Global wheat market: Wheat prices fall as global supplies increase

World wheat prices were mostly lower in the week ending Nov. 11, 2022, as the U.S. Department of Agriculture revised up global wheat supply data in its November supply and demand report and U.S. wheat export sales were sluggish. But continued drought in the United States and Argentina has worsened production prospects, limiting the downside. The market will also continue to focus on the Black Sea export talks ahead of the expiry of the Black Sea agreement on November 19.

Chicago Board of Trade (CBOT) December soft red winter wheat futures closed Friday at $8.1375 a barrel, down 4 percent from a week ago. December hard red winter wheat futures traded on the Kansas City Board of Trade (KCBT) closed at $9.435 / bushel, down 1 percent from a week ago. December hard red spring wheat futures on the Minneapolis Grain Exchange (MGEX) closed at $9.4575 a barrel, down 0.9 percent from a week ago. Euronext's December 2022 contract closed at 327.25 euros a tonne, down 3.5 percent from a week ago. Argentine wheat spot prices were quoted at $411 a ton, down 0.5 percent from a week ago. The ICE dollar index closed Friday at 106.164, down 4.2 percent from a week earlier.

The US Department of Agriculture unexpectedly raised wheat production in Australia and Kazakhstan

In its November supply and demand report, the USDA left its 2020/23 US wheat production and export forecasts unchanged, but revised up food demand, reducing US wheat ending stocks to 571 million cu, down 14.6 per cent from last month's estimate of 576 million Cu.

In terms of global wheat supply and demand, the 2020/23 global wheat production estimate was raised this month by 1 million tonnes to 782.7 million tonnes, up 0.4 per cent year on year, as production upgrades in Australia and Kazakhstan more than offset cuts in Argentina and the European Union.

Despite fears of damage to the quality of Australian wheat due to flooding caused by heavy rains in parts of the country, the US Department of Agriculture this month raised output to 34.5 million tonnes, 1.5 million tonnes above last month's forecast and just 5.1 per cent below last year's record high of 36.35 million tonnes. The USDA cited above-average or above-average soil moisture in the root system of the major growing regions, supporting yield potential per unit area.

Kazakh wheat production this month was revised up by 1m tonnes to 14m tonnes, up 18.5 per cent from a year earlier.

This month the US Department of Agriculture cut Argentina's wheat production by 2m tonnes to 15.5m tonnes, down 30% from a year earlier. In contrast, Argentina's local exchange is forecasting production of only 11.8 to 12.4 million tons, down about 50 percent year on year.

Eu wheat production is expected to be 134.3 million tonnes, down from last month's forecast of 134.8 million tonnes and down 2.9 per cent year-on-year.

Global wheat supply estimates were raised by 1.3 million tonnes to 1.059 million tonnes due to higher start stocks and production. The 202/23 global wheat ending stock estimate was revised up by 300,000 tonnes to 267.8 million tonnes, down 3.1 percent year-on-year.

Notably, this month the USDA left its Russian wheat production forecast unchanged at 91 million tonnes, despite recent substantial increases in Russian wheat production forecasts by local agencies, including SovEcon's forecast of a record 2020/23 wheat crop of 100.6 million tonnes. IKAR expects wheat production to reach 101 million tons.

Rainfall in the US plains helped improve wheat ratings, but remained at record lows for the time of year

Rainfall in much of eastern and central Kansas helped improve U.S. winter wheat rates in the week ending Nov. 8, according to the U.S. Department of Agriculture's Weekly Crop Progress Report. As of Nov. 6, the U.S. rate of good and good winter wheat rose to 30 percent from 28 percent a week earlier, but remained the lowest for this time of year since the 1980s. The U.S. winter wheat planting schedule is 92%, compared with a five-year average of 90%. The emergence rate was 73%, compared with a five-year average of 74%.

The U.S. Drought Monitor reported that several inches of rain fell over much of eastern and central Kansas during the week ending Nov. 8, bringing the state's drought rating down. But the areas that missed the rain had improved drought ratings. Northeastern and western Nebraska were upgraded to extreme drought and super drought. Drought areas also expanded in western Kansas, eastern Colorado and eastern Wyoming.

On Friday, the U.S. weather agency predicted that temperatures in the Northern Plains could drop below freezing in the coming days. Cold rain is possible in the Southern Plains early next week.

It should be pointed out that spring rainfall has a much greater impact on the yield potential of winter wheat per unit area than autumn and winter weather. As La Nina weakens next spring, drought levels in the Great Plains could lessen, helping to improve winter wheat conditions. The Japan Meteorological Agency expects an 80 percent chance that La Nina will last until the middle of the northern winter and a 70 percent chance that it will last into the spring.

U.S. wheat exports still lag

The U.S. Department of Agriculture's weekly export sales report showed net U.S. wheat sales for 2020/23 in the week ended Nov. 3 were 322,500 tons, down slightly from 348,100 tons a week earlier and at the lower end of market expectations. Us wheat export sales for the year to date totalled 12.49m tonnes, down 5.9 per cent from a year earlier.

Argentine wheat production continues to fall sharply

Two Argentine grain exchanges this week again significantly cut their forecasts for Argentina's wheat production. The Rosario Exchange on Wednesday cut Argentina's 2020/23 wheat crop to 11.8 million tonnes, down from last week's forecast of 13.7 million tonnes, the lowest output since 2015/16 (10.9 million tonnes) and 48.7 percent lower than last year's record 23 million tonnes. The Rosario Grain Exchange said wheat production could still be cut further as the drought continues. The next day the Buenos Aires Grain Exchange cut its forecast for wheat production to 12.4m tonnes, down from 14m the week before. In contrast, the U.S. Department of Agriculture on Wednesday cut its wheat production in Argentina by 2 million tons to 15.5 million tons.