Wheat prices fell despite lower production, consumption and inventory forecasts in the USDA report

In the August balance sheet for wheat, USDA experts, as in July, again lowered their forecasts for production, consumption and stocks to almost the level of the previous season, although export volumes and ending stocks will be lower than last year.

In general, the data of the report almost corresponded to the preliminary estimates of analysts, therefore, despite its “bullish” nature, stock market quotations fell. US wheat prices are being pressured by an increase in the forecast of ending stocks in the US and a decrease in the export estimate for 2023/24 MY.

In comparison with the July report, the new wheat balance for 2023/24 MY underwent the following changes:

• The estimate of initial reserves was reduced by 1 to 268.31 million tons (272.6 million tons in FY 2022/23) as a result of data adjustments for MY 2022/23.
• The global production forecast was reduced by 3.3 to 793.37 million tons (789.87 million tons in 2022/23 FY, 781.3 million tons in 2021/22 MY and 775.72 million tons in 2020/21 FY), in particular for China – by 3 to 137 (137.72) million tons, the EU – by 3 to 135 (134.4) million tons (especially for Spain, Lithuania and Romania), Canada – by 2 to 33 (33.82) million t against the background of worsening weather conditions, while the estimate for Ukraine was increased by 3.5 to 21 (21.5) million tons due to the increase in the area of sowing and yield, Kazakhstan – by 1 to 15 (16.4) million tons (corresponds to the official forecast ), Brazil – by 0.3 to 10.3 (10.6) million tons against the background of improved weather in the south of the country. For the USA, Australia and the Russian Federation, the estimates were left unchanged.
• The global consumption forecast was reduced by 3.38 to 796.07 million tons (794.27 million tons in 2022/23 MY and 782.22 million tons in 2021/22 MY) due to a decrease in feed use in the EU by 2 million tons, and for food purposes, for seeds and industry in China – by 1 million tons.
• The estimate of world exports was reduced by 2.2 to 209.4 million tons (218.6 million tons in 2022/23 MY and 202.98 million tons in 2021/22 MY), in particular for Canada – by 2 to 24.5 (25 .5) million tons and the USA – by 0.7 to 19.05 (20.65) million tons. For Ukraine, the export forecast was left at the level of 10.5 (16.8) million tons due to problems in the operation of the grain corridor, although UGA estimates exports at 15 million tons. For the Russian Federation, the export estimate was increased by 0.5 to 48 (46) million tons, while local agencies estimate it at 48.1 million tons.
• The estimate of world imports was reduced by 0.57 to 207.39 (211.4 and 199.37) million tons, primarily for the countries of Southeast Asia.
• The forecast of world ending stocks was reduced by 0.92 to the lowest level since 2015/16 MY of 265.61 (268.31) million tons (although analysts estimated them at 265.92 million tons), in particular for the main importing countries – by 2, 4 to 174.7 (176.65) million tons.

On Friday, September futures fell on the data report:

• by 1.8% to $230.3/t – for soft winter SRW-wheat in Chicago (-1% compared to the data after the release of the July report),
• by 1.5% to $277.7/t – for hard winter HRW wheat in Kansas City (-6.3%).
• by 0.2% to $299.5/t – for hard spring HRS-wheat in Minneapolis (-4.7%),
• by 0.1% to $245.5/t – for Black Sea wheat in Chicago (+4.3%).
• by 0.4% to €236.5/t or $258.9/t – for wheat on the Paris Euronext (+3.8%).

Wheat quotes were little changed during the month, although rising prices for Black Sea and European wheat will support the US wheat market, especially if the heat in the US intensifies in the coming weeks.

Tags: USDA Report, wheat, Ukraine, USA, Russia, China, Kazakhstan, Romania, Brazil, EU, prices, Canada