A surprisingly bullish quarterly grain stock report released by US Department of Agriculture (USDA) on Wednesday sparked a strong market rally that saw US wheat prices jump US$10/t after a fairly quiet week.
According to grain trader ADM Agriculture, much lower than expected US corn stocks set the tone for the late rally and, although wheat numbers came within the trade’s expected range, they were still deemed as supportive, mainly due to reductions seen for both 2019 and 2020 US wheat crops.
“The International Grains Council trimmed its global corn crop forecast by 6 Mt, although at 1.160 Bt, it would still be a record if realised,” said Jonathan Lane, ADM Agriculture’s head of grain trading. “The IGC left its global wheat crop forecast unchanged at763mln t, also a potential record.
“The USDA release certainly overshadowed Russia’s hike in wheat production. Russia’s agriculture ministry expects the 2020 grain harvest to top 125 Mt, including no less than 82 Mt of wheat.
“However, the ministry commented that Russia’s grain export quota mechanism remains relevant despite the large crop being harvesting this year, and that a quota could be set for January-June 2021 if there is a need to secure domestic supplies.”
Kazakhstan has also had a good harvest and ADM said it is likely to export 6.7 Mt of wheat/wheat flour in the 2020/21 season, due to a bigger and higher quality wheat crop of 11.6 Mt, up from 10.8 Mt last year.
But Argentina’s 2020/21 wheat harvest, set to start in December, is now expected at 17.5 Mt, down from 18.8 Mt last season, mainly due to dry weather affecting yields.
Meanwhile, Ukraine, hit by severe drought, plans to cut its winter wheat area to 6.1M-ha, from around 6.7M-ha a year ago, according to the country’s economy minister.
The UK wheat balance sheet received a surprise last week after the AHDB’s end-of-season update showed 2019-20 carry-out stocks almost 1 Mt lower than previously projected in May.
“Most of this was attributed to the likelihood that the 2019 crop was overstated and that the fed-on-farm figure was higher than previously envisaged,” said Lane.
“The lower carry-in almost certainly increases the volume of imports required this season; to offset it the UK would need a substantial fall in demand.
“Tighter restrictions due to the resurgence of COVID may affect domestic feed and food demand, while the level and pricing of imports will be dependent on the strength or weakness of sterling, against a backdrop of ongoing uncertainty regarding Brexit and the UK’s future trading relationship with the EU,” concluded Lane.