The December USDA World Ag Supply and Demand Estimates report was out last night. The WASDE is starting to get a bit like eating Maccas. It happens about once a month and you often think it’ll be better than it really is, only to be disappointed by the, often forced consumption, and you are reminded what it’s really like after the first bite.
So I’ll start by sinking my teeth into the dry, tasteless morsel that is wheat in last night’s WASDE. World production was increased 1.03mt. Adjustments to Canada, 31 to 31.95mt, Australia 24.5 to 25.5mt and Brazil, down 1mt from 9.4m to 8.4mt. These three major adjustments are probably pretty close to the money, potentially over shooting Australian and Brazilian production but close enough for the bush.
Imports and domestic use were generally higher across the board. Chinese imports increased from 12mt to 12.5mt. This could possibly be considered a little conservative. A drop of 500kt in N.African imports did counter the move in Chinese imports, some may question if the adjustment lower in N.Africa is a result of demand deflation or a funding issue. SE Asian demand looks about right, jumping from 24.3mt to 25.2mt. There’s speculation this could end up being much higher as the Asian economy starts to recover. The same could be said for China. A 1mt increase in EU imports was interesting, could this be mainly durum from Turkey ? The key number is the ending stocks and it was back 490kt from the Nov estimate, now pegged at 258.2mt. That gives us a stocks to use ratio of 32.4%, still way too high to rally this market.
The punters pushed US wheat futures lower on the back of this WASDE. Prior to the report the average trade guess for world ending stocks was 258.8mt, that’s actually a little higher than the WASDE number. The weakness came from spillover disappointment in the corn and soybean numbers, both coming in higher than the average trade guess prior to the report. Mid term, the report is neither bullish nor bearish wheat. Enter the flat boring Dec / Jan period.