The USDA has significantly reduced the harvest forecast for wheat. Yields in Russia, Ukraine, and the EU are disappointing due to moderate growing conditions. However, the market reacted only modestly to this yesterday. What is equally surprising to analysts is that yields for corn and soybeans in South America have hardly changed.
The September contract for wheat on the Matif closed €6.50 lower at €240 per ton yesterday. On the CBoT, wheat closed 1.5% lower at $6.17 per bushel. Corn recorded a 1% increase, reaching $4.54¼ per bushel. Soybeans moved sideways and ultimately closed 0.1% lower at $11.77¼ per bushel.
Yesterday, the USDA released the May edition of the Wasde report. The most significant changes were seen in wheat. The USDA has reduced the harvest expectation for wheat in Russia by 5 million tons to 83 million tons. The Ukrainian harvest is estimated 1.5 million tons lower compared to the previous Wasde report, totaling 19.5 million tons. The USDA attributes these reductions to frost in May and the subsequent warm dry weather. For the EU, the USDA has lowered the yield expectation by 1.5 million tons to 130.5 million tons. Here, it is the wet and cool weather that is hindering wheat growth.
Wheat becomes too expensive for feed
The total amount of wheat (beginning stocks plus production) available for 2024/25 is estimated at 1,050.3 million tons. This is 5.7 million tons less than in the previous report. The beginning stocks have been estimated higher. The expected wheat consumption is reduced by 4.3 million tons to 798 million tons. Due to higher prices, wheat is becoming too expensive for use in feed and other applications according to the USDA. The world ending stocks have been reduced by 1.3 million tons to 252.3 million tons.
There were no major adjustments made by the USDA in the yield expectations for corn and soybeans in the US, which is in line with analysts' expectations. More notably, there are also no significant changes for South America. The soybean harvest for Brazil has been reduced by 1 million tons to 152 million tons. The expected corn harvest in Argentina has been kept unchanged at 53 million tons. The world ending stocks for corn in this edition of the Wasde report amount to 319.8 million tons, up from 312.3 million tons last month. The ending stocks for soybeans have also been reduced from 128.5 million tons to 127.9 million tons.
Competition
A change in the soybean tax in Brazil has been beneficial for exporters in the US. According to sources, Chinese buyers have purchased 208,000 tons of soybeans in the US since the new tax came into effect. North American soybeans have become more price competitive for Chinese buyers due to the additional tax. Soy processors and traders had warned in advance about the negative consequences of the tax increase. The Lula da Silva government is now reportedly considering abolishing the tax.