Released late last week, the January World Agricultural Supply and Demand Estimates (WASDE) report tends to be quite significant, given that it's usually the final numbers in terms of yields, harvested area and production for the crop year in the US.
However, the case is not closed on 2019 US production just yet as the United States Department of Agriculture (USDA) acknowledged it would resurvey producers in Michigan, Minnesota, North Dakota, South Dakota and Wisconsin for corn production and Michigan, North Dakota and Wisconsin when it comes to soybean production.
Heading into last Friday's release, much of the market chatter suggested that the report would be bullish, based on the expectation of lower summer crop yields. But the opposite happened, with the USDA raising the national yield for both corn and soybeans.
US corn production was forecast at 347.7 million tonnes with an average national yield of 10.55 tonnes per hectare (t/ha), slightly higher than last month's yield estimate of 10.48t/ha.
Globally, corn production in South America was left unchanged by the USDA with Brazil and Argentina forecast to produce 101 million tonnes and 50 million tonnes respectively. These numbers seem to belie the dry conditions being experienced in many parts of Brazil and Argentina this summer.
The only production increase amongst the major exporters was Russia, which the USDA increased by 0.5 million tonnes to 14.5 million tonnes.
The washup of all the changes was an increase in global output by a little more than 2 million tonnes to 850 million tonnes, excluding China and 1,111 million tonnes including China. However, the bullish part of the corn equation comes in the demand number, increased by more than 6 million tonnes globally compared to the December report.
The US accounted for just under 6 million tonnes, with a 1 million tonne increase in China countered by a 0.5 million tonnes decrease in Ukraine and several other minor downward revisions.
The USDA pegged final 2019 US soybean production at 90.4 million tonnes, on an average yield of 3.19t/ha compared to 90.2 million tonnes and an average yield of 3.15t/ha in the December report.
This was a surprise to most analysts, who expected to see the impact of the extremely challenging season continue to ripple through the country's soybean supplies. Nonetheless, this is still 20 per cent lower than the previous season's production of 112.5 million tonnes.
Like corn, the South American soybean production numbers remain steady, with Brazil estimated to produce 123 million tonnes this summer and Argentina expected to harvest 53 million tonnes. Brazil's National Supply Company (Conab) released estimates last week that seem to ignore drought worries and support the USDA number. They are forecasting soybean production at 122.2 million tonnes off 36.8 million hectares.
Eventually, soybean losses will happen if it remains dry, but most agronomists believe the current lack of moisture only affects the first corn crop at this point in the season. The state raising the biggest concern is Rio Grande do Sul, the top summer corn producer in the country. Conab maintained its estimate for first crop corn production at 26.6 million tonnes, down 3.8pc compared with 2019, based on a 1.1pc increase in the seeded area.
When it comes to wheat, global production for the 2019/20 marketing year was reduced by a meagre 1 million tonnes to 764.4 million tonnes. Half of that decrease was in Australia, where the USDA decreased production by 0.5 million tonnes to 15.6 million tonnes. While this is getting closer to reality, it is still at least 1 million tonne higher than the majority of domestic estimates.
Argentine production remained at 19 million tonnes against the latest Buenos Aires Grain Exchange (BAGE) estimate of 18.8 million tonnes. BAGE increased their estimate by 0.3 million tonnes last week on the back of better than expected yields in the late-harvested regions.
The balance of the global production decrease was in Europe, with the Russian crop decreased by 1 million tonnes to 73.5 million tonnes and the European Union (EU) crop increased by 0.5 million tonnes to 154 million tonnes.
On the wheat export front, global trade for the 2019/20 marketing year was increased by 1.3 million tonnes to 181.1 million tonnes. The US, Argentine and Canadian numbers were all unchanged compared to the December report. The major tweaking was in Europe, where the Ukrainian and EU export numbers were increased by 0.5 million tonnes and 2 million tonnes respectively, and the Russian forecast was decreased by 1 million tonnes on the back of lower supplies.
The USDA adjustment to the Australian wheat export number was hardly worth the token effort, with a mere 0.2 million tonnes shaved off expectations. Like the production forecast, the figure of 8.2 million tonnes is at least 1 million tonne higher than most domestic expectations, and it simply should not be possible given domestic demand and the poor harvests receivals in Western Australia and South Australia.
Looking at the US new crop, the USDA reckons their farmers have planted 12.47 million hectares of winter wheat. This compares to 12.61 million hectares last year and is the smallest winter wheat area since 1909.
On the barley side of the equation, global production was decreased by 0.7 million tonnes to 156 million tonnes, up more than 12pc, or 17.4 million tonnes compared to the 2018/19 season. Australia was down 0.2 million tonnes to 8.2 million tonnes, EU up 0.5 million tonnes to 62.75 million tonnes and several minor producers collectively down by 1 million tonne.
The net change to global demand was minor at 0.1 million tonne, but the USDA did make some quite hefty regional adjustments to arrive at total demand of almost 153 million tonnes. The big one was a 0.9 million tonne decrease in Chinese demand, potentially decreasing Australian exports over the coming months.
Countering that were demand increases of 0.4 million tonnes in the European Union and 0.6 million tonnes in Turkey. Most importantly, Saudi Arabian demand was untouched at 8.5 million tonnes, a year-on-year increase of 20pc or 1.5 million tonnes. All this leaves 2019/20 global ending stocks at just under 21 million tonnes, down 1 million tonne on last season's number.
It could be said that last week's WASDE report was mildly bullish for wheat, barley and corn, but on the whole, it was quite underwhelming for a report that invariably has huge trade and market ramifications.
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