Increased export forecasts for Ukraine and Russia, as well as U.S. stocks, push wheat prices down

In the April WASDE supply and demand report, USDA experts increased the forecast of wheat production, consumption and exports in 2023/24 MY, while reducing the estimate of global ending stocks. The main attention is paid to the change in the structure of exports and redistribution of ending stocks between exporters, which led to the decrease of wheat quotations on the US and EU exchanges by 1.3-2.2%.

Compared to the March estimates, the new wheat balance for 2023/24 MY has undergone the following changes:

• Estimated beginning stocks decreased by 0.1 mln tonnes to 271 mln tonnes (272.4 mln tonnes in 2022/23 MY) due to the adjustment of the balance sheet for 2022/23 MY.
• World production forecast increased by 0.66 to 787.36 million tons (789.34 million tons in 2022/23 MY, 781.3 million tons in 2021/22 MY, 775.72 million tons in 2020/21 MY), in particular for the EU – by 0.5 to 134.15 (134.2) million tons.
• The global consumption estimate was increased by 1.12 to 800.1 mln tonnes (791.02 mln tonnes in 2022/23 MY and 782.22 mln tonnes in 2021/22 MY), in particular for India by 2 to 106.2 mln tonnes, while the use of wheat for feed will decrease in the US and Russia.
• The forecast for world exports was increased by 1.34 to 213.47 million tons (220.17 million tons in 2022/23 MY and 202.98 million tons in 2021/22 MY), in particular for Ukraine – by 1.5 to 17.5 (17.12) million tons due to the lowest prices for Ukrainian wheat on the world market, for Russia – by 1 to 52 (47.5) million tons amid high exports, Australia – by 0.5 to 20.5 (31.82) mln tonnes, Brazil – by 0.3 to 2.5 mln tonnes, while the estimate for Argentina was lowered by 0.5 to 10 (3.66) mln tonnes, Kazakhstan – by 0.5 to 9.5 (10.87) mln tonnes, and the EU – by 2 to 34.5 (35.08) mln tonnes due to increased competition with Black Sea grain. For the US, the forecast was left at 19.32 (20.65) million tons.
• The forecast for world imports was increased by 1.13 to 212.34 (211.74 and 199.37) million tons, in particular for the EU – by 0.5 to 13.5 (12.1) million tons due to active supplies from Ukraine, for North Africa – by 0.7 to 30.1 million tons amid low prices for the new harvest.
• The estimate of global ending stocks was reduced by 0.56 to 258.27 million tons, which will be the lowest level since 2015/16 MY and 5% lower than in 2022/23 MY, although analysts expected an increase in stocks to 259.14 million tons. The stock estimates were lowered for India by 2.1 to 6.9 (9.5) million tons, Ukraine – by 1.7 to 1.58 (2.9) million tons, while increased for the EU – by 1.52 to 16.69 (16.04) million tons, the US – by 0.6 to 18.98 (15.5) million tons and Kazakhstan – by 0.5 to 2.13 (3.27) million tons.

Based on the report, July futures fell in price:

• by 1.3% to 208.1 $/t – for soft winter SRW wheat in Chicago (+5.3% compared to the data after the release of the report in March),
• by 1.6% to 212.6 $/t – for hard winter HRW wheat in Kansas City (-1.7%),
• by 2.2% to 237.1 $/t – for hard spring HRS wheat in Minneapolis (-2.7%),
• by 1.5% to 214.5 €/t or 230 $/t – September wheat futures on the Paris Euronext (+10.8%).

Tags: USDA Report, wheat, India, USA, Australia, Argentina, Ukraine, crop forecast, Russia, Kazakhstan, Brazil, EU, prices