August USDA Grains Update Aligned with Market Players' Expectations

The latest August USDA WASDE report did not reveal any major surprises versus the market players' expectations, which led to a relatively neutral price reaction in the grain market. The weather has been favourable with precipitation in some areas, but slightly inconsistent across key grain growing areas. Thus, market players believe the yield figures are yet to be adjusted, especially from the drier regions. According to the USDA estimates, the 2023/24 global wheat production is set for lower supplies, lower demand, reduced trade and lower stocks this month versus the previous month. The global 2023/24 wheat production is estimated at 793,373 million mt, down 3,293 million mt from July estimates. Reduced production is evident in the EU, China, the US and Canada, which is only partially offset by an increase in Ukraine and Kazakhstan. The EU is reduced by 2.2% month-on-month (m-o-m) due to adverse weather conditions in Spain, Italy and Romania. The major reduction is in Canada, at 33 million mt, down 5.7% from the previous estimates due to worsening drought conditions in the prairie region. Meanwhile, China might start importing large amounts of milling wheat as the recent heavy rain has decreased China’s wheat production to 134.5 million mt, -0.9% year-on-year (y-o-y) (the USDA expects 137 million mt), according to market players. This could also lead to a further reduction in world stocks that are already looking tight for the 2023/24 season. These downgrades were partially offset by the increased forecast for Ukrainian wheat production, revised upward by 3.5 million mt to 21 million mt due to higher harvested area and yields. Taking into account the greater harvest from Ukraine, the estimated 2023/24 stocks held by major exporters (the US, Ukraine, Russia, the EU, Canada, Australia, Argentina, Kazakhstan, and Turkey) are estimated at 60,063 million mt, up by 1.3% m-o-m but still down 9.2% y-o-y, thus representing the tightest figure in 11 years.

For the 2023/24 global corn outlook, the USDA estimates lower production, lower trade and reduced ending stocks compared to the previous month. Global corn production is estimated at 1.213 billion mt, down 0.9% m-o-m. The largest production cuts are in the EU, the US, China and Russia, which is partially offset by increases in Ukraine and Canada. The EU corn production is down largely due to adverse weather conditions that have impacted yields in Germany, Italy, Romania and Hungary. Excessive rains in northeast China have also reduced China’s corn production to 277 million mt, down 1.1% m-o-m. Corn production in Ukraine is estimated to be 10% higher m-o-m at 27.5 million mt due to a higher area and yield estimates. Regarding the corn trade, the US and EU corn exports are revised lower to 52 million mt (-2.4% m-o-m) and 4.1 million mt (-18.4% m-o-m), respectively. Due to the expiration of the grain corridor deal, corn exports are largely unchanged this month. Mintec learned that Ukraine has started registering ships and is willing to use the corridor without Russia’s approval. Shipping and insurance entities have expressed their concerns for the safety of the vessel passage in the Black Sea. Global 2023/24 corn ending stocks are down 1.6 million mt to 255.1 million mt due to declines in Russia and China that are partly offset by increases for Ukraine and South Africa.