Key Points
- The USDA Report was bearish for wheat but positive for corn.
- The big change was the apparent shift in feed use from wheat back to corn in the US and from wheat to barley in the EU, pulling US corn stocks down, and helping lift wheat stocks in the US and globally.
- A return to trend yields globally would see the 2014/15 crop come in under the 2013/14 crop, but will that be enough to see stocks decline given reduced use of wheat for feed?
- Corn rallied after the report, reducing the price premium wheat holds over corn by 21 percent, or 36.2 USc/bu.
WHEAT
- Big crops keep getting bigger! Global wheat production was raised another 1.24 mill t, with rises in estimates for China and the FSU more than covering reductions in the EU and Argentina. The Aus- tralian estimate was left unchanged on 26.5 mill t.
- The global crop is now 712.66 mill t mill t, a massive 15.4 mill t above the 2011/12 record.
- Wheat use for feeding in the US declined 1.63 mill t, replaced by cheaper corn.
- Wheat for feed use has also been reduced by 1.0 mill t in the EU, as increased wheat exports have reduced wheat supply, and allowed more barley to be used.
- The lift in global wheat stocks of 2.6 mill t to 185.4 mill t looks bad, but most of the increase in estimates is in the US and China.
The wheat futures market had been falling going into the USDA Report, but the change in feed use of wheat caught the market by surprise. After the report was released, March CBOT futures fell another 15.25 USc/bu. With a lift in the A$ of close to 1.0 US cents this translated into a fall of A$8.71/t.
The Australian cash market had been resisting the decline in the A$ value of US futures last week, but a fall of this magnitude is likely to be partially passed on.
In another report released by the USDA the US winter wheat plantings were put at 41.9 mill acres, down 2.2 mill acres on 2012. The market had been expecting a 410,000 acre increase in plantings.
CORN
- Increased feed use in the US has seen US stocks fall 4.09 mill t since the December estimates, and global stock estimates fall 2.23 mill t.
- US corn stocks will still double in 2013/14, but the drop in corn prices has now triggered a lift in consumption, and away from wheat for feed use.
- The market had been expecting a lift in US corn stocks because of better than expected production, but the shift from wheat to corn for feed use overshadowed this.
OILSEEDS
- Global oilseed production is set at a record 505.9 mill t, up 3.58 mill t since December. 1.9 mill t of the gains are from US soybeans and a new record soybean crop expected from Brazil (estimates up 1 mill t to 89.0 mill t).
- Global sunflower production estimates were lifted 1.3 mill t.
- Canola export expectations for Canada and Australia have been reduced.
