The December WASDE report from the USDA Department of Agriculture is seen by the grain market as the better cut-and-paste. The international trade balance figures for grains are almost identical to the previous month.
Largely unchanged figures had already been priced in by stock exchange traders, meaning there was virtually no reaction on the futures markets. Significant changes in the production and inventory figures forecast by the USDA are not expected until January.
Market stays the course
In Europe, the December contract for milling wheat expired at €181 with hardly any trading. The March contract closed at €183 per tonne. This makes the record price of €186,25 seem far removed. The CME futures also moved little. Wheat, corn and soy finished narrowly higher.
As mentioned, the numbers are often cut-and-pasted. U.S. corn production is still estimated by the department at 13,66 billion bushels. The harvested area also remains at 81,8 million acres (33,1 million hectares). For soy, a harvest of 3,55 billion bushels is expected.
Less area
The ending wheat inventory (for August 2020) is set at 974 million bushels, compared to 1 billion bushels in November. This may indicate that a wheat production cut will begin in the United States next month. The USDA also makes an estimate for the area next year, and an expectation for Europe, among others. The grain market is currently watching the situation in Europe with great interest. According to new figures, 5% of the planned wheat area in France and the United Kingdom is not sown due to bad weather conditions.
Wheat production in Australia, Canada and Argentina is estimated to be lower. Both production and exports for Russia are adjusted upwards by half a million tons, which raises questions in the market given the slow export pace and record high wheat prices.
Drought in South America
Another entry point for market fluctuations is the situation in South America. Drought in Argentina in particular has insiders guessing at lower corn production. Traders expect that, due to seasonality, corn prices may rise slightly. Soy prices are mainly subject to the politically driven trade issues between the United States and China.
In addition to a smaller winter wheat area, the European wheat market has positive exports to fall back on. Results from the Egyptian GASC tenders show that 2 French parties are competing for the prizes. Russian wheat is competitive partly due to lower freight costs. The European export volume of wheat this season is a third higher than the 3-year average