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July 22, 2020 | FBN Insights | Kevin McNew

USDA Attachés Lower Wheat Forecasts

Hot and dry weather continue to be a concern in several areas of eastern Europe into Asia

China Plans Wheat and Rice Sales 

  • China plans to sell rice and wheat from state reserves to animal feed producers who are struggling with high corn prices.
  • China domestic corn prices have risen more than 20% and hit five-year highs in some areas amid tightening supplies.
  • The country’s corn stocks are down following years of government actions to reduce aging supplies. 
  • Extensive floods and cool weather across growing areas have also supported prices.  
  • Grain would be sold through state firms directly to feed makers, unlike stocks sold from reserves in regular auctions to the broader market.
  • China may initially sell about 10 million tonnes of rice at a price well below half of the current market price.

FBN’s Take On What It Means: Though China has worked to reduce its previously huge corn stocks, it has continued to build stockpiles equaling more than an entire year's consumption of other grains. China has recently bought over 7 million tonnes of corn from various origins and likely met its WTO quota for the first time. If domestic prices continue to climb, government grain firms could continue to import corn from the US and others, which would work to partially offset potentially burdensome new crop supplies. 

 

USDA Attachés Lower Wheat Forecasts

  • The USDA attaché in Kazakhstan lowered the projection of the wheat crop to 12.8 million tonnes compared to 13.5 million in the July WASDE report.
  • Kazakh wheat areas border the Russian spring wheat areas where weather stats suggest potentially worse conditions. 
  • USDA forecast total Russian wheat output at 76.5 million tonnes, with the spring wheat portion at 20 million.
  • Turkey’s attaché lowered the forecast of the wheat crop to 18 million tonnes from 19.5 million previously.

FBN’s Take On What It Means: Hot and dry weather continue to be a concern in several areas of eastern Europe into Asia, especially now for spring wheat. Russian spring wheat production estimates could be lowered in the coming weeks, which would continue to be supportive of world prices. 

 

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