The projected world Wheat supply was revised up in the June WASDE report as higher production is now expected in Europe and China.
Higher projected European corn production means that the projected world corn supply has also been revised higher.
Overall, June’s WASDE report thereby confirmed the benign grain supply outlook.
Earlier today the US Department of Agriculture (USDA) published June’s World Agriculture Supply and Demand Estimates (WASDE). The biggest revision for the 2014/15 marketing year was to the outlook for wheat supplies. Projected wheat output was revised 4.5mt higher compared to the projections in the May report despite projected US production being revised lower on the back of the low crops progress following the cold winter and dry weather. Larger output from Europe and China will more than offset the lower projected US output.
Projected corn output was also revised higher – around 2mt – on the back of higher projected European output. Projected corn demand was also revised up by close to the same amount, leaving ending corn stocks 0.9mt larger in the 2014/15 marketing year. There were also minor revisions to the outlook for soybean and soybean products production. Soybean ending stocks were revised higher by 0.7mt, while soybean meal ending stocks were revised down by 1mt.
Hence, overall June’s report confirmed the rather benign outlook for world grain supplies, which was further illustrated by the market reaction to the release. The corn and wheat price dropped around USD6/bu. and USD14/bu. respectively immediately following the publication of the new estimates, while the soybean price was more or less unchanged.
However, looming El Niño weather may change this. Recent El Niño forecast reports indicate that El Niño weather may approach already in July, while further suggesting that it most likely will be a weak or moderate El Niño. If El Niño weather develops during the summer, it will affect Australia’s large wheat crops, but also crops in Southeast Asia. El Niño weather will most likely push prices up and increase volatility. How much, depends on how strong it will be. If it turns out to be a weak El Niño, the impact will probably be limited.
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