It’s USDA WASDE time, grab a coffee and let’s have a look at what kind of sorcery the USDA analyst have conjured up for the December report. Sticking with wheat we see world production increased by 1.28mt to a record 773.66mt. Luckily to counter this we see an increase in exports, imports and domestic consumption which on a global basis calculates to a reduction of 3.95mt to end stocks from last month’s estimate of 320.45mt, now at 316.5mt. This is good news.
Production increases were in Russia, Canada and Australia while production decreases were noted in the EU and Brazil. Ending stocks reductions were noted in the USA, this could be considered bullish, Canada, helping to offset a production increase, the EU, which is currently seeing a healthy export program and China, -2.5mt. China appear to be chewing through wheat stocks as it is more plentiful and cheaper in some locations than corn.
The USDA still suggest that China and India hold a large slice of global carry over wheat stocks. China 161.18mt, 50.9%, and India at 31.1mt or 9.82%, between them 60.75% of world wheat stocks. China’s annual consumption was increased to 134mt, +3mt. The same amount the USDA increased Chinese imports by, now at 24mt. As for India, who’s up for counting stacks of bagged wheat that has sat in a shed for 4 years, seen a few monsoons and is probably made up of as much “foreign material” as it is wheat seed.
The take home message I guess is US ending stocks are a smidge lower. Aussie exports are higher, so competition into Asia should be healthy, but this report does tend to indicate prices are low enough already as ending stocks are reducing globally. Is this a bottom ?