Wheat prices fall despite a downgrade in the USDA's global production forecast

In the December supply and demand balance sheet, USDA experts lowered their forecasts for wheat production, consumption and stocks, but prices continued to fall amid general pessimism in commodity markets.

In comparison with the November estimates, the new wheat balance for 2022/23 MR underwent the following changes:

• The global production forecast was reduced by 2.1 million tons to 780.6 million tons (779.3 million tons in 2021/22 FY and 775.72 million tons in 2020/21 FY), in particular for Argentina – by 3 million tons to the lowest from 2015/16 MR level – 12.5 (22.5) million tons (although local agencies estimate it at 12.4 million tons BAGE and 11.8 million tons RGA), Canada – by 1.2 million tons to 33, 8 (22.3) million tons, but increased for Australia by 2.1 million tons to a record 36.6 (36.35) million tons. For the Russian Federation, the harvest forecast was left at the level of 91 million tons, despite the estimate of local authorities at 100 million tons For Ukraine, the production estimate was also not changed, although the consumption forecast was reduced, and the export forecast was increased.
• The estimate of world consumption was reduced by 1.6 million tons to 789.5 million tons (793.4 million tons in 2021/22 FY and 782.22 million tons in 2020/21 FY), in particular for the EU and Ukraine by 1 million tons and of Canada by 0.55 million tons due to a decrease in the use of wheat for feed.
• The global export forecast has been increased by 2.2 million tons to 210.9 million tons (202.8 million tons in FY 2021/22), in particular for Australia – by 1.5 million tons to 27.5 (27.5) million tons , Ukraine - by 1.5 million tons to 12.5 (15.3) million tons, the EU - by 1 million tons to 36 (31.9) million tons, the Russian Federation - by 1 million tons to 43 (33) million tons , while in Argentina it was reduced by 2.5 million tons to 7.5 (16.25) million tons. For the USA and Kazakhstan, the estimates were left unchanged. In Australia, as a result of heavy rains, the share of fodder wheat will increase, which will increase competition in Asian markets.
• The estimate of world imports was increased by 1.7 million tons to 204.3 million tons (198.3 million tons in 2021/22 MR and 195.3 million tons in 2020/21 MR), in particular for the EU - by 1 million tons to 7 (4.6) million tons thanks to the intensification of supplies from Ukraine through the western borders. In addition, the countries of Southeast Asia will increase purchases of cheap Australian wheat by 0.9 million tons.
• The forecast of world ending reserves was reduced by 0.5 million tons to 267.33 million tons (276.27 million tons in 2021/22MR and 291.6 million tons in 2020/21MR), in particular for Canada, Argentina, Ukraine and the Russian Federation, which will be offset by their increase in the EU and Australia.

During the month, wheat prices on the world exchanges fell by 5-11% under the pressure of reduced demand due to the recession of the economy, and on Friday, after the release of the report, they fell:

• by 1.7% or $4.41/t to $269.8/t - March futures for soft winter SRW-wheat in Chicago (-9.8% in one month and -20.2% in two months),
• by 1.4% or $4.32/t to $306.1/t - March HRW hard winter wheat futures in Kansas City (-11.6% and -16.5%),
• by 0.9% or $2.94/t to $331.2/t - March futures for HRS durum wheat in Minneapolis (-4% and -7.3%),
• by 1.7% or €5.25/t to €302.75/t or $318.8/t - March wheat futures on Paris Euronext (-8.5% and -16%).

At the same time, January futures for Black Sea wheat in Chicago remained at $315/t (-0.6% for the month and -3.9% for two months).