Wheat prices on the CBoT in Chicago skyrocketed yesterday. The reason for this was the publication of the Global Supply and Demand Report (WASDE) of the United States Department of Agriculture (USDA). What does this report say that had such an impact on the grain market?
The main thing is that the expectation from the USDA on the global wheat balance has become tighter than traders expected. This is partly because global wheat yields have been reduced by 10,5 million tons to 719 million tons. The most striking yield reduction was attributable to Russia. The harvest there is expected to be 3,8 million tons lower compared to previous expectations. This brings the total yield to 74,2 million tons.
Reduction in wheat yields
The forecast for the European harvest was also lowered by 2,5 million tons to 151,3 million tons. Both reductions are related to the hot, dry weather in June. Expectations for the Canadian and Australian harvest have also been lowered. While production expectations will decrease by 10,5 million tons, global consumption will also decrease by 2,9 million tons, partly due to lower feed use in China.
While production is significantly lower, consumption falls slightly. As a result, world wheat stocks for 2019/20 have been reduced from 294 to 286 million tonnes. That was reason enough for a price increase from $188 per tonne to $197 per tonne on the CBoT. Corn and soybean prices on the CBoT also ended higher, driven by increased wheat prices.
Lower soybean production
Also, the report for soybeans was simply bullish. US soybean yields are expected to decline by 8,3 million tonnes, according to the USDA. That is lower than traders' expectations. In addition, there was a lower expectation for production in Canada and Ukraine. Global soy stocks will therefore be more than 8 million tons lower (104 million tons). That was also lower than traders had expected.
Expectations for the corn market were less price supportive. Corn production expectations in the US increased by almost 5 million tons. Expectations for the harvest in Argentina also increased slightly. This will increase the global corn stock by 8,4 million tons to almost 299 million tons.