Wheat prices did not react to the decline in production and stocks forecast in the USDA report

In the September balance sheet, as in the previous two reports, USDA experts lowered their forecasts for wheat production, consumption and stocks to levels below last year, but wheat prices remain lower than the previous season.

Compared to the August estimates, the new wheat balance for the 2023/24 MR has undergone the following changes:

• The estimate of initial reserves was reduced by 1.18 to 267.13 mln t (272.6 mln t in FY 2022/23) due to data adjustments for FY 2022/23.
• The global production forecast was reduced (for the first time since 2018/19 FY) by 6.03 million tons immediately to 787.34 million tons (790.59 million tons in 2022/23 FY, 781.3 million tons in 2021/22 FY and 775.72 million t in 2020/21 MR), in particular for Australia due to dry weather - by 3 to 26 (39.69) million tons, Canada - by 2 to 31 (34.34) million tons (although the Canadian Bureau of Statistics estimates the harvest at 29, 5 million tons), the EU – by 1 to 134 (134.19) million tons, Argentina – by 1 to 16.5 (12.55) million tons, and Great Britain – by 0.75 to 14.75 million tons. For Ukraine the harvest estimate was increased by 1.5 to 22.5 (21.5) million tons, but more than 60% of wheat will be of fodder quality, so the export of food wheat this year will be low.
• The estimate of world consumption has been reduced by 0.21 to 795.86 million tonnes (796.12 million tonnes in FY 2022/23 and 782.22 million tonnes in FY 2021/22), but consumption will exceed production for the second season in a row.
• The global export forecast was reduced by 2.06 to 207.34 million tons (219.9 million tons in 2022/23 FY and 202.98 million tons in 2021/22 FY), in particular for Australia – by 2.5 to 19 (32 .5) million tons, Canada – by 1.5 to 23 (25.75) million tons, the EU – by 1 to 37.5 (35.07) million tons, and Argentina – by 0.5 to 11.5 (4 .5) million tons, while the estimate for the Russian Federation was increased by 1 to a record 49 (46) million tons, Kazakhstan - by 1 to 10.5 (10) million tons, and Ukraine - by 0.5 to 11 (17.12 ) million tons
• The global import forecast was reduced by 1.77 to 205.62 (209.54 and 199.37) million tons, in particular for China – by 1 million tons.
• The estimate of global ending stocks was reduced by 7 million tons to the lowest level since 2015/16 MR of 257.61 (267.13) million tons, in particular for the EU and the Russian Federation, although analysts estimated reserves at 264.44 million tons.

According to the report, December futures rose in price yesterday:

• by 0.5% to $215.9/t - for soft winter SRW-wheat in Chicago (-6.7% compared to the data after the August report and -51% for the year),
• by 1% to $268.5/t - for hard winter HRW wheat in Kansas City (-3.4% and -26%),
• by 1.6% to $286.2/t - for hard spring HRS-wheat in Minneapolis (-4.6% and -17%).

At the same time, December wheat futures on the Paris Euronext fell by 1% to €232/t or $258.9/t (-1.9% and -36%).

A further reduction in wheat production in the main exporting countries will increase the world market's dependence on Russian wheat, which the Russian authorities understand. Therefore, we can soon expect an artificial restriction of exports from the Russian Federation in order to increase world prices, as was the case with natural gas in 2022.