The US Department of Agriculture, in its first forecasts for 2013-14 season, pegged the world wheat harvest at a record 701.10m tonnes, lifted by a sharp recovery in former Soviet Union harvest, and increases in Australia, Canada and the European Union too.

“Production is projected higher in all of the world’s major exporting countries,” the USDA said in its benchmark Wasde report on world crop supply and demand.

Indeed, the Russian harvest was seen rebounding 49% from last year’s drought-affected levels to 56.0m tonnes, narrowly overtaking US production.

The world figure was above forecasts from other commentators, including a 695m-tonne forecast from the United Nations Food& Agriculture Organization on Thursday, and a 680m-tonne estimate from the International Grains Council.

Export competition

With all major world wheat exporting enjoying strong harvests, the US itself faced a drop of nearly 10% in its own shipments, to 25.2m tonnes (925m bushels).

“Large crops for major export competitors limit opportunities for US wheat,” the USDA said.

The impact was exacerbated by strong crops in many importing nations, with Middle Eastern purchases, for instance, expected to drop more than 20%.

“Also affecting global trade prospects are year-to-year production increases for major importers, the Middle East and North Africa, where weather has been favourable for winter crops since seeding last fall,” the USDA said.

Market reaction

World stocks were seen rising by 6.2m tonnes to 186.4m tonnes over 2013-14, with higher feed use in the likes of the European Union and Russia swallowing up much of the extra output.

Nonetheless, US farmers were expected to receive $6.15-7.45 a bushel for their wheat, down from $7.80 a bushel this season and, at the midpoint for the range, signalling a downgrade from the $7.00 a bushel the USDA outlined in initial estimates in February.

On the markets, Chicago wheat for July finished at $7.04 ¼ a bushel in late deals, down 2.7%, extending losses ratcheted up ahead of the report.

Paris wheat for November, which had shown a marginal loss ahead of the Wasde, closed down 1.1% at E208.75 a tonne.

London wheat for November ended down 0.8% at £181.50 a tonne.

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The US Department of Agriculture’s Kiev bureau forecast that the Ukraine wheat harvest will hit 22.6m tonnes this year, up from 15.8m tonnes last year, and making it the third highest out of the last 20 years.

“Winter wheat plantings were almost unaffected by winterkill and thus overall wheat area could be almost 20% higher than in the previous season,” the bureau said.

The recovery will allow exports “to increase up to 11.0m tonnes as a result of an expected good harvest and generous supply”.

‘Increase stress’

However, the forecast contrasts with lower, and decreasing, harvest estimates from within Ukraine itself, where dryness is causing increasing concerns over both winter crops and the planting of spring crops such as barley and corn.

As of April 23, Ukraine farmers had sown 3.3m hectares of spring grains, down from 6.0m hectares a year before, according to farm ministry data.

MDA warned of a further period without rain for especially eastern Ukraine, as well as south western areas of Russia, a major export area.

The six-to-10 day outlook shows that “dryness will build further in eastern Ukraine and the western North Caucasus”, the weather service said.

“This will increase stress on winter wheat.”

‘Growing concerns’

At broker FCStone, Jaime Nolan Miralles urged “caution” over trading on the USDA bureau estimates, flagging “growing concerns” over the lack of rainfall in Ukraine and southern Russia.

“Southern Ukraine in particular is lacking in moisture and temperatures are slowly pushing higher,” he said.

“Additional rains will be required, if we are not to see a downward revision to these estimates on final yield reductions.”

UkrAgroConsult, the analysis group, forecasts Ukraine reaping a 20.23m-tonne wheat harvest, with rival ProAgro putting the figure at 19.89m tonnes.

Seed boost

However, the USDA bureau’s forecast of a 22.0m-tonne corn crop in Ukraine, a rise of a little over 1m tonnes year on year, was more in line with market expectations.

UkrAgroConsult sees the corn harvest at 21.8m tonnes, and ProAgro at 21.4m tonnes.

The bureau said: “The area under corn would decline slightly as there is no need to replant large winter losses of other grains with corn as happened last year.

“However, corn yields are expected to be better.

“Ukrainian corn producers have been exploring the benefits of imported high quality hybrid corn seeds and are becoming more knowledgeable about corn seed choices.”

Ukraine corn exports – on which buyers from the Middle East and North Africa are increasingly relying, and which have reportedly gained entry to the Chinese market too – were pegged at 14.0m tonnes, a rise of 12.9% year on year.

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