USDA raised wheat harvest forecasts for Australia and the Russian Federation to record levels

In the February report, USDA experts finally raised the wheat harvest estimates for Australia and the Russian Federation, and accordingly, the forecasts of world production and ending stocks, which the market expected to see back in December and January. The forecast for the Russian Federation remains lower than the estimates of local agencies and the country's authorities, so in March the forecast of world production and reserves may increase.

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

• The global production forecast was increased by 2.5 million tons to 783.8 million tons (781.3 million tons in FY 2021/22 and 775.72 million tons in FY 2020/21), in particular for Australia – by 1.4 to 38 (36.24) million tons, for Brazil - by 0.4 to 9.9 (7.7) million tons, for the Russian Federation - by 1 to 92 (75.16) million tons, although the authorities estimate the harvest at 104, 4 million tons, and the local agency SovEkon - 101.2 million tons.
• The global consumption estimate has been raised by 1.4 million tons to 791.2 million tons (792.7 million tons in FY 2021/22 and 782.22 million tons in FY 2020/21), as the decrease in food consumption in Bangladesh will be offset by increased use for feed in Canada, the EU and the Russian Federation.
• The global export forecast was increased by 1.3 million tons to 213 million tons (202.8 million tons in 2021/22 FY), in particular for Ukraine - by 0.5 to 13.5 (18.8) million tons, the EU - by 0.5 to 37 (31.9) million tons, Australia – by 0.5 to 28 (27.5) million tons, the Russian Federation – by 0.5 to 43.5 (33) million tons, Brazil – by 0.4 to 3.9 (3 million tons, although for Canada the estimate was reduced by 1 million tons to 25 (15.12) million tons.
• The global import forecast was increased by 2 million tons to 207.09 million tons (199.23 million tons in 2021/22 FY and 195.3 million tons in 2020/21 FY), in particular for the EU - by 1 to 9 (4.6 ) million tons thanks to active supplies from Ukraine, for China - by 0.5 to 10 (9.6) million tons, the countries of the CIS and the Middle East - by 0.5 million tons against the background of cheap wheat supplies from Australia.
• The estimate of global ending stocks is raised by 0.9 mn t to 269.3 mn t (276.7 mn t in FY 2021/22 and 291.6 mn t in FY 2020/21), as stockpiles in Australia and China offset them reduction in Ukraine. However, this indicator will be the lowest since FY 2016/17.

Global stock markets reacted to the bearish report with speculative growth as traders factored in forecasts of a reduced harvest in 2023 and low initial stocks.

Yesterday, stock quotes rose:

• by 2% or $5.51/t to $281/t - March futures for soft winter SRW wheat in Chicago (+3% for the month),
• by 1.1% or $3.77/t to $329.2/t - March HRW hard winter wheat futures in Kansas City (+7.3%).
• by 1% or $3.3/t to $340.3/t - March futures for HRS durum wheat in Minneapolis (+1.5%).
• by 0% to $303/t - February futures for Black Sea wheat in Chicago (-1.6%).
• by 0.3% or €1/t to €294.75/t or $316.3/t - March wheat futures on Paris Euronext (-1.2%).

US wheat prices rose speculatively during January amid frost in hard winter wheat growing regions, while European and Black Sea wheat prices fell for a second month in a row due to reduced demand and increased competition from Australia, particularly in Southeast Asian markets.