Analysis Grains
Australia has had a good grain harvest
The Wasde report of March is usually not the most exciting of the year. This time it is different with significant adjustments from the USDA. For wheat, the stock has been revised upwards while the ending stocks of corn and soybeans have been revised downwards. The trade restrictions looming over the market have not been included in the Wasde report. However, that does not mean that the market is not paying attention to them.
The May wheat contract on the Matif closed €2.50 lower at €221.25 per ton yesterday. The grains also took a step back on the CBoT. Wheat closed 0.8% lower at $5.41 per bushel. Corn lost 0.5% to close at $4.56½ per bushel. Soybeans moved more sideways with a decrease of 0.2%. Soybeans closed at $9.97¾ per bushel.
The USDA surprised the market with the March edition of the Wasde report. Especially for the American market, the USDA is sending a bearish signal for wheat. The ending wheat stocks in the US for the 2024/25 season are estimated at 819 million bushels compared to 794 million bushels in the February report. Traders had expected the USDA to keep the ending wheat stocks roughly the same.
The estimate of the Australian wheat harvest has been increased by 2.1 million tons to 34.1 million tons. This is the third largest wheat harvest ever for that country. Together with a larger beginning stock in Turkey and better than expected harvests in Argentina and Ukraine, the total amount of wheat available this season is estimated to be 5.4 million tons higher at 1,066.7 million tons. The wheat consumption has been increased by 2.9 million tons to 806.7 million tons. This is actually larger than the harvest of 797.2 million tons. The amount of wheat traded on the world market has been reduced by 0.9 million tons to 208.1 million tons. The world ending wheat stocks for the 2024/25 season have been increased by 2.5 million tons to 260.1 million tons.
Less corn and soybeans
For corn and soybeans, the Wasde report is more neutral or even slightly bullish in tone according to analysts. The world ending corn stocks have been reduced by 1.4 million tons to 288.9 million tons. The corn production in Argentina and Brazil has been revised to 50 and 126 million tons, respectively. However, the USDA expects Brazil to export 2 million less corn. Due to more corn being used for biofuel production, Brazilian exports are expected to reach 44 million tons according to the USDA. The world ending soybean stocks have been reduced by 3 million tons to 121.4 million tons. Just like with corn, there are no changes in the harvest forecasts for Argentina and Brazil. The Argentine harvest is estimated at 49 million tons and the Brazilian at 169 million tons.
The Wasde report does not take into account the import tariffs that Trump plans to introduce on April 2. "The Wasde report only takes into account trade policies that are in effect at the time of publication," the report states. Until the tariffs are actually implemented, the USDA does not include them in the Wasde report.
Trade war
However, the looming trade tariffs do not go unnoticed by the market. Trump admits that import restrictions can harm economic growth. This caused a significant drop in the stock markets yesterday. The commodity markets are also affected. The concern lies mainly in the response of other countries to the American import tariffs.
The European grain market is affected by a relatively strong euro. The European currency has risen to its highest point in four months against the dollar. This makes European wheat relatively expensive on the world market, which does not bode well for confidence in the futures market in Paris.
