USDA estimate June 2013

USDA crop estimate 2013/14 from June 12, 2013

Downward revision to the May estimate - high increase in production but limited improvement in the supply situation compared to the previous year.

The latest USDA harvest estimate delivered few surprises, but remained largely in line with expectations. Stock market prices fell moderately; in Paris, the €200/t wheat price barrier was breached.

Key results for the global grain sector:

• The global grain harvest is estimated at 1,945.9 million tons, "only" 163 million tons higher than the May estimate. The wheat harvest was estimated to be around 5 million tons lower due to drought-related harvest losses in the Black Sea region and Europe. In the USA itself, the wheat harvest was surprisingly rated higher due to the first good threshing results. Other cereals - especially maize - were estimated to be a few 3 million tons lower due to a downgrading of the late US maize sowing with lower assumed yield potential.
• Consumption figures changed only slightly, with shifts between the animal feed and bioethanol sectors partially offsetting each other.
• Global trade in grain increased by 1.5 million tons.
• Although the calculated final stocks for 2013/14 are expected to rise by 32 million tons, the price-critical ratio of final stocks to consumption is now only 19% compared to the May estimate of 19.6%. In the past year, the supply ratio was only 18.4%. The multi-year average is just under 20%.

Significant production areas:

• The world's largest US harvest was downgraded by the USDA by around 3 million tons to 429 million tons compared to the May estimate, largely as a result of the reduced corn harvest.
• The second-largest harvest in China is expected to increase by 6 million tons compared to the previous year, while imports are also expected to rise by 6 million tons. Nevertheless, stocks of feed grain in China are expected to fall by 5 million tons and wheat stocks are expected to rise by 2 million tons.
• The USDA estimates the EU-28 harvest at 289 million tons, lower than the EU Commission's estimate of 291 million tons. The USDA emphasizes the shortfalls in the UK and in some south-eastern European countries such as Romania and Bulgaria.
• In the export-oriented southern parts of Russia (- 2 million tons) and Ukraine (- 2.5 million tons), harvest results were downgraded due to drought. The export volume of both countries together is expected to be 2.5 million tons lower.
• The major export countries in the southern hemisphere, Australia and Argentina, were taken over unchanged from the May estimate; both together are expected to bring in 6 million tons higher harvests in Nov/Dec 2013 compared to the previous year.

ZMP opinion: The ratio of final stocks to consumption (stock-to-use ratio) is decisive for pricing. At 19%, the currently estimated value is below the multi-year average. According to the old market rule, prices should be above the multi-year average.

Bullish factors: uncultivated US maize sowing areas not taken into account, increased risk of delayed maize sowing for the yield formation phase from the end of July/August, further monsoon-related harvest risks in India and in the countries of the southern hemisphere

Bearish factors: declining consumption due to reduction in livestock numbers; old market rule: rain brings grain, rising euro exchange rate

Comparison of different estimates: the changes are decisive