USDA’s Estimate Shows Expected Fall in American Wheat Crop Yields, Causing Prices to Rise Slightly Due to Drought

The USDA sees yields contract by 3.8% compared to the previous season, to return to a level close to the year 2021/22. The marketing year runs from July to June and corresponds to the marketing period for crops from the previous cycle.

“The market was a little surprised by this reduction,” commented Michael Zuzolo of Global Commodity Analytics. The most traded winter wheat contract of the SRW (Soft Red Winter Wheat) variety, for delivery in July, gained 1.23% during the session on the Chicago Stock Exchange (CME).

This low estimate appears to be the result of Drought which has been hitting the plains region since late last year, particularly the states of Texas, Kansas, Oklahoma and Nebraska.

According to the USDA’s latest weekly report, about 44% of crops were rated in “poor” or “very poor” condition at this point, compared to just 39% last year.

“I have customers in Kansas and Illinois who tell me they’re not expecting better than an average crop because the (wheat) emergence hasn’t gone well,” Michael explained. Zuzolo.

Gautier Le Molgat, from Agritel, noted that world wheat production projections were higher than for the current campaign, but that this difference was mainly due to a larger harvest expected in China (+ 2.3 million tonnes).

As for corn and soybeans, the USDA’s first estimates for the 2023/24 campaign confirmed the prospect of bountiful harvests.

They even promise to be record high in both cases, at 1,219 million tonnes for corn, up 6%, boosted by the United States (+11%), and at 410 million tonnes for soybeans, i.e. 11% more than last year.

These figures are “about what we expected, maybe a little above”, according to Michael Zuzolo, “which encourages operators positioned on the downside to maintain their positions”, preventing prices from rising, a- he explained.