Harvesting corn in Missouri this week. Photo: Topplanter

GLOBAL grain markets spent last week pre-empting the thoughts of the number crunchers at the United States Department of Agriculture, and when the latest World Agricultural Supply and Demand Estimates (WASDE) report was released on Friday, the contents were largely as the trade had anticipated.
The wheat news was bearish with Sonny Perdue’s team increasing global production by 4.5 million tonnes (Mt) to 770.5Mt. The big movers were Australia, up 2.5Mt to 28.5Mt, Canada up 2Mt to 36Mt, the
European Union up 700,000t to 136.2Mt, India up 400,000t to 107.6Mt and Argentina down 1Mt to 19.5Mt.

The big surprise, however, was forgetting to change Russian wheat production. At 78Mt, it is well below most industry estimates, with Russian agriculture consultancy SovEcon raising its forecast by another 700,000t last week to 83.3Mt on the back of better-than-expected spring wheat yields in Siberia.

Larger crops in Australia and Canada led to increases in export projections of 1.5Mt and 500,000t to 19Mt and 25Mt respectively. Argentina’s export expectations were lowered by 500,000t to 13.5Mt. The
majority of the net increase was absorbed by China; import projections increased by 1Mt. A minor increase in global wheat demand has pushed projected ending stocks 2.6Mt higher, primarily in major export origins.

Barley up, sorghum flat, soybeans unsurprising

World barley production was also increased, with the USDA pegging global output at 157Mt, up 4.2Mt compared to the previous month’s report. Russia caught most of the change following a big jump in yield, adding 3Mt to production, which is now forecast at 20.3Mt. The other changes were a 300,000t increase in Australia to 10.5Mt, and a rise of 800,000t in the EU harvest to 63.3Mt.

The global sorghum picture was very similar to that of July, with production unchanged at 60.3Mt. The US crop was decreased by 300,000t to 9.1Mt, but this was entirely offset by an identical increase in Australian output to 1.7Mt. World export forecasts are unchanged at 8.1Mt, 6.7Mt of which is out of the US, with 500,000t expected to be shipped from both Argentina and Australia. China is the biggest importer at 6.1Mt.

There were no real surprises in the soybean numbers, with the world crop down 700,000t to 369.7Mt. US production was decreased by 3Mt to 117.4Mt on the back of lower yields, while the Brazil crop, which is yet to be planted, was increased by 2Mt to a record 133Mt. The decrease in US soybean yields from 3.58t per hectare (t/ha) to 3.49t/ha was in line with industry expectations.

Corn

With a number of global production issues and demand uncertainty, particularly from China, most eyes went straight to the USDA’s prognostications on corn when the report hit the screens last week. Global output was posted at a record 1162Mt, down 8.6Mt from the USDA’s July estimate.

As the US harvest rapidly approaches, the WASDE corn yield came in at 11.2t/ha, down from the July estimate of 11.4t/ha. This may seem a small decrease, but when coupled with a 500,000ha reduction in the
harvested area due to the storm that lashed Iowa last month, it lops 9.6Mt off US production to 378.5Mt.

Elsewhere, the Brazilian corn crop is forecast at a record 110Mt, up 3Mt from the August number, the Russian crop was cut by 300,000t to 15Mt, and EU output was 1.5Mt lower at 66.3Mt. The harvest of major Black Sea exporter Ukraine was trimmed by 1Mt to 38.5Mt on the back of persistent dry weather, but that looks high compared to local analyst ProAgro, which has called the crop 4.5Mt lower again at just 34Mt.

On the demand side of the equation, the global picture came in unchanged. However, drilling down into the supply-and-demand matrix, there were some fundamental changes. US consumption was cut by 5.1Mt as
lower ethanol demand projections due to COVID-19 are realised. On the other hand, Brazilian demand was increased by 2Mt.

However, the trade was left baffled by the China corn numbers. Many think that Sonny’s merry men are asleep at the wheel when it comes to the Middle Kingdom. They did increase Chinese corn consumption by 2Mt to 279Mt but left production and imports unchanged at 260Mt and 7Mt respectively.  This is despite concerns mounting over new-crop Chinese corn production this month after three typhoons hit the country’s primary corn-growing region in quick succession over a 20-day period, levelling crops, flooding low-lying warehouses and pushing domestic corn prices to their highest level in five years.

The full extent of the storm damage is not yet known, but analysts are expecting corn output in the key producing provinces of Heilongjiang and Jilin to be severely affected. Shenzhen-based futures broker and private analyst Chaos Ternary put the losses in the aforementioned provinces at 5.88Mt and 1.68Mt respectively. And the massive corn auction program over the past four months has almost exhausted China’s corn reserves, forcing consumers to substitute corn with up to 20Mt of feed wheat and rice ahead of its harvest.

When it comes to China’s corn imports in the 2020-21 marketing year, it seems that the right hand doesn’t know what the left hand is doing along the hallowed corridors of the USDA at the moment. Leaving import projections at 7Mt when Beijing already has 8.8Mt of confirmed new-crop US corn purchases on its books was very strange. And sales of new-crop Ukraine corn to China already exceed 3Mt.

Global marketers are expecting corn shipments to China to be at least double the USDA projection, the majority are probably closer to triple, and some are even suggesting more than four times the WASDE number at 30Mt.

The global corn balance sheet is littered with questions and uncertainty at the moment, and this will be a crucial driver of international grain markets as we move into the northern hemisphere fall and the row crop harvest season.

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