The latest report from the USDA Department of Agriculture has bullish numbers in store for the wheat market. The prices are therefore significantly higher after the announcement. The country is heading for a historically small harvest. What do we notice about this in the EU?
On Thursday, September 30, the USDA published their 'small grains report'. This once again calculates the current state of the grain market. A painful situation is becoming clear, especially for wheat. On the reference date of September 1, the wheat stock in the United States was the lowest in 14 years. The country's wheat harvest is estimated by the USDA to be the smallest in 19 years. The wheat price in Paris is also reacting to this news.
10% less harvested
Once again, the US wheat crop and supply is facing a decline. A significant reduction in the 2021 harvest in particular resulted in commotion on the futures market. The department has cut 51 million bushels of wheat from total production. This means that the 2021 wheat harvest will be about 10% lower than the year before. The hard red winter wheat in particular has a significantly smaller harvest due to drought in the northern US.
If the ministry keeps the figures for wheat consumption and exports unchanged this month, the country's wheat stock will shrink considerably. The final stock of wheat next season will be the smallest since 2013-2014. For American arable farmers, this means that they will sow more wheat this fall - and probably next spring - because the market feels extra solid with these figures.
More exports expected
Despite the price level and smaller harvest, consumption in the US has increased. Consumption in the first quarter of this marketing season is even expected to be the highest since 2016/17. This means that we can work through a small stock very quickly, which results in a tight final balance. Analysts expect that the US could cause a surprise on the export market if Russia, Canada and the EU can no longer supply wheat or do not have wheat of sufficient quality. To achieve this, the export equipment in the ports must first be repaired, after the damage caused by Hurricane Ida.
In the report, the USDA revised the soybean inventory upward. This puts pressure on soy prices. Corn was also lower, but this commodity is somewhat supported by the mood on the wheat market.
Higher prices
Following the data release, the CBoT for wheat (December contract) was trading 2,15% higher at $266,58 per tonne on September 30. The price also shows green numbers on Friday, October 1. The Matif closed on Thursday at €258 per tonne and shot up to €263,50 per tonne on Friday due to the American news. That is the highest price since August 24.