Global Wheat Harvest Forecast Tumbles; Russia Bears the Brunt

Thursday 13 June 2024 - 10:20

The United States Department of Agriculture (USDA) has significantly lowered its forecast for global wheat production for the 2024/25 crop year, citing anticipated lower yields in Russia, Ukraine, and the European Union.

In its monthly report, the World Agricultural Supply and Demand Estimates (WASDE), the USDA projects global production at 790.75 million tons, down by 7.4 million tons from last month's initial estimate.

Specifically, the ministry has trimmed its Russian wheat harvest projection by 5 million tons, with reductions of 1.5 million tons each for Ukraine and the European Union. The southwestern region of Russia, the country's primary wheat-producing area, has faced severe drought over recent months.

Compounding the situation, a cold wave in May struck the crops as the harvest season approached. Specialized firm SovEcon has adjusted its Russian production estimate from 94 to 80.7 million tons.

Excessive rainfall, notably in France, has also impacted the European Union's production. The USDA's substantial downward revision of harvest forecasts has been tempered by an increase in estimated beginning stocks and a decrease in expected consumption.

Offsetting the downturn in Russia, Ukraine, and the European Union, the USDA has raised its forecast for U.S. wheat harvest by nearly half a million tons. "Everyone had anticipated a production decline," remarked Damien Vercambre of Inter-Courtages, noting deteriorating crop conditions in the United States in recent weeks for both winter and spring wheat. "Instead, they're increasing it."

Prices Remain Subdued

Given these developments, the U.S. Department of Agriculture noted that ending stocks would "decrease slightly, but not as much as expected," according to Damien Vercambre. Gautier Le Molgat, CEO of Argus Media France, added, "That was anticipated," regarding adjustments to the expected 2024/25 harvest, which begins in early June in the United States.

One of the report's surprises, Le Molgat highlighted, was unchanged import estimates for India, despite market expectations that the Indian government would remove a 40% tax on foreign wheat to bolster local stocks.

Following the USDA report release, U.S. wheat prices declined. The benchmark contract for Soft Red Winter Wheat (SRW) for July delivery fell by 1.51% to $6.17 per bushel.

Changes made by the USDA were more modest for corn and soybeans. The U.S. Department of Agriculture slightly reduced its estimate of corn ending stocks due to lower beginning stocks and higher consumption.

These adjustments buoyed U.S. corn prices, with the benchmark contract gaining 1.05%. "There's a decline in wheat consumption, and they anticipate increased demand for corn," emphasized Gautier Le Molgat, particularly in animal feed usage. The rise in beginning stocks and higher consumption more than offset a slight production increase, notably in Ukraine.