THE United States Department of Agriculture (USDA) updated its global supply-and-demand estimates last Friday. The knife wielded upon wheat production forecasts in August returned to its scabbard for the time being. It appears that most of the ambiguity around worldwide wheat production in the 2021-22 season is now in the rear-view mirror, with output rebounding slightly compared to last month’s report.
The World Agricultural Supply and Demand Estimates (WASDE) report pegged global wheat production for the 2021-22 marketing year at 780.3 million tonnes (Mt), 3.4Mt higher than the August number. Production among the world’s major exporters was 400,000t higher than last month’s forecast at 319Mt.
Rise for Australia
The USDA couldn’t quite grasp an Australian wheat crop as high as the Australian Bureau of Agriculture and Resource Economics and Sciences suggested in its latest crop report. The USDA came in at 31.5Mt, 1.5Mt higher month on month, but still 1.1Mt lower than ABARES forecast of 32.6Mt. Maybe it was the uncharacteristic 4.8Mt hike in the ABARES forecast compared to June that spooked the USDA number crunchers. In addition, Australian exports only captured two-thirds of the USDA production increase, rising 1Mt to 23Mt.
One Australian number that the USDA consistently underestimates is domestic demand. It may have increased by 200,000t in last week’s report, but at 8.2Mt, it is at least 10 per cent shy of most domestic projections. Milling demand is rising, cattle on feed numbers have not dropped below one million head all year, despite forecasts to the contrary, and demand from the poultry sector is quite robust.
Changes in Americas
The Canadian wheat production estimate was trimmed by 1Mt to 23Mt, putting the USDA in line with the first forecast from Statistics Canada of 22.9Mt. Export projections have taken a hiding due to the drought, with another 500,000t shaved off the August estimate to land on 17Mt last week. The big change to the Canadian balance sheet was a 1.9Mt hike in 2021-22 opening stocks after Statistics Canada reported higher than expected stocks.
Some very welcome rains have fallen across much of Argentina’s winter crop area in recent weeks, stabilising the production outlook after a dry winter threatened crop prospects. That said, the USDA did reduce its production estimate by 500,000t to sit at 20Mt. That compares to the Buenos Aires Grain Exchange forecast of 19Mt and the Rosario Grains Exchange on 20.5Mt.
EU, India, China lift
On the European continent, Russian production was unchanged at 72.5Mt, as was Ukraine at 33Mt, but European Union wheat output was increased 400,000t to 139Mt. On the export front, forecasts for each jurisdiction were untouched at 35Mt, 23.5Mt and 35Mt respectively.
Elsewhere, Indian production was increased by 1.5Mt to a record 109.5Mt. With domestic consumption unchanged at 105Mt, exports caught 80 per cent of the output increase, rising 1.2Mt to 3.5Mt. However, that is well short of the 6.8Mt sold in 2012-13, the country’s biggest export year. It was interesting to see India pop up with a sale to The Philippines last week, and the trade will be curious to see if they feature again in the coming months.
Among the major importers, the only mover was China, with the USDA increasing production by 900,000t from August to a record 136.9Mt. Domestic Chinese consumption was increased by 1Mt to 149Mt, all in the stockfeed column. The excess of demand over supply is made up of 10Mt of imports, unchanged month on month, and a decrease in the projected carry-out.
US corn, soybeans swell
The other eagerly awaited numbers from last week’s WASDE report were the row-crop projections for the coming US harvest. The trade expected a corn yield of around 11.02 tonnes per hectare (175.6 bushels per acre), but the USDA printed a higher estimate of 11.06t/ha (176.3bu/ac).
However, the more important corn number was the planted area, up only 243,000 hectares to 37.76 million hectares, against market expectations of around double that number. The wash-up of the yield and area changes was an increase in US production of 6.3Mt to 380.9Mt.
The other change of note for the US corn balance sheet, and quite a surprise to the market, was a 1.9Mt hike in 2021-22 exports. The main beneficiaries appear to be Mexico, up 500,000t, despite expectations of record production of 28Mt, and Canada up 1Mt as the effects of the ongoing drought flow through to corn production.
On the China front, favourable season conditions have pushed production 5Mt higher to a record 273Mt in 2021-22. The USDA also added 4Mt to the carry-in number after decreasing 2020-21 domestic consumption by the same amount. Add the lack of engagement between China and US exporters, and there is starting to be slight downward pressure on the Chinese import number, which was left unchanged at 26Mt.
On the soybean front, the US yield forecast exceeded market expectations, increasing from 3.36t/ha (50bu/ac) to 3.4t/ha (50.6bu/ac) against an average trade estimate of 3.38t/ha (50.3bu/ac). However, much of the yield increase was negated by a 162,000ha decrease in the planted area to 35.3Mha. Consequently, US production and exports increased by 1Mt, basically accounting for the entire change in the global output and trade forecasts for the 2021-22 season.
One interesting change was a hike in Chinese imports for the 2020-21 season to 99Mt, apparently a reaction to some higher-than-expected August import data from Chinese customs. No change was made to domestic crush or feed consumption, so it all ended up in the carry-out column. With production, imports and domestic consumption unchanged in the 2021-22 season, the 2Mt tweak has been carried all the way through to 2021-22 carry-out.
All in all, the USDA produced a relatively benign WASDE report, a sharp contrast to the fireworks that followed last month’s iteration. The neutral tone triggered some profit-taking, especially in wheat which touched a seven-week low in futures trade. Despite the rally in corn and soybeans post report, the three major commodities all finished down for the week. It seems the market will tread water for now as it searches for the next game-changing story.