Ample supplies fuel export competition

Ample supplies fuel export competition

Cropping
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The big picture remains one of ample global wheat supplies and competition between exporters to clear their stocks.

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The November United States Department of Agriculture Report saw United States wheat production estimates lowered because of significant unharvested acres of spring wheat in North Dakota and Montana. US wheat production was lowered by 1.13 million tonnes as a result.

At the same time, US consumption was also lowered because of lower seed use as, once again, planted area in the US contracts, to a new low for the past 110 years. The net result is that US closing wheat stocks declined by 810,000 tonnes.

While this might have been supportive of US wheat futures at the domestic level, it was overtaken by changes to the global supply and demand balance sheet.

Here we see the USDA adding to global production estimates by more than any lift in consumption, leading to larger global ending stocks. Basically, the big picture remains one of ample global wheat supplies and competition between exporters to clear their stocks.

Excluding China, global production estimates were raised by 320,000t, with consumption up 60,000t. When allowing for a change in opening stock estimates (up 210,000t), global ending stocks were raised by 470,000t compared to the October estimates.

MARKET UPDATE: The weekly movements in wheat prices. Source: Malcolm Bartholomaeus.

MARKET UPDATE: The weekly movements in wheat prices. Source: Malcolm Bartholomaeus.

The lift in the global crop came from production upgrades for the EU, Russia and Ukraine, with estimates all raised on the back of the latest harvest data available. EU output was lifted by 1mt, Russian output by 1.5mt and the Ukrainian estimate by 300,000t.

The USDA lowered the Australian crop from 18mt to 17.2mt, and the Argentine crop from 20.5mt to 20mt. Even with the 1.13mt drop in the US crop, the gains elsewhere were enough to see the size of the global crop upgraded.

Interestingly the Canadian crop was left unchanged at 33mt. With downgrades for the northern US crop, one might have expected to see some drop in Canadian output given that they also have had a lot of trouble getting their crop off after the early start to winter.

We may still see further downgrades for Canada, Australia and Argentina in post-harvest USDA Reports.

While wheat supplies seem plentiful for the 2019/20 year, with strong competition between the EU, US and Russia for export share, there is uncertainty building about the 2020 crop.

The acreage expected to be planted in the US is down again, and in western and northern Europe cold and wet weather is slowing the planting of their new winter crops. While the planting window will be open for some time, current progress has been slowed significantly, particularly in the UK.

Warmer weather in Ukraine and Russia may boost early crop growth, but Ukraine plantings have also been impacted by overly dry conditions.

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