Carlos Mera

Key May USDA report reveals lower global grain stockpiles for 2024/25 marketing year

The US Department of Agriculture (USDA) released earlier in May its first global supply and demand estimates for the new marketing year. This report holds significance for the grain and oilseed market, and this year predicts stockpiles globally and for most major exporter countries to decline over the course of the 2024/25 season.

Rabobank Head of Agri Commodities Markets Carlos Mera said supply figures surprised to the downside in wheat and corn, with 2024/25 global ending supplies for wheat now seen at a nine-year low.

“The global grain market was in buyback mode leading up to this report, with Chicago Board of Trade (CBOT) Wheat already up a (US) dollar and Corn up US 50 cents off minor supply cuts in low cost suppliers,” Mr Mera said. “However, additional price gains following the report release could not be sustained and prices for wheat and corn are almost back to the levels seen around release date.”

The London based analyst said with ‘highfalutin gluten’ grabbing headlines, it is important to distinguish what’s happening here: grain exporter supplies aren’t remotely “tight,” let alone approaching “scarcity.”

“In the US, farmers have voluntarily cut acres due to low prices, and 2024/25 stockpiles of wheat, corn and soy are all still expected to rise to multi-year highs,” he said.

“Meanwhile, global 2024/25 soybean carry-out is seen rising 15 per cent (following a 12 per cent increase in 2023/24), removing a key alternative planting option for grains.”

Mr Mera said over the past few months, US and Brazilian grain acreage cuts helped stabilise falling prices. “Subsequent weather, war and disease-related area cuts in Russia, Ukraine and Argentina drove a short squeeze and CBOT prices above their recent ranges.

“Current prices reflect the removal of cheap grain from the market and a shift in trade towards traditional (and higher priced) exporters. US farmers will not need to discount their wares as heavily, or at all, as they regain market share across G&O products,” he said.

For wheat, Mr Mera said the USDA forecasts 2024/25 US production at 50.6mmt, which is three per cent higher than last year due to higher harvested acreage and yields. “In our view US yield potential could be even higher given current crop conditions, and some crop tours in the US Hard Red Winter wheat areas seem to confirm this.”

In a similar vein, Mr Mera said US ending stocks came in higher year-on-year (YOY), up 11 per cent to 20.9mmt (a four- year high), but below average trade estimates.

“Unsurprisingly, US exports are also expected to pick up YOY by well over 10 per cent to 21mmt following the worst export campaign in 52 years. The strong US dollar along with Black-Sea exports will likely continue to be a headwind to the US wheat exports going forward.

“In contrast to swelling US stocks, global wheat ending stocks are expected to decline 4.2mmt YOY to 254mmt in 2024/25. This global deficit follows a 2023/24 deficit of 12.6mmt, which is concentrated in a decline in formerly excessive stocks in Russia (- 2.7mmt) and a decline in China (-6.3mmt).”

Mr Mera said the USDA forecasts global 2024/25 wheat output at 798mmt (+10.5m tonnes YOY), but despite a significant drop in global feed (-8.3mmt), other domestic uses are predicted high enough to still drive a small overall global wheat deficit.

“Noteworthy increases in wheat production forecast for China, India, Kazakhstan, Australia and Canada more than offset production losses, which are mainly in Europe.

“Russian production was reduced 3.5mmt YOY to 88mmt, which wasn’t a surprise given the pronounced dryness in the southern region which recently seems to have improved.”

“The USDA’s Australian production forecast of 29mmt – is 5-10 per cent too high in RaboResearch’s view – given dry weather in the west and south. Meanwhile, EU production was cut just 2.2mmt YOY to 132mmt, but given that the forecast continues to show more heavy rainfall for Central and Northern Europe, future downward revisions are possible,” Mr Mera said.

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