The July USDA Report has delivered significant changes to both the US and global wheat balance sheets. Although US wheat production estimates were raised, this was not enough to cover a drop in carrying stocks, thus reducing US wheat supply.
US domestic use for this year has also been increased as wheat becomes more competitive into feed markets, and US exports have been increased as other exporters see their crops decline. Year on year, US stocks are set to decline 1.96 million tonnes, a decline of 1.94mt from the June estimates.
Changes to the global numbers were more dramatic, with production estimates dropping 9.37mt from June levels, with another 7.88mt being pulled off global ending stocks. However, year on year the global crop is still expected to be up by 40.56mt, and closing stocks are set to grow by 11.31mt.
The production declines are seen for Russia (down 3.8mt after a hotter and drier than average June), but at 74.2mt this year's crop will remain the second largest on record. Hot weather in the EU and Ukraine has also seen their production estimates pulled back, but again their crops remain on target to be larger than last year.
The Ukrainian crop was reduced by 1mt to 29mt, while the EU crop was pegged at 151.3mt, down 2.5mt.
The Australian and Canadian crop estimates have also been reduced. Canada had a dry start to their season, and production estimates have been reduced by 1.2mt to 33.3mt. The Australian crop was cut by 500,000t, reflecting the ongoing dryness in eastern Australia.
The common theme across all major growing regions is that this year's crop is getting smaller, but that it is still well above last year's crop.
There is no crisis in global wheat production, and stocks will increase year on year. That simply makes it harder for global wheat prices to outperform those of last year. However, Russia may not be as aggressive for as long into the year as they were last year, preventing prices from moving as low as they did in 2018/19.
Estimates of Russian wheat exports have been pulled back by 2.5mt to 34.5mt. Last year they exported 36mt, and the year before they shipped 41.42mt.
We could also see further tightening in the global balance sheet. The USDA tends to feed changes in its numbers in over a couple of months, and we are still seeing other agencies in various countries continuing to wind back production estimates for the EU and Russia.
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