Lower harvest expectations and smaller closing stocks characterize the new Wasde report from the United States Department of Agriculture (USDA), published yesterday (Thurs. 12 May). The ministry is thus sending out a bullish signal, which has clearly not escaped the notice of the market.
On the Matif, all contracts for the 2022 harvest above €400 have been concluded. The September contract closed at €413,75 and that will decrease to €400,50 per tonne for the May 2023 contract. A unique situation, especially when you consider that only six months ago the €300 limit was broken for the first time. On the CBoT, the wheat price for the July contract rose 6% to $1178,75 per bushel (approximately €416 per tonne). Corn and soybean prices also rose, but the increases remained below 1%. According to analysts, these prices were mainly sucked in by the rally in the wheat price.
The Wasde report is friendly to the bulls in the market, especially wheat. The ministry puts the numbers sharper than what many traders and analysts were counting on. The USDA estimates global wheat production for the 2022/2023 season at 774,8 million tons. That is 4,5 million tons lower than the previous season. A smaller harvest is expected, especially in Ukraine, Australia and Morocco. Ukraine in particular stands out. In the forecast, the USDA expects a wheat harvest of 21,5 million tons, or 11,5 million tons lower than last season. Ukraine is expected to export 10 million tons less wheat in the coming season.
In Canada, Russia and the US, the ministry expects higher yields compared to last season. Wheat consumption is slightly lower at 787,5 million tons. Ministry analysts expect demand for wheat for human consumption to grow, but that will be more than offset by lower demand for wheat for animal feed. The closing stock for the 2022/2023 season has been revised downwards by 5% to 267 million tons. That's the smallest stock in six years. The biggest change is estimated closing stock for India. As a result, the stock is 16,4 million tons lower, making it the smallest stock in five years.
Corn yield correction
The US corn yield forecast came as a surprise to many traders. In February, the USDA released a yield forecast of 181 bushels per acre. Trade expected the ministry to stick to that estimate in the Wasde report, as it is still early in the growing season. However, the USDA lowered the forecast to 177 bushels per acre. For soy, the Wasde report did stick to the earlier figures from February.
Analysts react differently to the expectations in the Wasde report. Some believe that the ministry is making too small adjustments for maize and soya too early in the season. It is not yet possible to estimate the conditions during the growing season, which means that major adjustments are still necessary later on. Others, on the other hand, look more at the direction of smaller production and inventories in the report. The ministry is thus preparing the market for structurally higher prices, which will most likely not collapse after this season.