WASDE preview: Global wheat export change the one to watch

Despite an action-packed month in the wheat market which saw weather-related fears driving a futures rally, the market will have to wait until May before it sees any reflection of recent winterkill and drought fears on the supply side, leaving the market expecting a business-as-usual release for tomorrow’s WASDE.

A market survey from Bloomberg put US domestic carryover stocks at 988 million bushels on average, 1 million bushels lower than the January report, with a range of estimates covering from 937 million bushels to 1.01 billion bushels.

“A case could be made for a 25 [million bushel] decrease, although the USDA will likely take a conservative stance with an unchanged estimate,” said Advanced Trading in a research note Tuesday.

Analysts are not expecting many surprises on the global stage either, with an average estimate of 267.7 million mt down from 268 million mt last year, with the range of estimates from 265 million mt to 269.7 million mt.

“Wednesday’s S&D is not likely to see the wheat carryout move more than 10 million bushels from the January number, nor more than a million tonnes on the world S&D ending stocks,” said Charlie Sernatinger of ED&F Man in a note Tuesday.

The pace of sales means there is not much prospect of a major adjustment to the US export figures.

While weekly export sales and export sales inspection estimates have repeatedly fallen short of analysts' hopes in recent weeks, wheat has been much closer to last year’s performance than corn or soybeans, with 16.6 million mt inspected this year versus 17.5 million mt last year.

Export sales, meanwhile, stand at 27.56 million mt – 11% lower than at the same stage last year, while soybeans are down 13% and corn 20%.

Around the world there are some potential curveballs for the USDA to deal with as Russian wheat exports for 2017/18 are currently forecast at 35 million mt, but could yet be revised as logistics and stock considerations intervene.

Russian government officials are now openly talking about grain exports being 2 million mt higher at 47 million mt, and could be bolstered further after their announced intention to release at least 500,000 mt of grain from state reserves to the export market in June 2018.

Wheat comprises the bulk of these reserves.

And, while wheat exports are 34% higher than at the same stage last year after a record-breaking crop, the pace of loadings has slowed down considerably in recent weeks and is at its lowest levels since the start of the marketing year as ice and weather slow logistics.

The EU was adjusted down to 27 million mt in the January report, and there remains further scope for adjustment as the pace of loadings there also continues to show little sign of improving with the relative strength of the euro making EU wheat uncompetitive.

Wheat loadings are 2.8 million mt behind the same stage of 2017, according to the latest EU data, with last year’s exports falling just shy of 24 million mt.

Pakistan, while not traditionally a major exporter, could see an increase on the back of a new state-led export initiative which aims to export 2 million mt of excess supply this year.

With USDA export expectations currently at 600,000 mt, market rumours already have 200,000 mt of sales to East Africa in additional to typical sales of 400,000 mt to Afghanistan, leaving scope for a bigger number in tomorrow’s WASDE.