Wheat Prices Decline Amid Optimistic USDA June Report

USDA Report Surprises Traders

Wheat prices continued to decline following the release of the June USDA report, which presented more optimistic data than traders expected. Despite a forecasted drop in global production for the 2024/25 marketing year by 7.44 million tons, the USDA’s report provided a less bearish outlook than anticipated.

Global Wheat Balance for 2023/24 MY

The global wheat balance for the 2023/24 marketing year saw several key revisions:

• Initial Stocks: Revised upward by 0.6 million tons to 271.04 million tons.
• Export Estimates: Increased by 3.3 million tons to 218.95 million tons.
• Import Forecast: Raised by 3.46 million tons to 217.2 million tons.
• Consumption Forecast: Reduced by 1.26 million tons to 799.08 million tons, increasing initial stocks for the new season by 1.76 million tons to 259.56 million tons.

Additionally, the 2023/24 marketing year wheat export forecast was revised upward for the EU, Canada, Ukraine, and Russia, but reduced for Australia, Argentina, and Kazakhstan.

Revised Global Wheat Balance for 2024/25 MY

The June report included several adjustments for the 2024/25 marketing year compared to the May estimates:

• Initial Stock Estimates: Raised by 1.76 million tons to 259.56 million tons due to revisions in the 2023/24 balance.
• Global Production Forecast: Reduced by 7.44 million tons to 790.75 million tons, still higher than 787.59 million tons in the 2023/24 MY. Notable reductions included:
• Russia: Reduced by 5 million tons to 83 million tons.
• Ukraine: Reduced by 1.5 million tons to 19.5 million tons.
• EU: Reduced by 1.5 million tons to 130.5 million tons.

These reductions were offset by increases in the U.S. and Argentine harvests.

• Global Consumption Estimate: Reduced by 4.33 million tons to 798.04 million tons, mainly due to lower consumption in the EU, Russia, and Ukraine.
• Global Export Forecast: Reduced by 3.19 million tons to 212.81 million tons, with significant reductions for Russia, Ukraine, and Australia. These reductions were offset by increases in U.S. and EU exports.
• Global Import Forecast: Reduced by 2.34 million tons to 207.08 million tons, including a reduction for the EU due to rising global prices and increased corn consumption for feed purposes.
• Ending Stocks Estimate: Reduced by 1.34 million tons to 252.27 million tons, 2.9% less than in the 2023/24 MY, though slightly higher than analysts’ expectations.

Market Reaction

Following the report’s release, July wheat futures declined:

• Soft Red Winter (SRW) Wheat in Chicago: Fell by 1.6% to $226.7/t (-7.5% compared to post-May report data).
• Hard Red Winter (HRW) Wheat in Kansas City: Dropped by 2.9% to $234.1/t (-5.7%).
• Hard Red Spring (HRS) Wheat in Minneapolis: Decreased by 1.6% to $245.5/t (-7.8%).
• September Wheat Futures on Paris Euronext: Fell by 2.7% to €249.5/t or $259.2/t (-4%).

The June USDA report has significantly impacted wheat prices, presenting a more optimistic outlook than traders had anticipated. While the report acknowledged reductions in global production, the revisions were not as severe as expected. This has led to a notable decline in wheat prices, particularly in key futures markets. Market participants should continue to monitor these developments closely as the season progresses, considering the potential implications for global supply and demand dynamics.