The US Department of Agriculture released their World Agricultural Supply and Demand Estimates overnight. Here we take a look at the impact on wheat, and report on new import barriers being erected in India.
The WASDE report shows no major changes occurring. Unsurprisingly, the Russian crop was further increased by 1mmt, to a record wheat harvest of 83mmt. All in all, without beating around the bush, we are still in a world with a glut of wheat. There are arguments that a large proportion of this stock is in China and not available to the export market, however the reality is that global prices are likely to stay depressed for some time.
The USDA have a relatively poor performance when it comes to forecasting Australia, and we tend to believe that the WASDE is usually around 2 months out of sync with reality.
The items which stand out for future revision for me are:
- Beginning stocks: These are likely too high, and after such a strong export program this is likely to be revised back close to 5-5.5mmt.
- Production: USDA remain on the high end of the spectrum when it comes to Australian forecasts. A final production figure closer to 7mmt is more likely.
- Exports: An export program of 17.5mmt is extremely ambitious for the coming year, and when production and beginning stocks are brought back to reality will be a hard task to complete.
- Domestic consumption: The domestic consumption figure is sitting on the previous ten-year average, however this year there are a record number of cattle on feed.
So how did the WASDE report impact the markets? The answer is unfortunately for growers is minimally (figure 2). There was little in the way of sur...
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