The new WASDE report, which the United States Department of Agriculture (USDA) published Tuesday, March 9, contains few surprises. That was also expected by most traders and analysts. The report does leave a lot of room for further price corrections due to the tight corn and soybean stocks. The weather forecasts in North and South America can be important for that. As we move towards April, there will also be more clarity about what the areas of the crops will do in the new season.
The new WASDE report actually contains few surprises. That was not expected by most traders and analysts. The report does leave a lot of room for further price corrections due to the tight corn and soy supplies. The weather forecasts in North and South America can play an important role in this. As we move into April, it becomes more clear what the crop areas will do in the new season.
Compared to the February report, production, usage and inventories remain largely unchanged. Traders therefore call the report 'fairly boring'. The USDA's expectations are largely in line with what the market expects. There will be no major changes at the Chicago stock exchange. China remains a strong player in the agricultural commodity market. They thus provide a solid foundation in the market.
More wheat harvested than expected
For wheat, the global supply has been adjusted upwards by 3,5 million tonnes compared to February to 1.077,1 million tonnes. Total production for the season amounts to a record 776,8 million tons. The Australian wheat harvest is higher than previously expected at 33 million tonnes. The country's production is therefore higher than the record harvest of 2016/2017. Then 31,8 million tons of wheat were threshed.
Wheat consumption in 2020/2021 has increased by 6,6 million tons. This is mainly due to China. That country uses considerably more wheat as animal feed. The relatively high prices for corn on the Chinese market make wheat a popular alternative for use in animal feed. The country is expected to need 35 million tons of wheat for animal feed and other uses this season. The closing stock of wheat is 3 million tons lower and amounts to 301,2 million tons. China and India hold the largest share of the supply at 50% and 9% respectively.
On the Chicago stock exchange (CBoT), the wheat price took a step up after publication of the WASDE report. The small decrease in closing stock and increased consumption gives traders confidence.
Corn supplies increase slightly
Corn production is estimated by the USDA to be 5,9 million tons higher. Maize production in India, South Africa and Bangladesh is increasing. This is partly due to an expansion of the area and partly due to higher hectare yield expectations. The Mexican harvest is estimated to be somewhat lower. Total corn production amounts to 1.444,8 million tons. The final stock of corn is estimated to be 1,1 million tons higher and amounts to 287,7 million tons.
There was a small price correction on the CBoT after publication of the WASDE report. The price of corn dropped $3 per bushel.
Tight soy stock
The Brazilian soy harvest has increased by 1 million tons to 134 million tons. For Argentina, production has been adjusted downwards by 0,5 million to 47,5 million tons due to the dry weather. The ending stock of soy in the US remains the same as expected in the February report at 120 million bushels (approximately 3,3 million tons). That's a tight ending inventory. Last year it was 405 million bushels higher. The expected global ending stock of soy is estimated at 83,7 million tons.
The March edition of the WASDE report once again confirms that ending soybean supplies are tight. Small changes in soy production in Latin America do little to change this. On the CBoT, the price of soy rose slightly after publication of the report.