USDA cuts its Russian wheat harvest estimate

14-Jun-2018 - Last updated on 25-Jul-2019 at 11:44 GMT

The US Department of Agriculture’s World Agriculture Supply and Demand Estimates (WASDE), published yesterday, lowered its forecast for world wheat production for 2018/19 largely due to forecasts for Russia being down by 3.5Mt from May estimates, to a forecast 68.5Mt.

The USDA lowered its forecasts for Russia’s wheat production on drier-than-normal conditions this spring in winter wheat areas and excessive wetness in spring wheat regions lowering plantings – the 68.5Mt forecast for 2018/19 would be 19% lower than Russian wheat production from 2017/18.

Global wheat production for 2018/19 was forecast down 3.1Mt in the June report from the previous month's outlook to 744.7Mt. However, global 2018/19 ending stocks have been revised up 1.8Mt from May estimates to 266.2Mt, as a result of reduced 2018/19 consumption (-3Mt) and increased 2017/18 ending stocks (+1.9Mt).

European 2018/19 wheat production was revised down 1Mt from May estimates to 149.4Mt, therefore anticipating a 1% decline from 2017/18. This projected decline follows dry spring conditions in Germany and Poland raising concerns for winter wheat.

The US agency raised India’s wheat production 2Mt to 97Mt based on record yields and supported by reports of higher procurement for the 2018/19 crop compared to last year.

Contrasting views

Daniel Rooney, analyst, at AHDB market intelligence, described the tone in the USDA report as “bullish”.

He flagged up, however, the somewhat contrasting outlook between the USDA and official Australian reports.

“Following the recent dry weather in Australia, the USDA maintained projected 2018/19 wheat production at 24Mt, despite the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) decreasing monthly forecasts to 21.9Mt, putting it just 0.5Mt above the poor production last season.”

And likewise, he noticed disparities between Russian and US voices in relation to the final wheat tonnage expectations for Russia.

“Last week, Russian agricultural consultancy firm, SovEcon, predicted production to be 73.1Mt [against the 68.5Mt USDA estimate], although reducing their estimate by 3.9Mt from May estimates.”

Wheat price hikes

The immediate global market response to these projections was bullish, said Rooney.

New crop wheat futures rose in the US and Europe. Chicago milling wheat futures (Dec-18) closed at £157.26/t yesterday, a substantial rise of £5.17/t in a session, according to an AHDB market intelligence report.

Reacting to US movements, UK feed wheat future (Nov-18) closed at a new contract record high of £161.70/t ($217.2/t) on 12 June, rising £1.40/t from day earlier levels.

Paris milling wheat futures (Dec-18) rose £1.98/t from day earlier levels to close at £164.89/t, the highest level in sterling terms for 11 months (since 14 July 2017).