An increase in the forecast for wheat production, consumption and stocks in the USDA report will increase the pressure on the quotation

In the November balance of demand and supply, USDA experts increased the forecasts of wheat production, consumption and stocks, but left the harvest estimate for the Russian Federation unchanged at 91 million tons, while the Russian MSG estimates it at 100 million tons (75.1 million tons last year). Therefore, the forecast of world production may be adjusted in the December report.

Compared with the October report, the following changes have been made to the new wheat balance sheet for 2022/23 MR:

• The estimate of initial reserves was increased by 0.3 million t to 276.3 million t (290.4 million t in FY 2021/22 and 297.92 million t in FY 2020/21).
• The global production forecast was increased by 1 million t to 782.7 million t (779.76 million t in FY 2021/22 and 775.72 million t in FY 2020/21), in particular for Australia by 1.5 million t to 34, 5 (36.35) million tons, Kazakhstan – by 1 million tons to 14 (11.8) million tons, Great Britain – by 0.8 million tons to 15.4 (14) million tons, which more than compensates for the decrease in the forecast for Argentina by 2 million tons to 15.5 (22.5) million tons and for the EU – by 0.45 million tons to 134.3 (138.29) million tons. A prolonged drought in Argentina may lead to a further decrease in the production forecast.
• The estimate of world consumption has been raised by 1 million t to 791.17 million t (794.15 million t in FY 2021/22 and 782.22 million t in FY 2020/21), as the reduction in consumption in India will be offset by an increase in the use of wheat in production fodder in the EU, South Korea, Vietnam and the Philippines.
• The global wheat export forecast was increased by 0.32 million tons to 208.65 million tons (202.78 million tons in 2021/22 MY), in particular for Australia by 1 million tons to 26 (27.5) million tons, Kazakhstan – to 1 million tons to 9 (8.1) million tons, Great Britain – by 0.3 million tons to 1.3 (0.8) million tons, while for Argentina the estimate was reduced by 2 million tons to 10 (16.25) million tons. For the USA, the EU, Canada and the Russian Federation, the export forecasts were left unchanged.
• The estimate of world imports was reduced by 1.27 million t to 202.59 million t (197.9 million t in FY 2021/22 and 195.3 million t in FY 2020/21), primarily for Indonesia and Bangladesh, while for The EU import forecast was increased by 0.5 million tons to 6 (4.6) million tons thanks to the increase in supplies from Ukraine through the western borders.
• Contrary to analysts’ estimates, who expected a decrease in the forecast of world ending stocks by 0.6 million tons, it was increased by 0.28 million tons to 267.82 million tons (276.3 million tons in 2021/22 MR and 291.6 million tons in 2020/21 MR), in particular for Australia – by 0.5 million tons, India – by 0.5 million tons, while for the EU it was reduced by 0.5 million tons.

Wheat quotations on world stock exchanges during the last month fell significantly under the pressure of a record harvest. Yes, prices fell yesterday:

• by 2.7% or $7.81/t to $296.3/t – December futures for soft winter SRW wheat in Chicago (-10.4% for the month),
• by 1.7% or $5.79/t to $341.7/t – December HRW hard winter wheat futures in Kansas City (-4.9%).
• by 1.3% or $4.5/t to $344.7/t – December futures for hard spring HRS-wheat in Minneapolis (-3.3%),
• by 0.4% or €1.25/t to €328.75/t or $329.6/t – December wheat futures on Paris Euronext (-7.5%).

At the same time, December Black Sea wheat futures in Chicago rose by 0.3% or $1/t to $317.5/t (-3.3% for the month) amid active export sales at the latest tenders.

Continuation of the grain corridor will increase supplies to the world market not only of Ukrainian, but also of Russian wheat, which is currently the cheapest in the world (not including Ukrainian, whose prices are understated due to high delivery risks). Against the background of a record harvest in the Russian Federation, this will increase the pressure on prices.

Tags: Ukraine, grain, prices, wheat