This month has seen the United States Department of Agriculture (USDA) have its first crack at world grain and oilseed supply and demand estimates for 2023/24, and it has been a mixed bag.

While the outlook for wheat was bullish for prices, Rabobank agricultural analyst Dennis Voznesenski said, corn and soy were both bearish.

Mr Voznesenski said wheat market bullishness is being propelled by a decline in production across Russia and Ukraine. “And also expectations of lower production coming out of Australia. There may also be more to come to fuel bullish wheat price sentiment, considering the USDA’s May WASDE report assumes both a record wheat harvest in Canada – which is seeing dry conditions – and a rebound in Argentina’s production to the five-year average, despite no material improvement in the weather there so far,” he said.

For wheat, Mr Voznesenski said the USDA estimates saw particularly dramatic cuts to both Russian and Australian production – down 10.5 million metric tonnes and 10 million metric tonnes year on year respectively – amid a switch to an El Nino weather pattern.

“Ukrainian production was slashed by 4.4 million tonnes year on year (21 per cent), while planted area is estimated to be down by 19 per cent and exports five million metric tonnes (33 per cent) lower. Forecast 2023/24 wheat production for the US is for a decline of 0.3 million metric tonnes on last season,” he said.
Rabobank’s outlook for wheat prices is currently ‘slightly bullish’ due to global production being lower year on year in these key exporting countries, and with further cuts potentially on the horizon.

“While production is expected to be down in major wheat-exporting nations, overall, from a global perspective, the USDA forecasts world wheat production up 1.5 million metric tonnes year on year to 789.8 million metric tonnes,” Mr Voznesenski said.

The Rabobank analyst said notable increases include Argentina, up seven million metric tonnes year on year, with the expectation the country will recover from the 2022/23 drought. “However drought is still ongoing there and, in our view, the USDA’s decision to place its estimation in line with the five-year average may prove overly optimistic.

“The USDA also estimated increases for Canada’s wheat production (up 3.2 million tonnes year on year), which again may be optimistic given the continued dry weather in that country. EU wheat was estimated to be up 4.7 million tonnes.”

Mr Voznesenski said global ending stocks for wheat are forecast to decline 1.9 million metric tonnes, which, as the USDA notes, would be the lowest stocks-to-use ratio since 2014/15.

“Global wheat consumption has also been trimmed – three million metric tonnes down on last year to 791.7 million metric tonnes, as larger feed grain supplies make wheat less competitive.

“Soy and corn prices are bearish due to rising global stocks for both. This also, to a large extent, hinges on weather in north and south America playing ball,” he said.

There are expectations of a record US corn crop, Mr Voznesenski said, despite several states in that country currently being in drought. And Argentina is rebounding to a record production year.

“While the global outlook does not look overly bullish following this report, drying conditions in Australia may see local crop prices hold up comparatively well to global markets.”

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