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The US Department of Agriculture (USDA) tightened its view of US wheat balances in the January update to its influential World Agricultural Supply and Demand Estimates (Wasde) on Friday, but more than compensated for that trim with a significant upswing in global supply and ending stocks figures, as the agency zoned in on its Black Sea stance.
Analysts had expected global balances to push slightly higher but had hoped for stable US levels – as the USDA took its quarterly stock update into consideration.
And, while the domestic situation reflected a reduction in stocks that overcame a reduction in demand, Ukraine’s stocks were boosted by 2.2 million tonnes as the country’s domestic feed and residual use estimates were revisited back as far as the 2021-22 marketing year.
The data, once it landed, overturned early gains on the Chicago Mercantile Exchange’s soft red wheat contract, and hauled down a May contract that had reached $6.24 per bushel earlier in the day – up 8 cents per bushel on the overnight settle, as it slumped back to $6.14 per bushel in the immediate aftermath.
Similar ten-cent falls from the contract highs could be seen on the March, July, September and December 2024 contracts, and on the March 2025 contract.
Starting within the US, total use had a sliver trimmed off it with seed use cut by one million bushels (25,000 tonnes) to 64 million bushels, as overall use declined to 1.88 billion bushels (47.7 million tonnes).
But the overall impact was overwhelmed by the revision to stock levels, where the season’s beginning stocks were dropped by 11 million bushels (276,700 tonnes) to 570 million bushels in a move that was passed directly on to the 2023-24 ending stocks.
That still results in a year-on-year build in US ending stocks, but at 648 million bushels (16.3 million tonnes) it was still below last month’s 659 million bushels, and analysts’ expectations of 664 million bushels.
Digging into the complexion of the changes, the reduction in stocks fell on the hard red spring and winter reserves, with 2022-23 hard red winter beginning stocks trimmed by 20 million bushels to 356 million bushels (9 million tonnes).
Hard red spring was cut by a slim 4 million bushels to 142 million bushels (3.5 million tonnes), with a knock-on effect rolling into the 2023-24 beginning stocks for hard red and white wheat estimates, while soft red wheat domestic use jumped 11 million bushels to 267 million bushels (6.7 million tonnes).
Ultimately the 11 million bushel reduction in 2023-24 stock levels comprised 6 million bushels off hard red winter to 274 million bushels (6.9 million tonnes) and one million bushels off hard red spring to 177 million bushels(4.5 million tonnes).
To that, the domestic pull on soft red winter wheat cut reserves by 11 million bushels to 107 million bushels (2.7 million tonnes) while white wheat saw its feed and residual use changed to minus 5 million bushels, pushing ending stocks up to 73 million bushels.
Durum was unchanged at 17 million bushels.
For the rest of the world, the USDA undertook a significant revision to its 2021-22, 2022-23 and 2023-24 estimates as it revisited Ukraine’s production capacity in the light of Russia’s brutal and ongoing invasion.
Domestic use was the focus of the revision, with 2021-22 use cut 1.5 million tonnes to 3 million tonnes, and added straight to the country’s ending stocks.
That took Ukraine ending stocks to 6.77 million tonnes, and global ending stocks back up by a million tonnes to 273.32 million tonnes.
That trickled down into the 2022-23 and 2023-24 marketing years, with the effect exacerbated by a further reduction to domestic use in 2022-23 – down 700,000 tonnes to 7.7 million tonnes and taking ending stocks for the year from 1.3 million tonnes to 3.5 million tonnes.
Moving into the current marketing year, global starting stocks jumped 1.7 million tonnes to 271.56 million tonnes, and a broader slate of changes around the world ensured that ending stocks rose nearly 2 million tonnes to 260 million tonnes.
While Ukraine suffered a similar fate to its domestic use and ending stocks, and the reduction in US stocks was factored into global balances, both Russian and Ukrainian production also ticked higher.
The USDA moved Russia’s output to 91 million tonnes, up 1 million tonnes, and Ukraine’s up by 900,000 tonnes to 23.4 million tonnes, more than enough to compensate for a modest fall in Chinese production to 136.6 million tonnes.
As the changes settled in, Chicago tripped into free-fall with futures slumping nearly 15 cents per bushel as the market absorbed the changes, with slightly less heavy falls seen on Kansas.
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