USDA’s October balance sheet for wheat came in neutral, although traders expected an increase in global supply

USDA’s October wheat balance sheet for 2022/23 MR generally met market expectations, with the exception of harvest estimates in the Russian Federation, which differ significantly from the forecasts of the MSG of Russia.

According to official data, in the Russian Federation as of October 6, 101.9 million tons of wheat were threshed from 96% of the area (74.5 million tons on this date last year), while the USDA estimates the harvest at 91 million tons, as a result of which the main changes will be taken into account in the November report.

Compared to the September estimates, the October wheat balance for the 2022/23 MR underwent the following changes:

• The estimate of initial reserves was increased by 0.34 mln t to 276 mln t (290.4 mln t in FY 2021/22 and 297.92 mln t in FY 2020/21) due to a reduction in the consumption forecast in FY 2021/22 and an increase in reserves in USA.
• The global production forecast was unexpectedly reduced by 2.22 million tons (although it was increased by 10 million tons in 3 months) to 781.7 million tons (779.76 million tons in 2021/22 FY and 775.72 million tons in 2020/21 MR), in particular for the USA due to a reduction in the area before harvesting – by 3.62 to 44.9 million tons (44.8 million tons in 2021/22 MR) and Argentina due to drought – by 1.5 to 17.5 (22, 5) million tons. At the same time, the forecast for the EU was increased by 2.65 to 134.75 (138.29) million tons, and for Brazil – by 0.5 to 9.2 (7.7) million tons. For the Russian Federation and Kazakhstan, estimates left unchanged, although they are significantly lower than the forecasts of local agencies and official data, so they are likely to be adjusted in November.
• The estimate of world consumption has been reduced by 0.85 million t (+6 million t in three months) to 790.17 million t (794.15 million t in 2021/22 MR and 782.22 million t in 2020/21 MR) due to a reduction feed consumption in the USA.
• The global export forecast was reduced by 0.56 million tons to 208.33 million tons (202.78 million tons in FY 2021/22), in particular for Argentina – by 1 to 12 (16.25) million tons and the United States – by 1, 36 to 21.09 (21.78) million tons, which will be the lowest indicator since 1971/72 MR. For the EU, the export forecast was increased by 1.5 to 35 (31.9) million tons, and for the Russian Federation it was left unchanged at 42 million tons, although analysts estimate it at 50-60 million tons.
• The estimate of world imports was reduced by 0.28 million tons to 203.86 million tons (197.9 million tons in 2021/22 MR and 195.3 million tons in 2020/21 MR).
• The forecast of global ending stocks was reduced by 1 million tons to 267.54 million tons (276 million tons in FY 2021/22 and 291.6 million tons in FY 2020/21), which corresponds to the average analyst estimate of 267.9 million tons. In particular for the USA, the estimate was reduced by 1 to 15.68 (18.21) million tons, which will be the lowest indicator since 2007/08 MR.

Traders continue to take profits after a speculative jump in prices at the beginning of the week caused by missile attacks in Ukraine, so wheat quotes reacted with a decrease to the neutral report:

• by 1.2% or $4.04/t to $327/t – December futures for soft winter SRW wheat in Chicago (+3.6% for the month),
• by 1.6% or $5.6/t to $358.4/t – December HRW hard winter wheat futures in Kansas City (+5.2%).
• by 1.7% or $5.97/t to $356/t – December futures for HRS durum wheat in Minneapolis (+4.6%),
• by 0.1% or $0.5/t to $328/t – October Black Sea wheat futures in Chicago (+4.1%).
• by 0.7% or €2.25/t to €353.25/t or $342.68/t – December wheat futures on Paris Euronext (+5.3%).

Algeria, which used to be the main buyer of French wheat, bought 500,000 t of presumably Russian food wheat at a price of $380-384/t C&F for delivery in November, increasing pressure on European wheat prices.

Tags: EU, prices, wheat, USA, Argentina, Brazil, Algeria