Estimates predict 50% larger wheat crop in 2021

As we come to the end of what has been a truly challenging year, Grain Trader Claire Strachan looks ahead to what we have in store in 2021 in her latest wheat update.

The latest USDA report this month had expected to present a bullish picture for corn and beans whilst less supportive for wheat due to recent upgrades made to Australian and Canadian wheat production estimates.

The final estimates for 2020 unsurprisingly raised global wheat production by 1.28Mt to 773.66Mt. US and global ending stocks are expected to shrink on higher consumption and Chinese wheat demand was raised 3Mt to a total of 24Mt, while imports were also raised 0.5Mt to 8.5Mt.

For corn, expectations for reductions to South American crops were not realised, with only a marginal shaving of 1Mt made to the estimated corn crop and Brazilian production left unchanged.

Pre-report estimates had expected to see bigger reductions on the back of continued dry weather and, as the biggest competitor for corn supply to the US, further reductions would draw attention back to US supplies.

Recent developments coming from Russia have caused plenty of volatility in the market over recent weeks. After initially setting export quotas between 15th Feb – 30th June of 17.5Mt, this was then altered with the view of imposing export tariffs between that period.

The tariffs, which have now been confirmed, will be set at €25.00/t and will come into effect during the four-month period. These have been introduced to contain rising domestic values due to a weaker rouble.

Initially, we saw markets shoot up on the prospect of reduced supply. However, market momentum didn’t hold and the next trading day the majority of gains were given back, predominantly on the expectation that it is likely we will see a surge in shipments up to that date and no shortage of supplies elsewhere during this time.

In the latest report from Strategie Grains, the EU 27 soft wheat production has been placed at 129.61Mt, with an additional 15Mt estimated for the UK bringing the total to 144.61Mt. The estimate this month was increased after a month of further favourable weather for crop production.

UK wheat values have been no exception to volatile market movements in recent weeks. With Sterling following Brexit negotiations closely, the weaker pound has offered strength over recent months.

This week, Defra released their final results for the 2020 wheat crop estimate, which downgraded the latest estimate from 10.13Mt to 9.66Mt. Whilst it is felt this figure is far more accurate, there is still a degree of scepticism on how accurate this is, based on the number of responses in comparison with previous years.

Of course, the UK will need to import to satisfy further demand and despite Brexit discussions appearing to lean towards a trade deal between the UK and EU, some logistical issues have already begun to materialise.

It’s clear the start of the new year will be a challenge for the UK, with potential trade disruptions and ongoing COVID-19 restrictions posing further threats to our hospitality industry. But on a positive note, it is looking like we will be returning back to a wheat crop 50% larger than 2020 with current estimates confident of a 15Mt crop.

With Nov21 staying firm around the £160/t level, this is allowing growers to price wheat at reasonable values for the following harvest.

Closing in on the year, we at MSP would like to thank you for your support this year and wish you all the best for 2021.

If you want to discuss wheat marketing options, please do not hesitate to get in touch with us via email by contacting [email protected]