Wheat prices decline after USDA increases production forecast

In the December report, USDA experts raised their forecasts for global wheat production and exports for the first time after four months of decline, which resulted in wheat prices, which reached a 4-month high last week, declining slightly.

The increase in crop and export forecasts for Canada and Australia will increase pressure on prices in the near future, especially against the background of a possible increase in the harvest in Argentina and its new export policy.

Compared to the November estimates, the December balance for wheat in 2023/24 MY has undergone the following changes:

• Estimate of beginning stocks increased by 0.3 million tons to 269.85 million tons (272.4 million tons in 2022/23 MY) due to the adjustment of data for 2022/23 MY.
  The forecast for world production was increased by 1 to 783.01 million tons (789.49 million tons in 202/23 MY, 781.3 million tons in 2021/22 MY and 775.72 million tons in 2020/21 MY), in particular for Australia – by 1 to 25.5 (40, 55) million tons, Canada – by 0.95 to 31.95 (34.34) million tons, while for Brazil the forecast was lowered by 1 to 8.4 (10.6) million tons, and for Argentina, Ukraine and Russia the estimates were left unchanged.
• The forecast for global consumption was increased by 1.82 to 794.66 million tons (792.12 million tons in 2022/23 MY and 782.22 million tons in 2021/22 MY) due to increased feed use in the EU by 0.5 million tons and in China by 0.5 million tons, as well as in Thailand and South Korea.
• The estimate of world exports was increased by 2.18 to 207.19 million tons (220.5 million tons in 2022/23 MY and 202.98 million tons in 2021/22 MY), in particular for Australia by 1 to 18.5 (31.82) million tons, the United States by 0.7 to 19.7 (20.65) million tons, Canada by 0.5 to 23.5 (25.6) million tons, and Ukraine by 0.5 to 12.5 (17.12) million tons.
• The estimate of world imports was increased by 2 to 206.73 (211.74 and 199.37) million tons, in particular for the EU – by 1 to 8.5 (12.1) million tons, the countries of the South Asia – by 0.9 million tons, China – by 0.5 to 12.5 (13.4) million tons.
• The forecast of world ending stocks was lowered by 0.49 million tons to the lowest level since 2015/16 MY at 258.2 (269.85) million tons, while analysts estimated them at 258.86 million tons.

According to the report, the March wheat futures declined:

• by 1.7% to 232.1 $/t – for soft winter SRW wheat in Chicago (+8.8% compared to the data after the release of the November report),
• by 1% to 242.9 $/t – for hard winter HRW wheat in Kansas City (+2.1%),
• by 1% to 268 $/t – for hard spring HRS wheat in Minneapolis (-0.7%),
• by 0.8% to 230.25 €/t or 247.8 $/t – for wheat on the Paris Euronext (-1.3%).

Tags: prices, wheat