In wheat, world ending stocks still remain at record highs, note Shore Capital analysts, in commentary on the USDA World Agricultural Supply & Demand Estimates (WASDE) data report, published yesterday [February 9].
The USDA projected that the 2020/21 global wheat outlook would be for greater supplies, increased consumption, higher exports and reduced ending stocks.
Global wheat production for the 2020/21 harvest is projected to be a record at 773.4m tons (+0.8m tons from January’s report). “This has primarily been driven by an increase in projected production for Kazakhstan (+1.8m tons) more than offsetting reduced projected production in Pakistan and Argentina (-0.3m tons).”
Wheat, in summary, has a 2020/21 projected global ending stock of 304.4m tons (around a 3% decrease or about 9 million tons lower from the January’s report but with it still at a record), with China, India and the US accounting for around 51%, 9% and 7% of the total respectively.
“Despite wheat being well supplied in 2020/21 given global record projected ending stocks, we have seen wheat futures increase both from a USD and GBP perspective. This has been driven by a projected tightening in the corn and soybean market inflating prices and creating a substitution effect from corn or soybean largely for animal feed to wheat for the likes of feed; such movements may be inflationary down the chain,” said the UK based analysts.
Corn outlook: Ending stocks boosted
The USDA projections for the 2020/21 harvest for global corn production is 1,134m tons (+0.2m tons from January’s report).
“Brazilian and Argentinean crops productions projections were unchanged at 109m tons and 47.5m tons respectively. However, with unfavorable weather conditions being expected across South America, we see the potential for a declined in projected estimates across both countries in the next report if those conditions materialize,” said the Shore Capital team.
Global corn ending stocks for the 2020/21 harvest are projected to increase by 2.7m tons from January’s report to 283.5m tons, largely reflecting the increase in projected ending stocks for China (+4.5m tons to 196.2m tons) more than offsetting a projected decrease for the US (-1.3mn tons to 38.2m tons).
Corn, in summary, has a 2020/21 projected global ending stock of 286.5m tons (1.0% increase or 2.7m tons) from January’s report (its lowest since 2018/19) with China and the US accounting for around 68% and 13% of the total respectively.
Soybeans: All to play for with pending unfavorable weather
In terms of the forecast for soybeans, the USDA predicted that the 2020/21 ending stocks would be lowered by 1.1%.
Global soybean production projections for the 2020/21 harvest are at 361.1m tons (+0.1m tons from January’s report).
“Interestingly, the USDA did not adjust Brazil’s projected production of its soybean crop and still expects 133m tons to be produced which indicates a large harvest. Argentina’s projected production is also unchanged at 48m tons," noted the Shore Capital experts.
The analysts again struck a note of caution on those numbers given the unfavorable weather that is expected in South America.
“Overall, with a 1.1% projected decrease in 2020/21 soybean ending stocks to 83.4m tons, a reduction in the stock-to-use ratio from 28.8% in 2019/20 to 22.5% in 2020/21 and a yield of 2.83 MT/HA on 2020/21 harvested projections, we continue to see and expect slight upward pressure on prices as the market adjusts to the lowest soybean ending stocks in five years and increased import demand from China.”