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Wheat lift from Canada supports bearish tone: USDA

Grain Central, December 14, 2017

THE United States Department of Agriculture’s (USDA) December crop report has raised its estimate for Canada’s 2017 wheat crop by three million tonnes (Mt) to 30Mt, confirming the overall bearish tone expected by the market from these figures which have fine-tuned crop numbers for year end.

The report has lifted USDA’s estimate for 2017/18 world wheat production 3Mt to 755Mt (see table 1) based on the 3Mt rise for Canada, and a 1MT lift to 153Mt for the European Union.

These increases have more than offset production declines estimated for Brazil, South Africa and Yemen.

A rise in this month’s forecast of 2017/18 world wheat trade, to almost equal trade in 2016/17, was attributed to higher demand in Indonesia, up by 1Mt to 11.5Mt, primarily on higher expected feed wheat usage, but also on 500,000t increases from the November forecast in imports by China and Brazil, with higher exports from Canada, Russia, and Ukraine more than offsetting reduced US exports.

World wheat ending stock was forecast to reach a new record, 268Mt, up 900,000t from the November estimate.

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Table 1: World wheat, million tonnes

2017/18 2016/17 2015/16 2014/15
production 755 754 735 728
exports 182 183 173 164
ending stock 268 255 241 218

Source: USDA

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Total world consumption is projected 2.1Mt higher, primarily on greater usage from Indonesia, Canada, and the EU.

Upside for wheat values

Commenting on the report, Rabobank head of agrimarkets research, Stefan Vogel, said it was more or less in line with pre-release market expectations.

Rabobank said global wheat prices remained under significant pressure with both CBOT and Matif prices at contract lows as exports in the US and EU failed to inspire price support.

These exports remained uncompetitive against Russian-origin wheat, which continued to exit Black Sea ports at pace in the absence of weather disruptions, with freezing, disruptive weather expected to impact the region from next week at the earliest.

However, Rabobank reported that it maintained a more supportive view on global wheat futures, as seasonally slowing Black Sea exports, US southern plains dryness, and shrinking world-minus-China stocks limit downside pressure.

Sorghum demand lifts

For sorghum, recent large purchases by China have increased sorghum prices relative to corn, sharply reducing the estimated amount of sorghum used to produce ethanol. With expectations of increased U.S. sorghum exports to China, projected food, seed, and industrial use for sorghum is reduced by 50 million bushels, with an offsetting 50 million bushel increase in exports.

The full report covers wheat, coarse grains, oilseeds, rice, sugar, livestock, poultry, dairy and cotton. See full report here.  

Source: USDA

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