A marginally bullish WASDE brings no gains

With the US winter wheat harvest well underway, passing halfway last week, they are starting to get a good idea of how supplies will play out over the coming year. Given the reported yields, the market was expecting some sort of increase in US wheat production.

There was an increase in wheat production, but it was just 0.21mmt, and was more than wiped out by increasing exports, leading to lower ending stocks in the US. The story for the world balance sheet was similar. World production was basically steady, consumption up, and world stocks down.

There were minor alterations in wheat production, down 1mmt in Ukraine and Canada, up 0.5mmt in Russia, and 0.7mmt in the EU. The USDA held Australia steady at 31mmt, which is 0.4mmt higher than the Australian Bureau of Agricultural and Resource Economics (ABARES) prediction.

Figure 1 shows wheat supply and demand are still quite finely balanced. The market seems to be happy that supplies are just enough to cover rising demand, but it does leave markets open to supply shock.

The USDA stripped 2.3mmt out of corn production estimates, which led to a 1mmt decrease in consumption. Ending stocks fell to 272mmt and stocks-to-use to a 12-year low of 21.3% (Figure 2). Despite all this, the market eased after the WASDE report was released. The market appears to be focusing on record production, not record consumption.

Rapeseed/Canola was the crop we are interested in, which saw an increase in production. Canola production is expected to reach an all-time high, and outstrip consumption, with a small increase in ending stocks to result. There will also be a slight uptick in the stocks-to-use ratio to 10.6%.

Tags: US, ending stocks, Production, rapeseed, consumption, harvest, corn, canola, winter wheat