While global wheat production remains at a record level, the USDA reduced production, consumption and trade worldwide in the 2022/23 marketing year in the latest rendition of its World Agricultural Supply and Demand Estimates, released on October 12.
Total wheat supply across the globe was lowered by 1.9 million metric tonne month-on-month to 1,057.71MMT after the USDA slightly increased this season’s opening stocks but decreased global production by 2.22MMT to 781.7MMT. Both the Russian and Australian production numbers were left unchanged.
Production in the United States was reduced significantly from 48.52MMT in the September report to 44.90MMT this month on the back of a decrease in both harvested area and yield. US imports (mainly from Canada) were increased slightly to compensate for the lower supply. Exports were also decreased from 22.45MMT to 21.09MMT, which would be the lowest since 1971/72.
Severe drought continues to downgrade the Argentinian crop, with the USDA dropping production by 1.5MMT to 17.5MMT. However, local estimates are lower again, with the Rosario Grains Exchange decreasing production to 16MMT last week and the Buenos Aires Grain Exchange reporting a further decrease in crop condition and soil moisture but leaving its estimate unchanged at 16.5MMT. The USDA decreased exports by 1MMT to 12MMT. There is no talk of export restrictions just yet, but the government did meet with millers and exporters last week.
Wheat production in the European Union was raised by 2.65MMT to 134.75MMT, primarily on higher government output estimates from Germany and Poland. Domestic consumption in the EU was increased by 0.75MMT to 108.75MMT, and exports were increased by 1.5MMT to 35MMT. The Ukraine crop remains unchanged at 20.5MMT, but it is challenging to get an accurate picture as the war continues to disrupt farming activities.
The Brazilian wheat crop has been spared the woes of its southern neighbour, with the USDA adding 0.5MMT to output to land on 9.2MMT. But this is still well below some local estimates that have the crop as high as 11MMT as the harvest ramps up in the country’s centre.
The USDA’s Chinese wheat production number was the same as the September estimate at 138MMT, despite the extremely dry conditions in some regions in recent months, and Indian production is unchanged at 103MMT, regardless of much lower estimates emanating from India itself. The unchanged theme continued for Canada at 35MMT, its third biggest on record, and wheat output in Kazakhstan was pegged at 13MMT, the same as last month.
The two biggest surprises were the static Russian and Australian production estimates compared to last month. The USDA has the Russian crop at a record 91MMT, but leading Russian consultancy Sovecon is now saying it could breach the historic 100MMT threshold. Grain is reportedly piling up across the country as the war with Ukraine stymies export volumes via the Black Sea. There is now talk of Russia abolishing its grain export quota.
The Australian wheat crop has been pencilled in for 33MMT by the USDA, but in reality, it is probably 20 per cent higher today. Sure, some paddocks didn’t get planted in New South Wales because it was too wet. And crop hygiene has been severely hampered by the wet winter and early spring in many regions, reducing production. But the planted area is still relatively big, and the marginal areas of the state are in for a bonanza.
The crop in Western Australia is huge and could challenge last year’s record. Likewise, in South Australia, with a record crop on the cards. Reports from the Eyre Peninsula suggest it will certainly be one for the history books in that part of the state. Planting and growing conditions in Victoria have been much better than last year, and the same goes for Queensland, especially in Central Queensland, where a big reduction in the chickpea area went straight to wheat. However, export capacity constraints will likely stifle Australian exports, leading to higher ending stocks. That said, a repeat of this year’s pace, on track for 28MMT, would be 3MMT higher than the USDA’s October export estimate.
The global coarse grain production estimate in October is down 3.82MMT compared to last month at 1,459.8MMT. Total supply is down 8.38MMT after the USDA revised opening stocks down by 4.56MMT and global consumption was decreased by 5.7MMT to 1,466.91MMT on the assumption that demand will have to be rationed.
With global opening stocks 5.13MMT lower month-on-month and international production down by 3.84MMT to 1,168.74MMT, global corn supply took close to a 9MT hit in October. The USDA revised domestic consumption across the globe down by only 5.63MMT, and trade was relatively unchanged, culminating in relatively tight closing stocks of 301.19MMT, down 3.34MMT compared to last month’s estimate.
US output was decreased by 1.24MMT due to a reduction in yield to 171.9 bushels per acre (10.8 metric tonne per hectare). Total US supply is 5MMT lower when coupled with a 3.75MMT decrease in opening stocks. With consumption unchanged, exports were decreased by 3.18MMT accordingly.
The other significant change to the corn balance sheet was in the EU, where total supply was decreased by 2.3MMT after opening stocks were increased by 03.MMT and production fell by 2.6MMT to 56.2MMT. France in the west and Bulgaria, Hungary and Romania in the east were the poor production culprits.
Worldwide barley production is forecast to increase from 147.72MMT in September to 149.02MMT in October, thanks primarily to a 1MMT increase in EU output to 51.1MMT. Australian production was untouched at 12.2MMT, maybe 2MMT shy of local estimates. The Azerbaijan crop was upgraded by 0.15MMT to 1.1MMt, and the Argentinian crop was cut by 0.2MMT to 5.1MMT due to the La Niña induced drought.
On the whole, last week’s report was relatively benign for wheat and coarse grains. There appears to be some fat in the Indian wheat number that will require trimming down the track. It is tough to ascertain the impact of the dry in China, suffice to say, it will be much worse than the regime allows the western world to see. To the upside are the Russian and Australian numbers that will more than compensate for losses elsewhere.
Corn has the biggest challenges with the European production issues, slow Ukraine exports and more downside to US production if the dry continues. But the biggest challenge facing the US and global corn supply at the moment is the Mississippi River. Navigation is at horse and cart pace in some places, severely restricting US export potential. Logistics competition among commodities is growing, with beans winning out at the moment. All this places increased pressure on South American production, Brazil in particular, which is pencilled in for record output in 2022/23.
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