On Wednesday, the USDA released the September WASDE report, which offered a few key updates to the global wheat crop, but we took special note of US spring wheat ending stocks.
Going into the report, the market was a bit bearish on the US front, expecting ending stocks to increase a bit in 2018/19. But globally they were expected to fall as Chinese wheat numbers become less applicable.
The other key figure: Spring Wheat Exports.
Today’s key development was the big boost in global stocks and expected production in Russia. However, the silver lining came on news that the world is likely to purchase more American spring wheat as the hunt for quality squeezes stocks of high-protein grain.
Here’s our breakdown of the numbers.
The USDA’s September WASDE report showed the market that American farmers will produce 1.88 billion bushels of total wheat in 2018. This figure is unchanged compared to the figure the USDA reported in August 2018. Going into the report, the average guesstimate for US total wheat production was 1.858 billion bushels.
Compared to the five-year average of 2.06 billion bushels, 2018/19 American total wheat production will be 9% lower.
If we look just at hard red spring wheat, the USDA’s September WASDE report showed the market that American farmers will produce 583 million bushels of in 2018. (or 15.9 MMT if you convert bushels to metric tonnes at GrainUnitConverter.com). This figure is unchanged from the figure that the USDA reported in August 2018.
Looking at the major wheat exporters, this is how 2018/19 production was adjusted in the September WASDE as follows:
- China: 128 MMT (August WASDE was 128 MMT, 2017/18 production was 129.8 MMT)
- Russia: 71 MMT (August WASDE was 68 MMT, 2017/18 production was 85 MMT)
- Ukraine: 25.5 MMT (August WASDE was 25.5 MMT, 2017/18 production was 27 MMT)
- Europe: 137.5 MMT (August WASDE was 137.5 MMT, 2017/18 production was 151.7 MMT)
- Canada: 31.5 MMT (August WASDE was 32.5 MMT, 2017/18 production was 30 MMT)
- Australia: 20 MMT (August WASDE was 22 MMT, 2017/18 production was 21.3 MMT)
- Argentina: 19.5 MMT (August WASDE was 19.5 MMT, 2017/18 production was 18 MMT)
Keep in mind that StatsCan just said that Canada will produce 21.6 MMT of spring wheat in 2018/19.
From a demand perspective, we can look to ending stocks to get an idea of where we sit.
The USDA estimated that U.S. 2018/19 total wheat ending stocks will be 935 million bushels, an increase of 2% year-over-year. For American total wheat, average trade expectations before the report via Reuters was for 941 million bushels, so this estimate could be viewed as a bit bullish.
The USDA also said that hard red spring wheat stocks would decrease from its estimate of 262 million bushels in August to 252 million bushels. Domestic stock estimates have now declined by 31 million bushels since July.
From a global carryout perspective, 2017/18 total wheat stocks were revised by the USDA to 274.36 MMT. That figure is about 2.7 MMT higher than the average projection of 272.7 MMT held by analysts before the report. It’s also 1.3 MMT higher than the August 2017/18 global wheat stocks estimate of 273.1 MMT.
Thinking into the new crop, year, the agency says that 2018/19 global ending stocks will come in at 261.29 MMT. Compared to the 2017/18 number mentioned above, this is a bearish jump of 0.8% year-over-year. Going into the report, the market was expecting 257.2 MMT, and August’s number was 259 MMT.
Naturally, there is a lot to discuss this weekend as we continue building our weekly digest. We’ll dig deeper into a variety of factors that require greater analysis after this report.
- Russia’s 3 MMT increase in wheat output for the 2018/19 calendar and whether this will quell rumors about export restrictions.
- Key drivers behind decreasing U.S. spring wheat inventories.
- Whether Canadian farmers can anticipate additional cuts to wheat production estimates.