USDA revises forecast for wheat production in the US, Russia and Ukraine upwards

The estimates of global wheat production and demand in 2015/16 (WASDE report) published yesterday by the US Department of Agriculture (USDA) came as something of a surprise. The estimate of global wheat production was upwardly revised by 2.6 million tons. 

In contrast to the market, the USDA sees the heavy rain that has fallen in US wheat growing areas in recent weeks as having a positive influence, and has revised its figure for US wheat production in the 2015/16 crop year up by 34 million bushels (just shy of 1 million tons). 

According to the USDA's estimates, winter wheat in particular could profit from the rainfall. Crop yields were raised by 0.7 bushels to 44.2 bushels per acre. Nonetheless, the USDA points to the risk of sporadic plant diseases occurring as a result of the heavy rainfall and associated higher soil moisture levels. 

As a consequence of the higher production, the estimate for US ending stocks has also been upwardly revised by 21 million to 814 million bushels, which would constitute the highest ending stocks since 2010/11, notes Commerzbank. The USDA envisages rising production in key producer countries such as Russia (+1.5 million tons) and Ukraine (+1 million tons). The USDA believes the reason for this is favourable rainfall in the spring of 2015. The latest dry spell appears to be of no consequence in this context. The US wheat price shed 3.6% during the course of trading yesterday and closed at 512 US cents per bushel.