USDA sharply raised its 2022/23 wheat production forecast to last season's level

In the August balance sheet for wheat, experts sharply raised production and consumption forecasts in FY 2022/23, but lowered the estimate of ending stocks, which will reach a 6-year low.

Wheat quotations on world exchanges reacted to the bearish report with a slight decrease, but buyers will reduce activity this week in anticipation of a drop in prices under the pressure of increased supply.

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

• The estimate of initial reserves was reduced by 3.75 million tons to 276.35 million tons (290.27 million tons in FY 2021/22 and 297.92 million tons in FY 2020/21) due to an increase in the consumption forecast in 2021/22 by 2, 65 million tons to a record 793.16 million tons.
• The global production forecast was immediately increased by 7.96 million tons to 779.69 million tons (779.24 million tons in 2021/22 MR and 775.72 million tons in 2020/21 MR), in particular for Russia - by 6.5 million t to 88 million tons (75.16 million tons last year), Australia – by 3 to 33 (36.3) million tons, China – by 3 to 138 (136.95) million tons, Canada – by 1 to 35 (21 .65) million tons, which compensates for the decrease in production in India by 3 million tons to 103 (109.59) million tons, Argentina – by 0.5 to 19 (22.15) million tons, EU countries – by 2 to 132, 1 (138.42) million tons. For the USA and Ukraine, estimates were left unchanged. The increase in crop forecasts is based on the estimates of local statistical agencies, so the increase in the estimate of wheat production in the country by Russian analysts to 92-96 million tons may lead to a revision of the world balance.
• The forecast of world consumption was increased by 4.38 million tons to 788.6 million tons (793.16 million tons in 2021/22 MR and 782.22 million tons in 2020/21 MR) due to an increase in feed consumption in Russia by 1.75 million tons and Australia by 1 million tons. For the EU, the consumption forecast was unexpectedly reduced by 0.5 million tons, despite a sharp decline in the estimate of the corn harvest.
• The estimate of world exports was increased by 3.18 million tons to 208.65 million tons (202.67 in 2021/22 MR), in particular for Russia - by 2 million tons to a record 42 million tons, Canada - by 1 to 26 (15) million tons, Australia – by 1 to 25 (27.5) million tons, Ukraine – by 1 to 11 (18.8) million tons, the USA – by 0.68 to 22.45 (21.78) million tons, then for the EU, the forecast was reduced by 2 to 33.5 (29.5) million tons, and for Argentina - by 0.5 to 13 (16.5) million tons.
• The forecast of world imports was increased by 1.15 million tons to 203.89 million tons (197.83 million tons in 2021/22 FY and 195.37 million tons in 2020/21 FY) due to increased purchases by North African countries, where their own production is being reduced . For China, the import estimate was left at the level of 9.5 million tons, which almost corresponds to the 9.57 million tons of the 2021/22 season.
• Against the background of reduced initial stocks and increased consumption, the estimate of ending stocks was reduced by 0.18 mln t to 267.34 mln t (276.35 mln t in 2021/22 MR and 291.6 mln t in 2020/21 MR), which will at least the last 6 years.

Wheat quotes on the data of the report increased slightly, although they remain at the level of last month:

• by 0.9% or $1.75/t to $296.2/t – September futures for soft winter SRW wheat in Chicago (-1% for the month),
• by 0.2% or $0.82/t to $337.9/t - September futures for HRS durum wheat in Minneapolis (0%).
• by 0.2% or 0.75 €/t to 338.75 €/t or $347.2/t - September wheat futures on Paris Euronext (-0.9%).

September HRW hard winter wheat futures in Kansas City remained flat at $326.7/t (+2.5%) and fell 0.1% or $0.5/t to $354.25/ t August futures for Black Sea wheat in Chicago (-0.9%).

An increase in new crop supply as harvesting progresses amid significant last year's stocks from major exporters will continue to put pressure on prices in the near term.