Grain futures have mostly fallen since the start of June, and last week’s U.S. Department of Agriculture report added to the downward pressure.
The U.S. crop was seeded late, but concerns about that are receding and the market is instead focusing on generally good growing conditions in the United States and Canada.
The USDA report added to this “don’t worry, be happy” attitude. It didn’t alter its seeded acreage forecast for U.S. corn and soybeans despite the excess moisture that delayed seeding. It trimmed its corn yield outlook but still forecast a record large corn crop.
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The department could alter the seeded area picture June 28 when it releases its next seeding survey.
The only bullish news in the USDA report was the reduction in world wheat production, dropping to 695.9 million tonnes, down 5.24 million tonnes from May.
That is up about 40 million tonnes from last year’s 655.59 million tonnes, when drought hammered production in the countries of the former Soviet Union.
However, global demand is expected to rise by a similar amount in 2013-14, resulting in only a small increase in year-end stocks, up 1.4 million tonnes to 181.25 million.
The production decline was mostly because of crop cuts in the former Soviet Union, which more than offset a slight increase in the U.S. winter wheat production forecast.
The USDA expects that trimmed crops in other parts of the world will allow the U.S. to export more wheat. U.S. stocks at the end of 2013-14 would actually decline a little, and the USDA increased the season average price by 10 cents to a range of $6.25 to $7.55 per bushel.
The news was not enough to immediately raise wheat prices: there was too much pressure from the start of the U.S. winter wheat harvest. However, we could be looking at another year of solid wheat prices in 2013-14 if the situation does not change in future reports.
The picture will become clearer when Statistics Canada on June 25 and the USDA on June 28 report on seeded area surveys. Watch for our same day coverage at Producer.com and in my Twitter feed @darcemcmillan.
While Russia and Ukraine will have much better crops than last year, they are not as good as initially hoped. A dry spring trimmed yields.
The USDA pegged Russia’s wheat crop at 54 million tonnes, down two million from May.
Russia’s agriculture minister says the wheat crop will be 50 to 54 million tonnes.
SovEcon, an influential private forecaster, pegs the wheat crop at 50 to 52 million tonnes.
So judging by local forecasts, the USDA might have to trim its number a little more in future reports.
Forecasts for Russian wheat exports are fairly wide with USDA expecting 17 million tonnes and SovEcon expecting 14 to 15 million. The latter expects there will be a vigorous government buying program to support domestic prices and rebuild stocks, resulting in less grain to export.
The USDA cut its Ukraine wheat crop forecast by 2.5 million tonnes to 19.5 million.
That is close to the number put out by Ukraine’s state weather forecaster in May, which pegged the wheat crop at 19.3 million tonnes.
