The United States Department of Agriculture (USDA) has slashed its wheat and corn crop forecast in this August's WASDE report. Remarkable, according to analysts, during the grain harvest.
The total wheat yield, according to WASDE, amounts to 1.065,7 million tons. That is 16,8 million tons lower than last month's forecast. Wheat yields are particularly disappointing in Russia, Canada and the US.
The Russian harvest is estimated to be 12,5 million lower than in the July edition of WASDE, an unprecedented correction in the harvest period. According to new data from Rosstat, the wheat acreage appears to be smaller and the yields in Russia are disappointing. The alternation of frosts and thaws in February and March, which severely affected the wheat, are the main cause of the setbacks in Russia.
Drought on the prairies
In the US and Canada, the drought of recent months has cut wheat yields. The Canadian harvest forecast has therefore been reduced by 7,5 million tons to 24 million tons. That is the smallest harvest since the 2010/2011 season. Better than expected yields can be found in Ukraine and Australia. The Australian harvest forecast has been increased by 1,5 million tons to 30 million tons. Ukraine is even heading for a record harvest of 33 million tons. Early wheat harvest data exceeds previous expectations.
Wheat consumption is estimated 4,2 million tons lower by the WASDE at 786,7 million tons. The closing stock of wheat has been reduced by 12,6 million tons to 279,1 million tons. China owns 51% of that. Not only the wheat is disappointing, but also the corn yields are expected to be lower. The maize harvest in July was still estimated at 15,16 billion bushel (385 million tons). That has become 14,75 billion bushel (374 million tons) in August. A smaller maize harvest is also planned for the EU.
Boost for the price
Analysts find the August report unusually surprising. Wheat yields in particular are (much) lower than expected by the market. According to them, the WASDE confirms what many (American) farmers already knew. Drought in key growing areas has cost tons. It is therefore no real surprise that the hectare yields of maize are below the multi-year average. What does surprise some analysts is that the Russian wheat crop has been cut so sharply. Estimates of 75 million tons were already known, but that the WASDE will now be 2,5 million tons less.
The report during the wheat harvest makes the grain market bullish. Both US CBoT corn and wheat prices jumped after the report was released. The European Matif quotation also shot up.