Last week we saw the latest report from the USDA on global supply and demand. It focused on production and stocks as well as demand for grain and exports globally. Grain markets on a whole probably reacted a little more positively to the report than was expected with wheat corn and soy all making positive moves following the report and backed up by more positive gains during the week. A stronger Australian dollar and a basis that weakened recently has offset local prices though.
Northern Hemisphere weather markets are now starting to come into play with the wheat dormancy period starting earlier due to warmer and drier weather, leaving US winter wheat susceptible to a late freeze. Dry areas throughout the US may come under pressure and this threat along with damaging rain and hail recently in India’s Northern wheat growing areas have since aided the market. A quick snapshot of the latest USDA WASDE report as is most relevant to us here in Aus.
Wheat; a continuation of the recent bearish themes with an increase to stocks. Increases to the production forecast were made for Europe, China and the Black Sea, decreased in Brazil while notably a change to Aussie production decreased to 24.5mmt, finally. The market saw a decrease in US planted acres as a positive and was the main driver of Chicago markets in a US centric view on trading directly following the report.
Barley; again the report was not supportive of barley with supply up mainly in China and Russia. Global supply was increased 0.6mmt up from 145.16mmt to 145.83mmt. Demand was up by roughly the same figure. Stocks were increased from 23.6mmt to 24.2mmt.
Corn; bucked the trend and was slightly bullish. Chinese, Russian and US production was down by a combined 2mmt but the biggest drop came out of South Africa of 4mmt where the country has been gripped by drought. The market was most surprised by the cut to US corn yields however. Global supply decreased by 6mmt from 973.87mmt to 967.9mmt. Global demand was also decreased tempering the reports decrease to supply down 4mmt from 970mmt to 966mmt. Global stocks were decreased by close to 3mmt.
Soybeans; Beans were bullish with both greater consumption and forecast lower production. The reduction of US hectares was seen as key to reducing production overall by 1.4mmt. Global supply decreasing 1.1mmt overall, decreases to the US offset somewhat by increases to China production. Demand was increased by a healthy 1.85mmt form 270.86mmt to 272.7mmt.Stocks were decreased by 3.3mmt overall.
Tom Wake
