Wheat prices rise to 9-month high amid USDA cut in FY2024/25 ending stocks estimate

Wheat prices continue to rise against the backdrop of frosts in northern Europe and the Russian Federation, as well as a reduction in USDA experts' assessment of world wheat stocks to a 10-year low.

WASDE's May supply and demand report raised the global wheat production forecast to a record high. However, increased consumption and exports in FY 2024/25 will lead to a reduction in ending stocks.

In comparison with the balance for 2023/24 MR, the new wheat balance for 2024/25 MR underwent the following changes:

• The estimate of initial reserves has been reduced to 257.8 million tons (270.4 million tons in FY 2023/24) due to increased consumption in the previous season.
• The global production forecast has been raised to a record 798.19 million t (787.82 million t in 2023/24 FY, 789.19 million t in 2022/23 FY, 781.3 million t in 2021/22 FY and 775.72 million t in 2020/21 MR), in particular for the USA – by 1.3 to 50.6 million tons, Canada – by 2.1 to 34 million tons, Australia – by 3 to 29 million tons, Argentina – by 1.1 to 17 million tons, India - by 3.4 to 114 million tons, Kazakhstan - by 2.4 to 14.5 million tons, China - by 3.4 to 140 million tons, which compensates for the reduction of the harvest in Ukraine by 2 to 21 million tons (although UZA estimates it at 20 million tons, and the Ministry of Agriculture - at 19.2 million tons), in the Russian Federation - by 3.5 to 88 million tons (ICAR estimates it at 91 million tons, SovEkon - at 89.6 million tons), EU - by 2.2 to 132 million tons, Great Britain - by 2.8 to 11.2 million tons.
• The estimate of world consumption was increased to a record 802.37 million tons (800.34 million tons in 2023/24 FY, 791.02 million tons in 2022/23 FY, 782.22 million tons in 2021/22 FY), with the largest - for India. At the same time, the world consumption of wheat for feed will decrease, and the most - in China.
• The global export forecast has been increased to 216 million tons (215.65 million tons in 2023/24 FY, 220.17 million tons in 2022/23 FY and 202.98 million tons in 2021/22 FY), in particular for the USA - by 1, 5 to 21.09 million tons, Canada – by 0.5 to 24.5 million tons, Australia – by 2 to 22.5 million tons, Argentina – by 2.5 to 11.5 million tons, Kazakhstan – by 1 to 10.5 million tons. At the same time, estimates were reduced for Ukraine – by 3.5 to 14 million tons, the Russian Federation – by 1.5 to 52 million tons, and the EU – by 1 to 34 million tons.
• The global import forecast was reduced to 209.42 (213.74; 211.74 and 199.37) million tons, in particular for the EU – from 13.5 to 11 million tons and China from 11.5 to 11 million tons due to the increase of own production in the main importing countries.
• The estimate of ending stocks has been reduced to the lowest level since 2015/16 MY at 253.61 million tons, which will be 1.6% less than the indicator of 2023/24 MY, although analysts estimated them at 257.37 million tons. Reduction of stocks in the EU from 16.7 to 14.44 million tons and the Russian Federation - from 11.44 to 7.99 million tons, partially compensated by their increase in the USA from 18.71 to 20.85 million tons and India - from 7.5 to 8.5 million tons.

Based on the data of the report, July wheat futures rose:

• by 4% to $243.8/t - for soft winter SRW-wheat in Chicago (+17.2% compared to the data after the release of the report in April),
• by 3.3% to $247.4/t - for hard winter HRW wheat in Kansas City (+16.4%).
• by 1.4% to $264.6/t - for hard spring HRS-wheat in Minneapolis (+11.6%),
• by 1.9% to €249.5/t or $268.7/t – September wheat futures on the Paris Euronext (+16.3%).

According to the CFTC's Commitment of Traders, wheat futures short positions in Chicago fell by 5,506 to 42,360 contracts on May 7, and by 5,597 to 24,013 contracts in Kansas City, the largest reduction since October 2023. р and indicates the fixation of profits by traders after a speculative rise in prices.