The effect on crops of droughts in parts of North America, Russia and Brazil were translated into production numbers in the August United States Department of Agriculture report and the results were much tighter global balance sheets for wheat and corn.
The department also trimmed North American oilseed production but the impact on global supply and demand numbers was modest.
Wheat and corn futures rallied on the report’s data. Chicago, Kansas and Minneapolis December wheat contracts set life-of-contract highs.
The rally in corn was more modest. Chicago December corn on report day settled well off the peak of trade. On the following day it traded around US$5.75 per bushel, well back from the contract high of $6.36 1/2 set May 7.
The trade is concerned about corn demand, with U.S. exports in recent weeks well below expectations.
But the story in wheat is all about tight supply.
Last month, USDA slashed U.S. spring wheat production and this month turned its attention to Canadian and Russian crops.
It pegged Canadian all wheat at 24 million tonnes, down 7.5 million or 24 percent from its outlook last month.
It is down 11.2 million tonnes or 32 percent from last year, based on an eight percent decline in harvested acres and a 26 percent decline in yield.
It would be the smallest Canadian wheat crop since 2010-11.
The trade expected a big decline in the Canadian number but was surprised by how much the USDA cut the Russian crop.
It slashed Russian production to 72.5 million tonnes, down 12.5 million tonnes or 15 percent from last month’s forecast.
It is down 12.85 million tonnes from last year’s production.
The reduction was strongly influenced by the cut Russia’s statistical agency recently made to its seeded area estimate to reflect acres lost to winterkill.
RusGrain Union, representing Russia exporters, tweeted shortly after the USDA report that the department misunderstood the Russian data and that many lost acres had been reseeded. Russia’s agriculture ministry has a wheat estimate of 81 million tonnes.
Because the USDA made massive cuts to its U.S. spring wheat numbers in July, it made only minor revisions this month. However, it lowered winter wheat numbers, showing the crop was not quite as good as thought.
When all wheat classes were tallied, the U.S. production forecast was 46.18 million tonnes, down 1.34 million from last month and down 3.5 million from last year. It would be a 19-year low.
Increases in the estimates of Australia crop, up 1.5 million to 30 million, and Ukraine, up three million to 33 million, partially offset the cuts to Russia, Canada and the U.S.
The USDA made no change to its China crop forecast of 136 million tonnes, up 1.75 million from last year.
Overall, it pegged world wheat production at 776.91 million tonnes, down 15.5 million from last month.
It estimated year-end 2021-22 stocks at 279 million tonnes, down about 12.6 million from last month and almost 10 million down from last year.
The USDA also surprised the trade by cutting its U.S. corn yield forecast more than expected.
It estimated national yield at 174.6 bu. per acre, down about five bu. from July and three bu. less than the trade’s average guess.
The estimate was the first for the year based on a farmer survey instead of the long-term trend.
Estimating corn yield is especially hard this year given the wide range of conditions. The Dakotas and Minnesota expect miserable yields, but in the eastern Corn Belt of Illinois, Indiana and Ohio farmers see potential for record yields.
Historically, USDA’s final yield estimate winds up lower than the August forecast. Whether that will be the case this year is unknown. In the last week many states saw corn conditions improve thanks to rain.
The lower yield resulted in a cut of 2021-22 production to 14.75 billion bu. or 374.68 million tonnes, a decline of 10.5 million tonnes.
The USDA also cut Brazil’s corn production, which is being cut now but is considered 2020-21 crop. It dropped six million tonnes to 87 million, because of drought in the second crop.
But the USDA also lowered global 2020-21 demand numbers so the reduced supply in Brazil did not lower global year end 2020-21 stocks.
The estimate for global 2021-22 year-end stocks came in at 284.63 million tonnes, which was less than what the trade expected.
The USDA’s numbers for barley were also bullish. It sees global production at 149.4 million tonnes, down about 11 million tonnes from last year.
It pegged Canada’s barley crop at 8.8 million tonnes, down from last year’s 10.74 million, based on a 23 percent decline in yield but a 6.8 percent increase in area.
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