Harvest estimates in comparison

Crop estimates 2013/14 - Same direction, different extent of results.

Two new crop estimates for 2013/14 were published almost simultaneously, with the forecast by the USDA in Chicago attracting more attention than that of the FAO in Rome. The IGC forecast was published almost 3 weeks ago. The results remain largely in line with expectations, which were still broadly based at the time. Stock market prices fell moderately, in Paris the price dam of 200 €/t wheat was broken downwards. Spot prices fell significantly. Speculatively hoarded goods depressed!

Key results for the global grain sector:

1. comparison of harvest results

As each institution uses its own estimation method, it is not so much the absolute values but the changes that are of meaningful interest.

Despite reductions already made compared to the May estimate, the USDA's forecast of +163 million tons remains 22 million tons higher than the FAO's +141 million tons and the IGC's +130 million tons. This is primarily due to the USDA's maize estimate being 15 million tons higher. The wheat harvest forecasts differ in almost all major growing regions. The greatest uncertainty exists in the export-oriented southern parts of Russia and Ukraine as to whether and to what extent a dry phase has caused harvest losses there. The Russian announcement that it will buy up more grain for intervention stocks is causing confusion.

If one takes the differences in the various estimates of crop growth as a basis and relates them to the total harvest, an estimation error in the order of 1.5% emerges.

2. comparison of consumption estimates

Estimates of the increase in consumption vary widely. The approximately 30 million tons higher feed consumption estimate of the USDA compared to the FAO accounts for a significant share of this. However, there are also unexplained losses in the US feed position. The estimation error difference here is a rough 2 %.

3. comparison of ending stocks

Ending stocks for 2013/14 are expected to increase by 32 / 33 million tons (USDA, IGC) or 50 million tons (FAO). The price-critical ratio of ending stocks to consumption rises to 19% in the case of the USDA estimate, while the FAO figures show much more favorable supply figures. Accordingly, there are different statements regarding the possible price development. The differences in estimates here are 4.5%.

At this early stage, the differences in estimates are within the usual range. The decisive factor for pricing is the change in the supply situation measured in terms of final stock to consumption. The FAO estimate sees the supply situation in 2013/14 in the upper average range. In the case of the USDA and IGC estimates, the result is that although there is an improvement on the previous year, the supply situation is still below the multi-year average.

ZMP opinion: The estimated above-average production increases are a combination of the very weak previous year's harvest and assumed high harvest increases due to acreage expansion and above-average yield assumptions. The US maize harvest plays a key role, accounting for 50% of global growth. Low initial stocks and increases in consumption are largely consuming the growth in production, leaving little left to replenish stocks.

If the supply situation is assessed using the stock-to-use ratio, only the FAO estimate shows a good average of over 20%, meaning that prices should be below average. Although the USDA and IGC estimates show improvements compared to the previous year, the key figures remain below the multi-year averages. From today's perspective, this indicates good average prices. But the decisive yield formation phase has not yet begun!

Bullish factors: Recent impairments of the sowing areas have not yet been taken into account.

Bearish factors: "Rain brings grain", if the rainfall is not already too much of a good thing.

in both directions: the decisive yield formation phase is only just beginning

Supplementary reading aid to the chart for the HRW No 1 fob Gulf price: international benchmark price for wheat, loaded onto ships in the Gulf of Mexico. Depending on the market situation and the dollar exchange rate, the German producer price level is 123 per tonne lower; example 2012/13: 337 $/t - 113 => 224 €/t annual average; estimate for 2013/14: 300 - 113 => 187 €/t