Wasde: USDA slashes Argentina wheat, but Black Sea exports boost trade

9 Dec 2022 | Tim Worledge

The USDA has slashed its production outlook for Argentina and Canada, marking a significant reduction in global production figures but the impact was offset by increased export flows as the operation of the Black Sea corridor was guaranteed for another 120-day stretch.

For domestic US wheat outlooks, the December update to the World Agricultural Supply and Demand Estimates (Wasde) posted minimal changes with just a small tweak made to the export outlook for 2022/23 that had a knock-on impact for ending stock outlooks.

Overall, Chicago soft red wheat futures were sharply lower in the aftermath of the report's release, with over 11 cents wiped off the March 2023 future and similar losses on contracts out as far as September 2023.

However, the devil was in the detail – with total US ending stocks left unchanged at 571 million bushels (15.5 million mt) but hard red spring, soft red winter and white wheat export and ending stock outlooks shuffled underneath.

Soft red winter stocks pushed higher as a 10 million bu reduction in exports boosted ending stocks by the same amount, but a 5 million bu increase in hard red spring and white wheat exports reduced both ending stock figures to leave the total unchanged.

But the swingeing changes came in the world outlooks, where aligning or adopting with official figures cut Canadian and Argentine production by close to 4.5 million mt in a move that could not be redressed by bringing Australian outlooks into line with official figures.

Argentina shed 3 million mt to 12.5 million mt, with the USDA warning it could be the smallest production since the 2015/16 marketing year.

That was augmented by a near 1.2 million mt reduction to Canada’s output, which slipped to 33.8 million mt and contributed to a near 2 million mt reduction in global production, which fell to 780.6 million mt.

Even an increase to Australian output, which jumped 2.1 million mt to 36.6 million mt, failed to stymy the overall reduction – but an increase in trade meant that supply balances were largely untroubled with global ending stocks pegged at 267.3 million mt.

That was just a half million mt reduction overall, and was supported by a 2.2 million mt increase in export figures, which rose to 210.8 million mt.

Evidence of the grain corridor at work drove that increase, with Ukraine’s wheat export figures pushed 1.5 million mt higher to 12.5 million mt and Russia increased by 1 million mt to 43 million mt.

That suggests that the huge 100 million mt crop that Russian authorities claim is starting to find its way into the global market – although the USDA steadfastly maintained its 91 million mt production outlook.

Increased comfort with the operation of the corridor seems to be easing the lingering morality concerns amid competitive pricing, but logistical concerns remain uppermost, with Black Sea export programs in general hurt by deteriorating weather and increasing ice flows in the region.