Despite lower production and inventory forecasts in the USDA report, wheat exchange prices fell

In August’s supply and demand report, USDA experts raised their forecast for world wheat   consumption by more than their production  forecast, lowering their estimate of ending stocks. But stock prices fell 0.4-1.2%, and were not supported even by a reduction in the forecast for production and stocks of wheat in the US, although analysts had expected a rise in production estimates thanks to a good harvest.

Compared to the July estimates, the new wheat balance for MY 2024/25 underwent the following changes:

• The estimate of initial reserves was increased by 1.37 to 262.36 million tons (271.04 million tons in  2023/24) after adjusting data for MY 2023/24.
• The global production forecast was increased by 2.09 to 798.28 million tons (789.67 million tons in MY 2023/24 and 789 million tons in MY 2022/23), in particular for Ukraine – by 2.1 to 21.6 (23 ) million tons (corresponding to the harvest data), Kazakhstan – by 1.5 to 16 (12.1) million tons due to high productivity, Australia – by 1 to 30 (26) million tons against the background of favorable weather. At the same time, the production forecast for the EU was reduced by 2 to 128 (134.87) million tons (although local agencies lowered estimates to 125-126 million tons), and for the USA – by 0.7 to 53.9 (49.3) million tons as a result of the decrease in the estimated area of sowing by 365 thousand hectares, which will be partially compensated by high productivity. For the Russian Federation, the harvest forecast is left at the level of 83 million tons.
• The estimate of world consumption was increased by 4.08 to 804.02 (798.75) million tons, primarily for the EU, Kazakhstan and Ukraine.
• The global export forecast was increased by 1.97 to 214.86 (220.8) million tons, in particular for Ukraine – by 1 to 14 (18.4) million tons and Australia by 1 to 23 (20) million tons, while its decreased for the EU by 0.5 to 34 (37) million tons.
• The global import forecast was increased by 1.7 to 208.4 (218.8) million tons, in particular for the EU – by 1 to 11 (13) million tons, North African countries – by 0.5 million tons, Southeast Asia – by 0.3 million tons.
• The estimate of world ending stocks was reduced by 0.62 to the lowest since MY 2015/16 at the level of 256.62 (262.36) million tons (although analysts estimated it at 256.9 million tons), in particular for the USA – by 0.78 to 22 .53 (19.1) million tons, the EU – by 0.79 to 10.15 (15.4) million tons.

According to the report, September wheat futures fell:

• by 1% to $197.2/t – for soft winter SRW-wheat in Chicago (unchanged compared to data after the release of the July report),
• by 1% to $201.5/t – for HRW hard winter wheat in Kansas City (-10.1%).
• by 0.4% to $217.6/t – for hard spring HRS-wheat in Minneapolis (-4.9%),
• by 1.2% to €214.5/t or $234.6/t – for wheat on the Paris Euronext (-2.6%).

The world wheat balance remains tense, as production will decrease in major exporting countries and increase in importing countries, which will reduce demand, which will be able to grow only in the second half of the season.