USDA reports set the tone on the US wheat market at the start of the week. Both SRW and HRW wheat came under pressure after the global production estimate was surprisingly raised by 4.4 million tons in the Wasde report. Higher harvest estimates in Russia and Argentina made the global supply outlook appear brighter. At 1.68 billion bushels, US wheat stocks also exceeded expectations, as did winter wheat sowings, which were higher than forecast by the market. Although good export figures provided short-term support, the overall environment remained bearish. In Kansas, dry prospects for the southern Plains increased concerns about stocks, which are still rated as good overall. On Euronext, wheat was volatile, but overall more stable than in Chicago. The prospect of a large tender from Saudi Arabia provided a positive boost towards the end of the week, although EU export prospects remain subdued due to favorable competition from Argentina.
The corn market experienced a massive price slump at the beginning of the week. Unexpectedly, the USDA significantly increased both acreage and yield, which pushed US production to a new record of 447.8 million tons. This revision is in contrast to previous historical practice and continues to puzzle analysts. Demand, meanwhile, was solid: ethanol production reached a new record high and export figures remained robust. The private trade also reported extensive sales. In South America, drought in Argentina had a negative impact on stock valuations. Nevertheless, corn was only able to recover temporarily. The price only stabilized towards the end of the week, with the Euronext decoupling from the downward trend in Chicago at times.
ZMP Live Expert Opinion
Following the surprising flood of USDA reports, the market picture for wheat and corn has clouded over considerably. The massive increase in US acreage caused uncertainty, particularly in the case of maize, as this development is neither historically normal nor can it be explained by obvious factors. The high global supply of both crops is putting additional pressure on prices. On the demand side, however, there are bright spots, such as strong ethanol production and isolated large export tenders. The markets should stabilize at a technical level in the short term, but remain fundamentally susceptible to further bearish impulses.
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