Forecasted US wheat and corn stocks were raised in the USDA’s latest report, while domestic consumption and export projections for both were trimmed.
With no fresh news from the US/China trade talks and lacklustre demand for US wheat, traders were not surprised by this news in this week’s World Agricultural Supply and Demand Estimates report, and further cuts in future reports cannot be ruled out.
David Sheppard, joint managing director of ADM Agriculture, commented: “Spring crop sowings in the US have commenced. Poor weather could delay or even stall progress in certain areas, but the forecast did little to dampen the winter wheat market as ratings improved on the week.”
Meanwhile, European wheat prices remain mixed with old crop little changed on the week and new crop slightly lower. “Firm cash premiums, linked to another decent shipping line-up, continue to underpin the old-crop market,” said Shepherd.
“New crop levels have eased, mainly on the French agriculture ministry’s upward revision of the 2019 soft wheat area. These are forecast at just over 5M-ha, an increase of 2.8% on the year.”
UK prices are also little changed. “There is little selling off farm and consumer buying has recently slowed,” said Shepherd. “More competitive maize imports, now seen at 2 Mt for the season-to-date, continue to undermine wheat usage.
“The Brexit extension will allow both the export and import of grain at zero tariff to continue until at least the new deadline.
“Given the reported build-up in global stocks and expected rebound in global 2019 wheat production, plus the £25-30/t spot-to-harvest price discount, current ex-farm prices look attractive.”
The bearish USDA report should slow any substantial rise in prices. However, Shepherd cautioned: “The predicted 10 Mt combined gain in global wheat and corn stocks, while providing extra assurance against new crop weather issues, still shows a fall year-on-year.”
In the case of maize, Shepherd said that the global stock-to-use ratio would be at a historically low level, especially after discounting the two-thirds of global supplies held within China. “This will keep weather firmly in the spotlight, with US planting delays and dryness concerns in the EU and Black sea worthy of note,” he concluded.