Grain prices on the international stock exchanges were under considerable pressure during the past trading session. The Wasde report from the United States Department of Agriculture (USDA) is the main reason for this. Top yields are still not expected but the USDA is sending a bearish signal nonetheless. In the meantime, varying yield forecasts are coming out from Europe.
On the Matif, the September wheat contract closed 3% lower at €341,75 per tonne. In Chicago the loss was even greater with a decline of 5%. The September wheat contract on the CBoT therefore amounts to $8.14,25 per bushel (approximately €298 per tonne). The August soy contract fell 3,5% and the September corn contract even fell by almost 7%.
According to the analysts, the Wasde report put pressure on the market. For wheat, the USDA expects a lower yield, but because there is less demand, the ending stock will increase. The total starting stock plus the harvest available for the 2022/2023 season has been adjusted downwards by 1,1 million tonnes to 1.051,7 million tonnes. The reduction is largely due to lower yields in the EU, Ukraine and Argentina. In Canada and the US, yield expectations have been adjusted upwards. For the EU, the harvest is estimated at 134,1 million tons due to persistent drought in large parts of Europe. That is 2 million tons lower than the Wasde report reported in the June edition. Wheat consumption has been estimated 1,8 million tons lower and now stands at 784,2 million tons. This is mainly due to lower demand for wheat for animal feed in the EU and Ukraine. The closing stock has been increased by 0,7 million tons to 267,5 million tons. That is the smallest stock since the 2016/2017 season.
More corn
The USDA also expects an increase in ending stocks for corn. In the US, the starting stock has been increased and the accountants of the Wasde report assume a larger harvest compared to the previous report. However, at a global level, the total corn harvest is lower. In Russia, the EU and Kenya, yield expectations have been adjusted downwards. However, corn consumption has been adjusted downwards more, in contrast to the yield. However, the final stock this season is still 2,5 million higher than the Wasde report reported in June, namely 313 million tons.
In oilseeds, production, exports and ending stocks have been adjusted downwards. The demand for oil production has increased slightly. The EU rapeseed harvest has been reduced by 0,4 million tonnes to 17,9 million tonnes. The drought in Germany and France is the main cause of this.
Critical Sounds
According to several analysts, the Wasde report focuses on the demand for grains. The USDA thus provides ammunition to the group of traders who believe that the relatively high prices are at the expense of the demand for grain and that these prices cannot be maintained in the long term. The high dollar exchange rate is an additional barrier for the American market. This overshadows concerns about disappointing production. Drought in the EU is mentioned several times, but attention to the problems with the weather in the Midwest of the US is virtually no attention. Several experts therefore warn that supplies remain tight. This remains a breeding ground for a very volatile market, as has become apparent in recent months.
Big differences in Europe
The French Ministry of Agriculture yesterday released a yield forecast for wheat. The soft wheat harvest is estimated at 32,9 million tons by the ministry. That is 7% lower compared to last year, mainly caused by drought. In Germany, the damage from the drought appears to be less than expected, according to the first reports from traders. The wheat harvest has started in several southern and eastern states and yields are good. A total yield of 22 to 22,5 million for Germany, which is approximately 5% higher than last year, seems possible according to some sources. However, it should be noted that it will take about ten days before the wheat harvest in Germany really gets going and the yields in other regions become known.