Volatility in the grain market has dampened down a bit, at least for now.

A switch in the Ukraine war battlefronts away from ports and grain infrastructure has contributed to the smoother ride, easing concerns of setbacks to exports from the Black Sea.

Nerves ahead of the USDA’s just-released Wasde report dampened volatility too, with many investors reluctant to stick their neck out too far in case of surprises in the benchmark briefing. (See below for CRM Agri’s immediate reaction to the report).

Sure, US corn and soybean crops got off to a dire start, and remain in worse-than-usual condition for the time of year, according to official crop ratings. However, recent weather has been benign, and NDVI scores drawn from satellite data have shown a more promising yield picture.

Such conflicting dynamics have instilled market caution, notably in the soybean market. Expectations for the revision in the USDA’s soybean harvest-23 forecast shown in the Wasde varied from a downgrade of 5.5Mt to no change at all.

Not that the US production outlook, while taking a high profile this week, is the only game in town. Brazil is, having harvested a record soybean crop and with a record safrinha corn harvest in train, proving a key influence on both markets. This is analysed in greater detail in this week’s CRM Agri Grains and Oilseeds reports.

The Grains report also discusses factors such as corn price seasonality and, in wheat, the start to Ukraine’s 2023/24 export season and the impact of currency markets on European values.

The Oilseeds report also analyses dynamics such as the wide contrast in major rapeseed exporters’ crop fortunes, and unusually high soybean crush margins.

CRM Agri will examine the Wasde in detail in its Monthly report next week, which will also include updated corn, rapeseed, soybean and wheat price forecasts.

Wasde analysis – Production estimates cut, but demand hopes trimmed too

The USDA’s August Wasde report cut forecasts for world production of corn, soybeans and wheat in 2023/24, reflecting in the main downgrades to expectations for output by major exporters, including the US.

However, with expectations for demand reduced too, the report had little immediate impact on prices.

Corn

The USDA cut its forecast for this year’s corn yield by 0.15t/ha to 11.0t/ha, stripping it of record status.

The downgrade, which was marginally larger than the cut speculative investors had pencilled in, read through into a bigger-than-expected reduction of 5.3Mt to 383.8Mt in the production estimate, taking it below the 2016 high.

However, the downgrade to the 2023/24 US carryout stocks figure was reduced by a more modest 1.5Mt to 55.9Mt, factoring in reduced expectations for feed and export demand. Stocks will thus still expand by nearly 19Mt next season, around the level investors had expected.

At a global level, the USDA cut its expectations for the Russian and, especially, EU corn harvest this year. “EU corn production is sharply lower with reductions to both area and yield,” the USDA said.

Still, the EU’s dryness reduced corn harvest, downgraded by 3.7Mt to 59.7Mt, will remain above last year’s 52.2Mt result.

Soybeans

The USDA cut its forecast for the US yield by 0.08t/ha to 3.42 t/ha, a little more than the market had expected, demoting it to the third largest on record, and resulting in a bigger-than-forecast crop downgrade of nearly 3.6Mt to 114.5Mt.

However, the downgrade to the US carryout figure for 2023/24 was limited to 1.5Mt, taking it to 6.7Mt, with the soybean export forecast reduced too below 50Mt.

Wheat

For wheat, the USDA cut its forecast for world production by 3.3Mt, reflecting revisions including cuts to China and the EU of 3.0Mt apiece, and a 2.0mt reduction to the Canadian harvest “on worsening drought conditions in the Prairie provinces”.

Chinese and Canadian harvests will now decline year on year, with this year’s EU crop, at 135.0Mt, seen growing only 860kt from 2022.

However, these downgrades were in part offset by an increased expectation for Ukraine’s output, upgraded by 3.5Mt to 21.0Mt “on higher area harvested and yields, with the forecast yield the second highest on record”.

Factoring in the enhanced Ukrainian harvest, the forecast for stocks held by major exporters at the close of 2023/24 actually loosened by 0.5 points to 24.9%, compared with domestic use, although this would still represent the tightest figure in 11 years and is unduly reliant on Ukraine and Russian origin.

The estimate for the UK wheat harvest was held at 15.5Mt.

Rapeseed

The forecast for Canada’s canola harvest was cut in line with last year’s 19.0Mt result, with export and carryout inventory estimates downgraded too.

Indeed, the forecast for major exporter inventories, compared with use, fell to 10.8%, signalling the tightest market this century on this metric.

CRM Agri will unveil more detailed Wasde analysis in its Monthly Global Grain Report next week.