WASDE Review July 2018 : Soybean / Wheat / Corn
[Tridge WASDE Review] July 2018
United States Department of Agriculture(USDA) releases World Agricultural Supply and Demand Estimates(WASDE) reports on a monthly basis. This series of “Tridge WASDE Review” aims to analyse month-on-month changes in USDA projection.
Soybean: US Soybeans Heading Nowhere
Source: USDA, Tridge
In July 2018 WASDE report, USDA raised the projection on the U.S. soybean ending stocks by 5.3 million tonnes for MY2018/2019 from the June report. Despite the raised projection for domestic consumption by 1.2 million tonnes, the nation is expected to experience higher ending stocks due to drop in exports projection by 6.8 million tonnes, total exports coming to 55.5 million tonnes in MY 2018/2019. Such change in projection is attributable to heightened concerns on trade war between the U.S. and China. Still, such lowered global exports projection was partly offset by the raised projection on Brazil soybean exports by 2.1 million tonnes, with Chinese buyers demanding more soybeans from Brazil as an alternative to the U.S.
USDA raised its MY2018/2019 projection on Brazil soybean production by 2.5 million tonnes, from 118 million tonnes in June report. Current global trade issues with China puts two nations in an opposite position; higher price for Brazil soybean and lower price for the U.S. soybean. For Brazil, as planting season commences from August, we expect farmers to plant more soybean as the price becomes more attractive. However, a question remains as raised Brazil’s production estimate is not sufficient enough to replace the drop in the U.S. export projection. Where will China get their soybeans from? Our recent report discusses further on this issue.
Wheat: Production Forecast Down as Dry Weather Continues
Source: USDA, Tridge
USDA lowered the projection on global production by 8.4 million tonnes for MY2018/2019 from the previous month projection. This reduced production estimate is due mainly to likely reduction in global production driven by the EU. The EU alone accounted for over half of the month-on-month reduction in production forecast for wheat.
Continued dry weather in wheat exporting countries is expected to damage the crop, especially in the Northern European countries. Raised projection for the U.S. production, however, is expected to partly offset the declining production. With recent adequate rainfall in the U.S. farming area, good yields are expected for spring wheat where the harvest commences from mid-August. Still, it is is not sufficient enough, leaving the global ending stock projection to 261 million tonnes for MY2018/2019, down 5.3 million tonnes from the previous WASDE report.
Corn: Expected Growth in Animal Feed Uses
Source: USDA, Tridge
USDA lowered the production forecast for former Soviet Union (FSU) countries by 3 million tonnes from June WASDE report. USDA had cut projections for FSU countries’ production forecast for two consecutive months, down 7 million tonnes, or 13% from May WASDE report. Still, projection change for the global corn production managed to stay positive, as USDA raised U.S. corn production by 4.8 million tonnes.
However, the production forecast is far behind from catching up with the growing demand for feed usage. The projection for global corn feed usage was raised by 3.6 million tonnes, led by increased feed usage from major corn producers and importers such as China and the U.S. As such, USDA lowered the projection of global ending stock by 2.7 million tonnes for corn.
Given such changes in projection, we are left with four important questions:
1. Given the lack of soybean suppliers other than the U.S., can China find the alternative supplier?
2. Given that the U.S. will face a drop in soybean export, will the U.S. find the alternative buyer?
3. Given the expectation on weaker global production, how can buyers source for wheat at the most competitive price?
4. With rising demand for corn in feed uses, can buyers find sustainable corn suppliers?
Tridge provides advice and makes suggestions for buyers and suppliers on what might be the best option regarding the current market condition. Through our distinctive network of world-wide scope local agents, we identify the most competitive condition customised for every buyer and supplier.
Contact Us:
Editor: Eunyoo Chang / eunyoo.chang@tridge.com
Sourcing Team Expert: Eunjee Lee / eunjee.lee@tridge.com
Or request for quotation through: https://www.tridge.com/inquiry