The February USDA Report has been released, breaking a two-month drought on market sensitive data.
There were a couple of positives from the various reports. One was a much smaller than expected estimate of winter wheat plantings in the US. They are the second lowest on record, because of the delays to planting caused by a wet autumn. It also means a lot of the crop that was planted, went in late, and into overly wet conditions.
Another positive was a 570,000 tonne drop in global wheat ending stock estimates. This extends the decline in global stocks year on year to 12.49m tonne.
Outside of those two factors, it was somewhat negative for wheat. Firstly, the decline in stocks was driven by a 3.5m tonne drop in Chinese stocks. The USDA lowered their production estimate by 1.07m tonne and lifted consumption by 2m tonne. As a result, stocks outside of China lifted by 3.02m tonne.
Secondly, stock levels in the US were raised on the back of reduced usage, partly because of less seed use due to lower plantings, but also lower use with less needed for livestock feed.
US stock levels were raised by 980,000 tonne, to 27.5m tonne, well up on the 16.065m tonne in 2013/14.
So, the headwinds for wheat got just a little stronger on the back of rising stocks in the US, and globally outside of China. It takes some of the pressure off the balance sheet and will allow the market a buffer against any issues seen for the 2019 crop.
Another negative was Russia. Production estimates were lifted for their 2018/19 crop. A 1.6m tonne lift has taken their crop to 71.6m tonne. It has also allowed a 1m tonne lift in their export projections, to 37m tonne, while allowing their ending stocks to lift by 1.1m tonne to 6.47m tonne.
Russian ending stocks are down 5.4m tonne year on year, and production is not expected to rebound to the record crop seen in 2017/18. However, they may still be able to maintain strong export numbers in 2019, which is likely to keep the pressure on the pace of US exports.
The near term positive for the market is the reduced acreage in the US, and the potential condition of their winter wheat crop as it comes out of dormancy. If the crop has suffered from less than ideal planting conditions, we could see some upward move in US futures until their growing season settles.
So far, the USDA has released two weekly sales reports that were delayed since December. In both cases they came in with strong numbers.
We need that trend to continue to make sure that some pressure remains on US ending stock estimates. At least the USDA has left their US export estimates unchanged at 27.22m tonne for this year.