On Thursday, December 9, the monthly World Agricultural Supply and Demand Estimates (Wasde) of the US Department of Agriculture, USDA, was published. Wheat, in particular, was in the line of fire. What does this do to the prices and is an upward price movement still possible?
The USDA employees raise in their last report of 2021 the global wheat harvest by 2,7 million tons to 778,89 million tons. Australia gets a big plus with 2,5 million tons, partly because the USDA was previously quite conservative with their estimate. The EU will receive an additional 300.000 tons and Russia one million tons. Canada's harvest is also increased (650.000 tons). Argentina remains unchanged. The ending stock worldwide has been increased by 2,4 million tons by the Americans. This volume of 278,18 million tons is considerably higher than what the market took into account.
Corn and soy undisturbed
It is mainly wheat that is taking a hit. The report leaves corn and soy in the US untouched. This is interpreted bearishly because the market had expectations that more corn will be used for ethanol production. The USDA does not want to go along with this (yet). There was a lot of optimism prior to the report for that very reason. The reason for the reluctance must be sought in the economic impact of the new corona variant omikron.
The CBoT futures market closed slightly higher for both corn and soy, despite the impact of the news. Wheat was again sharply lower, falling from $290,73 per tonne on Wednesday to $284,21.
The Matif has been on a downward trend since Friday December 3. In particular, the December contract - which expires today (December 10) - has to give up and closed on Thursday at €277 per tonne with minimal turnover. The March contract is still just above €290. The question is whether it can maintain this price level before the trading week ends.
Less wheat exports
U.S. wheat exports have been cut by 20 million bushels for the current season. Especially because less hard spring wheat is exported. Export levels are expected to be at their lowest level since 2015. Export data shows that 20% less wheat was exported last month and even 30% less in October, compared to a year earlier.
A record-breaking price rally in the wheat market in November was largely built on a disappointing harvest in the Southern Hemisphere. Mainly due to precipitation in Australia, but also drought in Argentina. The situation is looking better again and the market is now paying the price for this. The grain harvest is progressing steadily in Australia. In many places, arable farmers are still dealing with the after-effects of the enormous rainfall. Local rain is falling again, forcing the combine harvesters to stop.
Stand washed well
In the US there is talk of an improved moisture situation for wheat crops in the Plains due to rain and snowfall. Together with increased wheat acreage, this produces more bearish signals. Crops are also in good shape in the EU and we can count on a small increase in the area. Wheat in the Black Sea region is in less good shape, although this varies per region. Winter has now arrived and we now have to wait to see how the grains will emerge from under the snow in the spring.
Until then, there is a good chance that the grain market will be influenced by the current market mood of a larger harvest in the southern hemisphere, increased acreage and a good starting position of the crop. It will then only be March or April 2022 when a significant change can take place and the price moves upwards. The opposite is also possible if a harsh winter does not throw a spanner in the works and spring goes well.