raised by 1.36MT to 57.15MT, considering the inspection numbers, this was kind of expectable. On the new crop, barely anything and world ending stocks are raised by +1.31MT to 93.53MT, also significantly above market expectations (91.9MT). World stocks are 27.09% of the use and 27.10% of the production, so it’s also tough to see any supply issue next year. Market reaction was however mostly neutral. US yield is still pegged at 48 bushels per acre, on 88.7M acres (+0.01M acres from previous USDA WASDE, so US crop was raised to 115.94MT, +0.14MT).
There’s still a lot of information to process, especially on Wheat, market can be expected to remain volatile.