The United States Department of Agriculture (USDA) does not foresee major shifts in supply and demand in the grain market. The data published tonight (Friday 8 April) in the Wasde report is therefore reasonably in line with what the trade expected. That just doesn't mean that analysts also assume the USDA is right.
On the wheat balance sheet, the Wasde report expects a larger supply, a larger consumption and a smaller closing stock. The opening stocks of Pakistan, Brazil and Saudi Arabia have been revised upwards. For Pakistan and Argentina, a larger harvest is expected for the 2021/2022 season. That more than makes up for the lower production in the EU. World wheat consumption is estimated to be 3,8 million tons higher at 791,1 million tons. The higher consumption is largely due to India.
The amount of wheat traded on the world market is estimated at 200,1 million tons. That is 3 million tons less than in the March forecast of the Wasde report. The EU, Ukraine and the US export less. For the EU, it is even estimated that 3,5 million tonnes less will be exported. That could bring the total to 34 million tons by the end of this season. Russian exports are actually doing better than the USDA previously assumed, mainly helped by a competitive price on the world market. The closing stock has been reduced by 3,1 million tons to 278,4 million tons. That is the lowest level in five years. For maize and soy, the closing stock this season amounts to 305,5 million and 89,6 million tons. The closing stock of maize is therefore 4,5 million tons higher than in the March edition and soya 400.000 tons lower.
Critical note
Several analysts are questioning the USDA's numbers. According to them, the consequences of the war in Ukraine and the drought in South America have not been sufficiently taken into account in the balance sheet. This is in a sense confirmed by the price movements on the CBoT. Wheat is up 3% on Friday evening, soy is 2,5% and maize is up more than 1%. There is a solid foundation in the market and due to the volatile nature the players have priced in a nice risk premium. In North America and Europe it is still too early to make a reasonably reliable estimate of the new harvest. Depending on how the growing season progresses - and in particular the drought in the US - it will take a while before a real direction is taken in the grain market.