Wheat is doing well in the EU. That's according to analysts of the US Department of Agriculture (USDA) in yesterday's (Thurs, June 10) WASDE report. The expectations for wheat therefore do not deviate much from the May edition of the WASDE report. For maize and soy, the report does contain some surprises. How do the markets react to that?
The available wheat for the 2021/2022 season has been adjusted upwards by 4,3 million tons in the WASDE report to an expectation of 1.087,9 million tons. The wheat harvest is estimated by USDA analysts at a record 794,4 million tons. Especially in the EU, Russia and Ukraine, things are better than previously thought. For the EU, the harvest estimate has been increased by 3,5 million tons to 137,5 million tons due to favorable weather conditions (rain) in large parts of Northern and Central Europe. Wheat in Germany, France and Romania in particular has benefited from this.
Good conditions and larger acreage
Russian wheat production is estimated to be 1 million tons higher at a record harvest of 86 million tons. Due to precipitation in the spring in the west of the country, the WASDE report assumes higher hectare yields. Spring wheat yields are also higher, mainly due to an expansion of the acreage. A harvest of 29,5 million tons is forecast for Ukraine. That is 0,5 million tons more than in the previous WASDE report.
Wheat consumption is expected to reach 791,1 tons this season, also a record. More demand for wheat is expected, especially for animal feed and other applications. The world ending wheat stock is estimated at 296,8 million tons. China has 48% of this. For the wheat market, the WASDE report provides few new insights and expectations are reasonably in line with what most analysts already assumed.
Barley yields in the EU are estimated to be higher. Good yield expectations in Germany and France more than make up for the poorer prospects for barley in Spain. Due to the higher yields, the EU is expected to export more barley to China.
Rapeseed is doing well
Production and inventories of oilseeds are higher in this month's report than in the May edition of the WASDE report. The production expectation has been increased by 0,6 million tons and amounts to 632,9 million tons. Due to a cool spring with sufficient precipitation, especially in May, rapeseed has done well in France, Germany and Poland in particular. Australian yields have been adjusted upwards due to larger acreage and higher yields.
For soy, the final stock is estimated to be 1,5 million tons higher and amounts to 92,6 million tons. This is due to higher initial inventories in the US and Brazil. The Brazilian harvest of the 2020/2021 season is 1 million higher than previously expected and amounts to 137 million tons. Yields were particularly higher in the Mato Grosso do Sul region. According to several analysts, the report is therefore bearish for the soy market. This can also be seen from the rating on the CBoT, which dropped slightly after the WASDE report was published.
Corn remains in demand
The US corn starting stock for the 2021/2022 season is 150 million buhsels (3,8 million tons) lower than in the previous WASDE report. Ethanol production and fuel consumption have almost returned to pre-corona crisis levels. As a result, the consumption of the old harvest is 75 million buhsels (1,9 million tons) higher.
Exports are also better than expected and are 75 million buhsels (1,9 million tons) higher. High corn prices appear to hardly be an obstacle to exports, according to US customs data. The strong demand for corn reinforces the good sentiment on the stock market, according to analysts.