Wheat quotes fall, despite USDA's worsening wheat balance sheet

The expectation of a recession in the world economy and the withdrawal of funds from commodity assets by investors increases the pressure on world prices for grain and oil crops. Wheat prices also declined, even as global production and ending stocks were downgraded.

The wheat balance for the 2022/23 MR has undergone the following changes compared to the June report:

• The estimate of initial reserves was increased by 0.7 million tons to 280.1 million tons (291.57 million tons in FY 2021/22 and 297.92 million tons in FY 2020/21) due to low export rates in the 2021/22 season.
• The global production forecast was reduced by 1.79 million tons to 771.64 million tons (779.03 million tons in 2021/22 FY and 775.72 million tons in 2020/21 FY), in particular for EU countries – by 2 million tons to 134.1 million tons (138.42 million tons in 2021/22 MR), Ukraine – by 2 million tons to 19.5 million tons (33 million tons), Argentina – by 0.5 million tons to 19.5 million tons (22.15 million tons), which will be partially compensated by an increase in the harvest in the USA by 1.2 million tons to 48.47 million tons (44.79 million tons), in Canada - by 1 million tons to 34 million tons (21.65 million tons) and Russia - by 0.5 million tons to 81.5 million tons (75.16 million tons), while Russian experts increased their forecasts to 87-89 million tons. For Australia, China and India, production forecasts were left unchanged .
• The estimate of world consumption was reduced by 1.77 million tons to 784.22 million tons (790.51 million tons in 2021/22 MR) as a result of a decrease in wheat consumption in the EU (including for feed) by 1 million tons.
• The global export forecast was increased by 0.88 million tons to 205.47 million tons (200.07 million tons), in particular for Canada - by 1 million tons to 25 million tons (15 million tons), the USA - by 0.68 to 21 .77 (21.88) million tons, while for the EU it was reduced by 0.5 to 35.5 (29.5) million tons, Argentina – by 0.5 to 13.5 (16.5) million tons. For Russia left the export estimate at 40 million tons (33 million tons).
• The forecast of world imports was increased by 1.28 million tons to 202.74 million tons (195.39 million tons) as a result of an increase in supplies from Ukraine to the EU by 0.5 million tons to 5.5 million tons, as well as increased purchases by the countries of the South East Asia.
• The estimate of final reserves was increased by 0.67 million tons to 267.52 million tons (280.1 million tons in 2021/22 MR and 291.6 million tons in 2020/21 R), in particular for Canada - by 0.5 million tons and the USA – by 0.34 mln t, but global stocks will be the lowest since FY 2016/17.

However, wheat quotes did not react to the report and fell in line with oil and other commodity markets:

• by 5.4% or $15.2/t to $299.2/t - September futures for soft winter SRW wheat in Chicago (-31.5% for the month),
• by 5.8% or $17.45/t to $318.8/t - September HRW hard winter wheat futures in Kansas City (-34%).
• by 5.2% or $16.53/t to $337.6/t - September futures for hard spring HRS wheat in Minneapolis (-33%).
• by 1% or $3.75/t to $357.5/t – August futures for Black Sea wheat in Chicago (-12.8%).
• by 3.1% or €10.75/t to €341.75/t or $343/t - September wheat futures on Paris Euronext (-15.4%).

As harvest progresses, wheat harvest forecasts in Ukraine, the EU and Russia will decrease due to dry weather. Against the backdrop of restrictions on supplies from the Black Sea countries due to high freight rates, sanctions on the Russian Federation and blockade of ports in Ukraine, this will soon turn wheat prices upwards.