Comments on Global Wheat Situation
Russia’s wheat export prices have been falling thanks partially to weakness in Chicago wheat futures but also due to a bumper crop expected.
FOB wheat prices were quoted down $4-$12 versus a week ago.
Record yields are expected in some parts of Russia; recall that Russia’s carryover stocks are large.
Ukraine’s FOB wheat prices also slipped on the week, dropping by around $8-$11 per tonne.
Ukraine’s government sees a wheat harvest of about 30 million tonnes this year versus 25 last year.
EU wheat harvest is underway but slightly delayed in France.
In Saturday’s weekly report, we showed that US and Canada spring wheat yields are forecast to be well below last year and trend.
While conditions have been nearly ideal for winter wheat production across the Northern Hemisphere, spring wheat producers in North America are suffering from hot temps and a lack of moisture.
The US PNW white wheat crop is another crop that is suffering from heat and a drought; that balance sheet will be tight for 2021/22.
FBN’s Take On What It Means: While production problems are present for the US and Canadian spring wheat crops, other countries are set to harvest larger crops versus a year ago. White wheat and HRS producers are advised to be patient on securing additional sales of wheat. Upside is expected for both markets, but a word of caution for white wheat growers; a very high protein crop is not sought by traditional buyers; there is risk that heavy cash discounts will be forthcoming for white wheat given expectations that protein content will be higher than normal.
Trade Expectations for USDA’s Report Later Today
USDA will update its US wheat production forecasts in the production report and will update global balance sheets for other crops.
The wheat production totals and updated US balance sheets will incorporate USDA’s June Acreage report, which is a key reason the trade looks for higher winter wheat production.
Winter wheat is seen higher versus a month ago with the average estimate at 1,331 million bushels, up 22 million; HRW production is seen higher.
Other spring wheat production is seen at 459 million bushels by the trade on average, which is larger than our current outlook.
The trade looks for lower corn production for Argentina + Brazil at 140 million tonnes versus 146 million in June.
US corn production is seen at 15,115 million bushels, up from 14,990 million in June on a slightly lower yield assumption but higher acreage.
US soybean production is expected at 4,394 million bushels versus 4,405 million in June, again on acreage changes and a slight yield reduction.
US balance sheets also will incorporate June 1 stocks with old crop stocks seen lower for corn and unchanged for soybeans.
New-crop stocks are seen smaller for wheat, slightly larger for corn, and down marginally for beans versus the June forecasts.
FBN’s Take On What It Means: USDA’s updated outlooks for US corn and soybean production will not be based on survey data whereas the wheat production updates are survey based. Lower corn output from Brazil is not surprising given the dry weather and cold snaps the crop has faced. That is a plus for feed grains in general, but particularly for corn exporters. We think the trade has overshot US spring wheat production for the US, but USDA may not make such a bold forecast this early in the growing season.
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