Market Insider

USDA Makes Major Bullish Cuts for Global Wheat

Grain futures all headed higher through the middle of August as the USDA’s monthly WASDE report showed reduced production across the board for the 3 major crops of corn, soybeans, and wheat, but wheat continues to have the most bullish undertones. The smaller wheat crop – namely due to downgrades in Russia, Canada, and the U.S. – has propelled Chicago futures higher by nearly 15% in the past 3 weeks, and that has also supported corn prices going higher. Soybean prices continue to see positive momentum as well thanks to continued strong demand, U.S. yield reductions, and the USDA dropping the Canadian canola crop by 4.2 MMT to 16 MMT on the drought in the Canadian Prairies. 

While American farmers will still produce their second-largest corn crop and third-largest soybean crop ever, there are concerns that the USDA will continue to drop yields as more is understood of the damage in the Northern Plains. The government body dropped their corn yield estimates in Minnesota, South Dakota, and North Dakota by at least 20 bu/ac. However, making up for the downgrades are Illinois, Indiana, and Ohio, which are all forecasted to experience record yields. Overall, total U.S. corn production is now pegged by the USDA at 14.75 billion bushels, up 4% year-over-year, but down 3% from last month’s July WASDE, while the soybean crop is estimated at 4.34 billion bushels, up 5% YoY, down 1.5% MoM. 

However, the bigger story continues to be wheat where, in the U.S., a total harvest of 1.7 billion bushels will be the smallest crop in 19 years, barely beating the 1.6 billion bushels of output back in 2002. American spring wheat production was lowered month-over-month by 3M bushels (9.3 MMT), but at an average yield of 30.6 bu/ac, it should only produce 343M bushels or a drop of 41% compared to Harvest 2020. The U.S. durum harvest was slightly increased to 21M bushels (or ~571,000 MT). Unsurprisingly, U.S. millers will have to import much more wheat, about 1.2 MMT more than last year according to the USDA for a total of nearly 4 MMT. 

The U.S. will have competition though as there were some very big drops in production estimates made in Russia and Canada. In the former, the USDA lowered their wheat harvest estimate from 85 MMT last month to 72.5 MMT this month, which would be a 15% fall year-over-year. With their exports also lowered by 5 MMT for the 2021/22 crop year, it’s likely Ukraine will benefit the most, as their wheat harvest was upgraded by 3 MMT, and exports by 2.5 MMT. Australia also saw a production increase from the USDA’s estimates in July, with their harvest AND exports moved higher by 1.5 MMT each.  

The spotlight continues to be on Canada though, as the amount of high-protein wheat coming out of the Canadian Prairies remains disappointing. The USDA finally acknowledged this in their August WASDE last week, dropping the total Canadian wheat harvest by 7.5 MMT to 24 MMT, which would be a drop of 32% year-over-year and one of the smallest harvests since 2010’s 23.2 MMT. Quite honestly, most analysts I know are actually sitting on a number somewhere between 20 – 23 MMT, and Statistics Canada is admitted that they’re looking at data all the way back to the drought of 2002 to ensure their quality indicators are reliable. That said, StatsCan’s satellite-based estimates may be helpful, but we’re not set to get that for another month, as it comes out on Tuesday, September 14th

Plainly speaking, between increased freight costs and shipment challenges, and now lower available supplies, many international buyers are starting to feel a bit panicked by their coverage and are bidding up to cover their needs. Inherently, this is helping push prices higher, both in the papers/futures trade, as well as in the cash market. Ultimately, in the global wheat market, this is a year of haves and have nots and the likes of the EU, Ukraine, Australia, and possibly even Argentina could benefit the most. Inherently, I’ll reiterate the importance of knowing the quality of what is able to harvest, and staying in constant contact with your trusted trading partners, be it with all of them at the same time on a simple platform like, or just one-by-one phonecalls.

To growth, 

Brennan Turner