The November USDA Report was bearish for corn and soybeans, but not quite so negative for wheat.
The biggest negative was the upgrade to forecast corn yields in the US, which rippled through to US and global ending stocks.
The news for wheat was more positive, with a lift in projected exports from the US. Exports are now projected to be 680,000 tonnes higher than the October estimate, with confidence being built by recent large sales to Iran. Importers are also actively buying from a range of sellers at current low prices.
Global wheat production estimates were raised 790,000t, but opening stocks were lowered 970,000t, and consumption was lifted by 460,000t. The net impact was to see a 600,000t decline in estimated ending stocks.
The gains in production again came from Russia, with a further 1 mill t added to the size of their already massive 2017-18 crop. Estimates for the EU were raised by 500,000t on the back of published harvest results.
The USDA left Australia’s production estimate unchanged at 21.5 mill t. However, they have increased opening stocks by 370,000t, and reduced exports by 500,000t. To make all that balance, the ending stock estimate has lifted to 4.25 mill t, which seems more realistic than the previous very tight level of 3.38 mill t.
The reduction in exports for Australia might be recognising that the current cash market is very strong against global prices, which are being driven down by cheap wheat from Argentina and Russia. It makes it that bit harder for our exporters to be able to buy wheat from growers and still be competitive in global markets.
The big risk for wheat is the negative impact that might flow through from the US corn market. However, the funds already hold very large short (sold) positions in both wheat and corn, and the potential of profits from further selling at already low levels appears to be constrained. That may help form a base in prices for both grains.
There may also be support from ongoing downgrades to the Brazilian wheat crop. The significance here is that it has the potential to push more import demand back to Argentina, which in turn will take cheap Argentinian wheat away from other parts of the global market.
There is also support for wheat in general, coming from higher prices for high protein wheats in the Kansas City and Minneapolis Exchange wheat contracts. Support may well flow over to prices for the CBOT Soft Red Winter wheat contract.
Since coming out of the USDA Report, CBOT wheat futures have lifted a little. The most recent low on the December contract was 419 US¢/bu. On Friday night last week, futures settled at 431.5 US¢/bu.