On Friday, the USDA released the August WASDE report, which offered a few key updates to the global winter wheat crop. Today’s report stood out thanks to a higher-than-expected forecast for global wheat supplies.
Here’s our breakdown of the numbers.
The USDA’s August WASDE report showed the market that American farmers will produce 1.88 billion bushels (51.1 MMT) of wheat in 2018. This figure is 4 million bushels lower than what the USDA reported in July 2018.
Compared to the 5-year average of 55.9 MMT, 2018/19 American all wheat production is nearly 9% lower.
For winter wheat, the USDA’s August WASDE report showed the market that American farmers will produce 1.2 billion bushels (33 MMT) of winter wheat in 2018. This is a 6% increase compared to last month’s estimate and the same as the previous year.
Compared to the five-year average of 40 MMT, 2018/19 American winter wheat production is 12% lower.
From a demand perspective, we can just look at ending stocks to get an idea of where we sit.
The USDA pegged all wheat new-crop ending stocks at 935 million bushels (25.4 MMT). This is down 15% year-over-year. In contrast, it is up 2% from the 5-year average of 920 million bushels (25 MMT) and down 2% from the USDA’s 2018/19 estimate in July of 985 million bushels (26.8 MMT).
In the aftermath of the USDA report, winter wheat prices edged lower.
The USDA pegged the new-crop winter wheat ending stocks at 642 million bushels (17 MMT) – that is down 26% year-over-year. Compared to the 5-year average of 18 MMT, 2018/19 American winter wheat ending stocks are 5% lower.
From a global carryout perspective, 2017/18 all wheat stocks are pegged at 273 MMT. That figure is the same as average trade estimate ahead of the report of 273.12 MMT.
The agency says that 2018/19 global ending stocks will come in at 259 MMT. This is 3% above the 5-year average of 237.8 MMT and 1% above the average analyst estimate of 256.42 MMT. Thus, this month’s WASDE could be considered slightly bearish for wheat.
On the global production front, the USDA has lowered 2018/19 production by 6.63 MMT or 1% month-over-month to 729 MMT. This is a drop of 5% or 28 MMT from last year’s production estimate of 758 MMT.
A few other key points from the report:
– The decrease in global wheat production is mainly driven by lower EU production. Continued drought conditions in Northern Europe, most notably Germany, resulted in lower production estimates. German wheat production is down 5% or 7.5 MMT to 137.5 MMT.
– 2018/19 EU wheat exports are expected to be the lowest in six years, down 16% or 4.5 MMT to 23 MMT. As cited above, this is mainly driven by conditions affecting the EU crop.
– Russia remains the leading world wheat exporter for the second consecutive year at 35 MMT for 2018/19, a revised increase of 3% or 1 MMT compared to last month’s estimate.