Wheat prices fell on sharp increase in production and stock forecasts in USDA report

In the March supply and demand report, USDA experts significantly increased forecasts for beginning stocks and wheat production in the 2024/25 MY, as a result of which the estimate of ending stocks exceeded analysts' expectations. Against this background and given the reduced import forecast for China, stock quotes fell by 0.8-1.3% yesterday, losing 5.8-6.7% for the month.

Compared to February estimates, the world wheat balance for the 2024/25 MY has undergone the following changes:

• The estimate of opening stocks was increased by 2 million tons to 269.5 million tons (274.27 million tons in 2023/24 MY) after an increase in stocks in Turkey by 2.2 million tons due to a multi-year adjustment towards a decrease in food, seed and industrial wheat consumption.
• The forecast for world production has been increased by 3.44 million tons to 797.23 million tons (791.24 million tons in 2023/24 MY and 789 million tons in 2022/23 MY), in particular for Australia – by 2.1 million tons to 34.1 (26) million, Argentina – by 0.8 million tons to 18.5 (15.85) million tons, Ukraine – by 0.5 million tons to 23.4 (23) million tons. The forecast for Australia corresponds to the official ABARES estimate, which will be the third largest indicator in the country's history.
• The global consumption forecast is increased by 2.93 million tonnes to 806.65 million tonnes (797.83 million tonnes in 2023/24 MY) due to increased feed use in Australia, the EU and Thailand. For Ukraine, the forecast is increased by 0.1 million tonnes to 7 (6.7) million tonnes.
• The estimate of world exports has been reduced by 0.9 million tons to 208.1 million tons (221.22 million tons in 2023/24 MY), in particular for the EU – by 1 million tons to 27 (38) million tons, the Russian Federation – by 0.5 million tons to 45 (55.5) million tons, the USA – by 0.4 million tons to 22.7 (19.24) million tons, while for Australia the forecast has been increased by 1 million tons to 26 (19.84) million tons.
• The estimate of world imports has been reduced by 2.1 million tons to 202.7 million tons (221.83 million tons in 2023/24 MY), in particular for China - by 1.5 million tons to 6.5 (13.28) million tons, which will be less than half of its imports in 2023/24 MY.
• The forecast for world ending stocks has been increased by 2.52 million tons to 260.08 million tons (269.5 million tons in 2023/24 MY), although analysts estimated them at 257.6 million tons. The estimates for Turkey, Argentina, the USA, Australia, Ukraine, and the Russian Federation have been increased the most.

After the report was released, March wheat futures fell:

• by 0.8% to $198.8/t – for soft winter SRW wheat in Chicago (-6.6% compared to data after the February report), May – $204.5/t,
• by 1.3% to $205.3/t – for hard winter HRW wheat in Kansas City (-5.8%), May – $210.2/t,
• by 1.3% to $214.1/t – for durum spring HRS wheat in Minneapolis (-6.1%), May – $219.5/t,
• by 1.1% to €221.25/t or $241/t – for May wheat futures on the Euronext exchange in Paris (-6.7%).

May US wheat futures have also declined, but are trading about $5/t more expensive than March futures.

Increased harvests in Australia, Argentina and India in the coming months will increase the global supply of wheat on the world market, while the slowdown in economic development due to trade wars will sharply reduce demand.

The Indian government predicts that the wheat harvest will reach a record 115.4 million tons (with the USDA forecast of 113.3 million tons), which will exceed last year's 110.5 million tons. High prices guaranteed by the state have encouraged farmers to increase the area sown with wheat.

The SovEcon agency predicts that Russia will export 1.4-1.8 million tons of wheat in March (4.8 million tons a year ago and 3.3 million tons on average over the past 5 years). This is due to a 12.5% increase in prices for Russian high-protein wheat to $248-250/ton FOB, which has forced buyers to look for cheaper offers.