Argentina’s fans cheer on their team at the Qatar event amid high hopes for a tournament victory. Photo: FIFA World Cup

THE United States Department of Agriculture has released the final chapter for the year of its never-ending global supply-and-demand saga known as WASDE. On the whole, last Friday’s delivery was relatively uneventful, with most of the crop production, consumption and trade estimates already dialled into market sentiment.

The December World Agricultural Supply and Demand Estimates is rarely a game changer, and this edition was no exception. Wheat is all about Russia at the moment and whether it can maintain the strong export pace, keeping downward pressure on global prices amid Black Sea bottlenecks and the onset of winter. The row-crop picture will be dominated by South American production prospects, with the world relying on big crops in Brazil and widespread rains for the Argentinian farmers.

Of course, there is also the football World Cup to divert attention at the moment, and I expect it will get very Messi in Argentina if they manage to claim the coveted trophy in Doha this weekend.

Wheat weakens

Wheat futures were bleeding ahead of the report, and that trend continued into the close as the report pointed to reduced production, declining global consumption, increased trade and slightly lower 2022-23 closing stocks. USDA cut global output by 2.1 million tonnes (Mt), decreased worldwide usage by 1.6Mt, and increased international trade by 2.2Mt, with the end result being a 500,000t decrease in carry-out stocks.

On the production front, USDA landed on 12.5Mt for Argentinian production, down from 15.5Mt in November but still higher than the latest estimates from the Buenos Aires Grain Exchange on 12.4Mt and Rosario Grains Exchange on 11.8Mt. This led to exports being clipped by 2.5Mt compared to the November forecast of 7.5Mt, substantially lower than the 16.3Mt shipped last season.

The Canadian production number was also reduced with the USDA adopting the latest Statistics Canada wheat output figure of 33.8Mt, 1.2Mt lower than the USDA’s November cut. Despite the decrease, Canadian exports were untouched at 26Mt, almost 9Mt higher than in the 2021-22 marketing year.

Australia underdone?

The only production increase of note was in Australia, where USDA adopted the forecast released last week by the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES). However, like last year, it is a case of the blind leading the blind, with the ABARES number of a record 36.6Mt lagging many local trade estimates by at least 4Mt.

Looking at exports over the past 12 months, robust domestic consumption, and anecdotal bulk-handler carry-out numbers, last year’s crop must have been close to 40Mt, and a wheat harvest in excess of 42Mt in 2022-23 is a distinct possibility before the headers are parked up early in 2023. There have certainly been losses due to rain and flooding in New South Wales, but they will be more than recouped by record, or near-record production in Queensland, South Australia and Western Australia. And Victorian output will also be much higher than last season.

Increasing Australian exports from 26Mt to 27.5Mt is undoubtedly achievable, considering just over 28Mt was shipped from Australian ports in the 12 months to October 30. This high mark was achieved despite significant logistics issues and port disruptions in Queensland and NSW over the past 12 months and the underutilisation of South Australia’s export capacity due to a below-average crop in 2021.

Russian figure stuck

USDA remains stubbornly low on Russian wheat production, keeping its number unchanged at 91Mt despite many Russian analysts calling the crop over 100Mt.

USDA did increase Russian exports by 1Mt to 43Mt as the shipping pace continues to surprise the market. The Ukraine export forecast was also increased by 1.5Mt to 12.5Mt on the back of the extension to the Black Sea grain corridor.

Corn mixed

Corn futures were mixed with the nearby old-crop contracts higher and new-crop contracts lower. The old-crop gains likely reflected lower Ukrainian corn supplies as farmers struggle to harvest their crops amid a wet autumn and the ongoing Russian military invasion. Global corn production was decreased by 6.5Mt from the November figure to 1161.9Mt, with Ukraine accounting for 4.5Mt of that fall and Russia another 1Mt.

Despite continued dryness across almost all of Argentina and parts of Brazil, USDA left corn production unchanged at 55Mt and 126Mt respectively, both records. Estimates in Argentina have started to drop on account of the drought, with the Buenos Aires Grain Exchange currently sitting at 50Mt. The higher production in Brazil is supported by a 9pc jump in the planted area, but some regions desperately need a drink.

USDA decreased worldwide corn consumption in 2022-23 by 4.8Mt to 1170.6Mt, and again it was Ukraine accounting for the lion’s share, down 3Mt to 7.7Mt. Demand from South-east Asian consumers and South Korea is expected to be 1.5Mt lower compared to the November report.

According to USDA, the global corn trade in 2022-23 is set to drop by 1.1Mt. Unsurprisingly, US exports are down 1.9Mt after a lacklustre autumn marketing campaign and China’s approval of Brazilian imports. This was more than offset by a 2Mt increase in Ukrainian corn exports, despite the significant decrease in production expectations. Argentinian exports at 41Mt seems optimistic given the faltering crop, and Brazilian shipments at 47Mt may be pessimistic if China favours the South American origin over the US in 2022-23.

Chinese demand impacts beans

The USDA pushed international soybean production fractionally higher month on month to 391.2Mt.  The major producers were all unchanged, with Brazil at a record 152Mt, the US at 118.3Mt and Argentina at 49.5Mt. However, the latter must be in serious jeopardy as the devastating drought continues unabated.

The December soybean trade picture is almost exactly the same as the November rendition, the exception being Argentina, where exports were increased by 500,000t. The futures reaction to the USDA’s report was the antithesis of corn – old-crop down and new-crop up – but the movements were minor. Soybean prices struggled to gain traction after a rough week for China’s live hog futures, down 9pc in five sessions as falling retail demand and high slaughter numbers keep Chinese pork stocks plentiful in the short term.