As expected last night’s USDA report confirmed the smallest sown winter wheat crop in the USA since 1909.  A winter storm is also pushing through the US Midwest. Although not likely to have a major impact on grain production is will hamper logistics in some locations.

The USDA Wade report:  Let’s start with world wheat for 2019-20. Global production is lower to 764.39mt, yes that is still a big crop. There was a reduction of 1.42mt to the carry over total which now stands at 288.08mt. The worst news is that supply is still expected to be greater than demand by roughly 10mt. The stocks to use ratio will remain close to 38% which is not inducive to a massive rally in wheat values in the midterm. To see a major rally we need to see the stocks to use number well under 30%, ideally under 25%.
So drilling down into the report for wheat we see adjustments to production in Australia 15.6mt from 16.1mt. The EU is pegged at 154mt, that’s up 500kt countering the Aussie reduction. Russia is back 1mt to 73.5mt. Any other adjustments in production are minor, as you might expect to see in January as just the southern hemisphere is finishing up.
There were small increases to world demand, a total increase of just 610kt, 250kt of that in the USA and then mainly from the Middle East and Asian buyers. Australian domestic consumption was left unchanged, I guess the lack of a sorghum crop isn’t factored into that yet. Australian exports were also reduced 200kt to 8.2mt. Personally I think they are way off with Australia. There’s probably 1mt less wheat produced than they think. If consumption is at the USDA level and we export 8.2mt we will end up with a carryover under 2mt.