Wasde preview: War and weather raise stakes for global wheat

November’s US Department of Agriculture (USDA) update is likely to bring renewed scrutiny to the agency’s assumptions around the rest of the world, with Australia, Argentina and Black Sea at the forefront of thinking.

While just modest tweaks are expected for corn and soybeans, especially in the US, wheat still carries a raft of bearish and bullish considerations that carry potential surprises.

Ending stocks remain the focus for pre-release estimates, but on a US-basis, the month-on-month changes are expected to be minimal – analysts polled by newsagency Reuters looking for an increase of just 2 million bushels (54,500 mt) to the upside.

That is likely to reflect the disappointing pace of wheat exports to date amid record prices.

World ending stocks, however, are expected to shrink by a million tonnes to 266.5 million mt as key origins grapple with the ongoing effect of weather.

There is cause for optimism in the supply stakes – with a raft of origins facing potential climate issues, both Russia and Australia are likely to set further records.

With the USDA currently holding Russia’s production at 91 million mt, some way adrift of government and local analysts’ expectations, there is certainly scope for the USDA to push its production estimate higher.

Government data puts the estimated wheat crop at 104 million mt as per bunker weight, equating to around 101 million mt clean – but production is something of a moot point, as the question remains of how much of the crop will make it to the world market.

Russian wheat exports have been below par – partly a reflection of the ruble’s recovery, the ongoing distaste around trade following the invasion of Ukraine and potential hesitancy on the part of importers to tie themselves entirely to the Russian supply roulette.

With the USDA currently estimating 42 million mt in exports, and Russian ending stocks of 15.4 million mt, there is scope for the production figure to rise, the exporting figure to fall and the stock levels to balloon.

Moscow-based consultancy Ikar warned only last week that Russia’s year-end grain stocks could hit 27 million mt, with three-quarters of that likely to be wheat.

That is before quality issues are delved into as well – with rains still likely to see a portion of the Russian production relegated to feed wheat, with a similar picture emerging in Australia.

Sources in the country are anticipating a huge crop – potentially even a second consecutive record of around 36 million mt, with some calling it even higher.

With the USDA currently at 33 million mt, the figure could also be pushed higher, although the big harvest is likely to continue to strain limited port logistics that could make it hard to justify any increase to the 25 million mt marked as exports.

Set against that, of course, is Argentina, where the impact of the third consecutive drought is continuing to pare back production outlooks.

Currently the USDA’s October figures hold 17.5 million mt – a 1.5 million mt reduction on the previous September figure but still looking toppy given local estimates as low as 12.5 million mt.

Any sort of cut would also call into question the 12 million mt export figure – itself also reduced by one million mt in the October update – with the government already stepping in to allow exporters with export licenses some leeway to roll their obligation into the next marketing year.