The USDA put out their September World Ag Supply and Demand Estimates report last night. I’ll have a quick look at wheat and see if the market move lower is justified from this data.
The first thing we see is an increase in world production of 3.13mt, and an increase in world carry out of 3.04mt. The USDA also increased world carry in stocks by 380kt. Domestic consumption was increased 480kt, largely negating the increase in carry in. Exports were reduced by 980kt.
Drilling down into the data we see that the increase in production was from the major exporters, up 4.2mt. Argentine production was increased 500kt to 21.5mt, Aussie production was increased 3mt to 31mt and Canadian production was increased 1mt to 36mt.
There are two countries there I’m not convinced are correct, Australia and Canada. The latest weather in Canada would be peeling test weight of unharvested wheat. To suffer a 10% reduction in test weight isn’t hard, 82kg to 74kg isn’t that unusual. Spread that over 25% of a crop and you have a 1mt fall in production not a 1mt increase. Time will tell. The Aussie crop has a long way to go. The outlook for the NNSW and QLD crop is poor. September is shaping up to be warm and dry, the exact opposite of what was needed. Will SNSW compensate, I have my doubts the acres are there.
One piece of data I do agree with is the 3mt reduction in Russian exports. They countered this a little by reducing production by 500kt, but the net result is still a 2.5mt increase in Russian carry out. Ukraine carry out was also increased by 1.3mt , their exports were reduced 1mt but their production was increased 600kt. The important take home message for the Black Sea is that Russian & Ukraine ending stocks are now projected at 22.19mt, 8% of total world ending stocks. The US will hold roughly 7% of world ending stocks. China still hold 43.5% of world wheat ending stocks.
N.African ending stocks were reduced by 1.31mt. The lack of Black Sea grain decreasing imports to that region by about 1.55mt.
These are the big numbers, as stated yesterday, if Canada, Australia or Argentina see production issues then the game can change quickly.