The Wasde report managed to surprise the grain market once again. In particular, the yield forecasts for corn, soybeans and wheat in the US are higher than analysts had expected. With all the news from the US, the rapprochement that the UN is seeking towards Russia is somewhat undermined. The UN wants to grant the Russian agricultural bank access to the international payment system subject to conditions if Russia agrees to extend the grain deal.
The September contract for wheat on the Matif closed €4,50 lower yesterday at €227,75 per tonne. The July contracts at the CBoT have almost expired. The September wheat contract on the Chicago exchange lost 4,2% yesterday to close at $6.33¼ per bushel. Corn also took a hit, dropping 3,9% to $4.75½ per bushel. Soy also did not escape a downward correction, but with a 2% decline to $14.42¾ per bushel for the August contract, the loss was not too bad compared to corn and wheat.
The July edition of the Wasde report, which was released yesterday evening Dutch time, is, according to analysts, an important cause of the price pressure on the American stock market. Unexpectedly bearish across the board, the report is called. The US wheat harvest for the 2023/24 season has been revised up by 74 million bushels to 1.739 million bushels due to increased acreage and slightly higher than previously expected yields.
Ending stock of wheat continues to decline
The world wheat stock (initial stock plus production) is estimated by the USDA at 1.066 million tons. That is a decrease of 900.000 tons compared to the June edition of the Wasde report. The wheat harvest in the EU has been reduced by 2,5 million tons to 138 million tons. This lower forecast is due to drought in Germany, Spain, France and Italy, which means lower yields. For Canada, the harvest forecast has been adjusted downwards by 2 million tons to 35 million tons, also due to drought. Argentina's wheat harvest is shrinking, according to the USDA. Not due to drought, but due to a smaller than expected sown area. The final wheat stock for the 2023/24 season amounts to 266,5 million tons, a decrease of 4,2 million tons. If the forecast comes true, this would mean a decline in ending stocks for the fourth time in a row, the USDA writes.
For corn, the USDA also expects a larger harvest in the US, mainly due to a larger acreage. The world production of coarse grains, which, in addition to corn, also includes barley, has been increased by 100.000 tons to 1.513,4 million tons. In Canada and Ukraine, a slightly larger area compensates for the shrinkage in the EU and a good harvest in Brazil more than makes up for a disappointing harvest in Argentina. The ending stock of corn is forecast at 314,1 million tons. That's an increase of 100.000 tons compared to the Wasde report a month ago.
Soy production in the US has been adjusted downwards by the USDA. This is due to a shrinkage in the area. The yield has been kept the same at 52 bushels per acre. World production of oilseeds has increased by 1,5 million tons to 539,7 million tons. More sunflowers and rapeseed have been sown in Ukraine and in Canada the soy area is somewhat larger than expected. This partly makes up for lower yields in the EU due to drought in France and Germany.
Clear signal, but volatility is not decreasing
As mentioned: with the Wasde report, the USDA is sending a bearish signal, especially for the US market according to analysts. But one comment that is often made is: "The USDA leaves room to cut yields in August." The weather in the US has been more favorable for corn and soy in the US in recent weeks. But the period in which the yield is actually produced has yet to come and the basis is not such that things will turn out well towards the harvest anyway, say several experts. Satellite monitoring and reports from the field can sometimes cause the market to move unexpectedly, both up and down, according to some analysts.
outstretched hand
The Wasde report almost makes you forget that the soap opera surrounding the extension of the Black Sea grain deal still continues. The Secretary General of the UN, Antonio Guterres, yesterday provided an important helping hand to Russian President Vladimir Putin. Guterres has proposed to grant a subsidiary of the Russian agricultural bank Rosselkhozbank access to the international payment system Swift, specifically for grain and fertilizer payments. The fact that Russia no longer has access to Swift is one of the Kremlin's main objections to extending the grain deal after July 17.