The USDA has made significant cuts in its wheat harvest forecast. In Russia, Ukraine and the EU, yields are disappointing due to mediocre growing conditions. However, the market responded to this only to a limited extent yesterday. What is at least as surprising to analysts is that corn and soy yields in South America have hardly changed.
The September contract for wheat on the Matif closed €6,50 lower yesterday at €240 per tonne. On the CBoT, wheat closed 1,5% lower at $6.17 per bushel. Corn rose 1% to $4.54¼ per bushel. Soybean moved sideways to close 0,1% lower at $11.77¼ per bushel.
Yesterday the USDA released the May edition of the Wasde report. Most of the spectacle was with wheat. The USDA has lowered its wheat harvest forecast in Russia by 5 million tons to 83 million tons. The Ukrainian harvest is estimated to be 1,5 million tons lower compared to the previous Wasde report, which amounts to 19,5 million. The USDA cites the frost in May and the warm, dry weather that followed as the reason for these reductions. For the EU, the USDA has lowered the yield forecast by 1,5 million tons to 130,5 million tons. Here it is the wet and cool weather that inhibits the growth of wheat.
Wheat is becoming too expensive for feed
The total amount of wheat (initial stock plus production) available for 2024/25 amounts to 1.050,3 million tonnes. That is 5,7 million tons less than in the previous report. The initial stock is estimated to be higher. The expected consumption of wheat is reduced by 4,3 million tons to 798 million tons. Higher prices make wheat too expensive for use in feed and other applications, according to the USDA. The world ending stock has been reduced by 1,3 million tonnes to 252,3 million tonnes.
The USDA has not made any major adjustments to the yield expectations for corn and soy in the US. That is in line with what analysts expect. What is more remarkable is that there are no major changes for South America either. The soy harvest for Brazil has been reduced by 1 million tons to 152 million tons. The expected corn harvest in Argentina has even been kept the same at 53 million tons. The world ending stock of maize in this edition of the Wasde report amounts to 319,8 million tons. That was 312,3 million tons last month. The ending stock of soy has also been reduced from 128,5 million tons to 127,9 million tons.
Competition
A change in the tax on soy in Brazil will not hurt US exporters. Chinese buyers have purchased 208.000 tons of soy in the US since the new tax came into effect, according to sources. North American soy has become more favorable price-wise for Chinese buyers due to the extra tax. Soy processors and traders had already warned in advance about the negative consequences of the tax increase. Meanwhile, Lula da Silva's government is said to be considering scrapping the levy.