- The headline data released today showed that global wheat supply and demand has moved, in a very short period of time, from stock building to stock reducing. Sharply reduced US stocks and a 10 million mt jump in Chinese feeding shows that, like most of us, the USDA has little, if any, idea of the reality of Chinese supply and demand data. Data for India, Pakistan and FSU all looks a touch high as well.
- Overall the report should be seen as slightly bearish based upon large new crop end stock estimates and an unchanged forecast for US corn and soybean yield. Bullishness has emanated from estimates of 2013/14 Chinese wheat import estimates, which have jumped from 5 million mt to 8.5 million mt. This, coupled with reduced carry in, left world end stocks some 9 million mt lower.
- In the shadows of the report the 2013/14 world wheat crop was reported at 697.8 million mt, which is an increase of 2 million mt and the second largest crop on record! Improved US and EU harvests were the principle drivers of the increase, with the EU up 1.2 million mt.
- US corn yield was left unchanged at 156.5 bu/acre with acreage increased to 97.4 million acres. This leaves the 2013 crop estimated at a record large 13.95 billion bu. Any increase in yield, which is possible given current weather, soil moisture and growing conditions, could see output in excess of 14.25 billion bu. Yes, it will be necessary for the weather to cooperate, but we are not looking at last years dire dry conditions thank goodness! There is full potential for corn carryout to exceed 2 billion bu, which argues a lower price than we are seeing today, which will in turn place its own pressures on wheat prices.
- Overall we do not see the report as introducing long term bullishness to the market.
To download PDF summaries of today’s report please click on the links below: