The US Department of Agriculture (USDA) WASDE report is bearish for the wheat market. This is mainly due to the fact that world wheat stocks are larger than expected. What does the WASDE report mean for the different grain markets?
The USDA treasure global wheat stocks for the 2018/2019 season at 276 million tons. That is more than 5 million tons more than expected last month. This does not have to do with an increase in production, but is mainly because the consumption of wheat (including in Europe) is lower.
Corn price under pressure
The reduced consumption of wheat is partly due to a low price for corn, which makes this product more attractive to import. The low corn price is caused by large stocks. In addition, the price is under even further pressure after the publication of the WASDE report. The expectation for global corn stocks was higher than analysts had initially expected.
The USDA increased its corn inventory forecast by 6 million tons, projecting ending corn stocks to 314 million tons. This increase is partly due to a decrease in the use of corn for the production of ethanol. The expectation for corn production in Brazil, Argentina and Europe is also higher.
Soy market uncertain
The WASDE report had a price-supportive effect on soybean prices. This is because the expectation for the global stock of soybeans is slightly lower, resulting in 107 million tons. However, the soy and corn markets are still under pressure due to uncertainties surrounding the trade war; Rumor has it that China will import 40 million tons of soybeans, 20 million tons of corn and 10 million tons of wheat from the United States. However, it remains unclear what period this refers to.
On the other hand, there is also a positive point for the corn market. China is considering lowering import duties on ethanol from the United States, which is part of the deal between the two countries. This could have a major impact on the corn market, as China was one of the largest importers of ethanol in 2.