Prices rise on USDA crop and market forecasts

Wheat, corn and soya bean prices have risen sharply after the US Department of Agriculture released global crop reports and estimates for 2020-21.

The World Agriculture Supply and Demand Estimates (Wasde) report was released late on Tuesday 12 January.

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Wheat

It suggested the global market for wheat faced lower end stocks, smaller supplies and increased consumption for 2020/21, offsetting any increase in production in Russia.

Opening UK wheat futures markets for May 21 contracts initially hit £210/t after the announcement, before easing back slightly to £208.75/t.

The market was reacting to detail in the Wasde report that stated US wheat end-of-season stocks would be down 19% on year-earlier figures – to just 22.8m tonnes.

Farmgate prices reacted to the report on Wednesday 13 January, with spot feed wheat averaging £203.8/t. This was up about £2.50 on a week earlier, with the general upward trend having also helped.   

Midweek, trade talk of Russia possibly imposing further or higher export taxes added to the upward pressure.

Lower revised wheat production estimates for China at 134.3m tonnes – down 1.8m tonnes – and Argentina at 17.5m t – the lowest for five years – added to upward price pressure.

The falls outweighed a rise in Russian production of 1.6m tonnes to a record harvest of 85m tonnes. Meanwhile, world consumption in 2020-21 is put at 759.5m tonnes – up 1.8m tonnes.

This estimate has been pushed upwards by higher feed and residual use in China and the US, and greater food, seed, and industrial use by Russia, the report said.

Maize (corn)

The US production figure has been revised down by 8.2m tonnes to 360m tonnes  – a result of both reduced yields and a small reduction in harvested area.

The figure for end-of-season stocks has also been cut by 10%, to 39.4m tonnes, despite large cuts to ethanol consumption. This is the lowest level since 2013-14.

Markets reacted strongly, with Chicago maize futures jumping by 4% to $203.5/t (£148.67/t) – up $16.54/t (£12.03/t) over a 24-hour period. The latest price represented a seven-year high.

Outside the US, the Wasde report suggested Brazilian maize production was down by just 1m tonnes to 109m tonnes and, in Argentina, down 1.5m tonnes to 47.5m tonnes compared with the previous month’s estimate.

These remain relatively high production statistics, given that many analysts had raised concerns about a long period of hot, dry weather in South America which has hampered early crop development.   

However, AHDB Cereals and Oilseeds highlighted a smaller forecast tonnage issued by the Buenos Aires Grain exchange of 47m tonnes for Argentina.

Brazilian market agency Conab also released a far more conservative estimate of the nation’s maize crop at 102.6m tonnes – almost 7m tonnes lower than the Wasde figure.

Soya beans

Soya bean production in the US is estimated at 112.6m tonnes – down by 0.95m tonnes compared with the earlier estimate. With lower supplies and increased use, US ending stocks are projected at 3.8m tonnes – a drop of 0.9m tonnes on last month’s USDA forecast.

Although the revised harvest estimate was relatively small, Reuters suggested the downward crop revision had raised fears of shortages in 2021 amid rocketing global demand.

Stock market trader Globex suggested demand had risen by 42% year on year during the first quarter. Demand had already accounted for 37.5% of the full year’s supply of the crop, it said.

The intensifying concern in the markets pushed up soya bean futures, with other oilseeds markets dragged along. 

Ex-farm spot oilseed rape values moved up by about £4/t over the week to Wednesday (13 January) to average £380/t. 

Beyond the US, global soya bean stocks are projected down 1.3m tonnes to 84.3m tonnes.

Much of this is accounted for by reduced production estimates for Argentina (down 2m tonnes to 48m tonnes) because of dry weather.

Estimates for the other major producers in South America, Brazil and Paraguay, remained steady.

However, with the crop at a key stage of flowering in South America, the situation could change according to the weather.