The 2020/21 wheat crop begins to enter the ports of Gran Rosario
With the advance crop in the north, the entry of wheat to the Gran Rosario plants reached 210,000 tons, 15% below the discharges on the same date in 2019. Grain prices for November are the highest since 2013.
The harvest advances in the northern zone of the national wheat area, reaching an advance of 10% of the area planted at the country level, and with this, the grain begins to enter the plants and terminals of the Gran Rosario. In the last 10 days an average income was close to 500 trucks of wheat per day, more than tripling the average income of the last ten October. Income is expected to accelerate as the croppers advance, deepening towards December, when threshing becomes general in the core zone.
The main elements that are conditioning the wheat market are analyzed one by one below:
1) Since the beginning of the harvest back in mid-October, the entry of new wheat to the Gran Rosario plants reached 210,000 tons, 15% below 2019.
Since mid-October, it is estimated that 210,000 tons of new wheat entered the zone’s terminals for export, mainly from the provinces of Chaco, Santiago del Estero, and the north of the province of Santa Fe, the most advanced areas in threshing. In comparative terms, revenues are 15% below last year as of the same date, mainly due to the effect of poor yields in the areas where they are harvesting.
The export sector, however, does not seem to have a very pressing need to originate merchandise in the short term, with commercial stocks in the hands of port terminals, warehouses, and industries at the highest levels in 5 years to date; and an undemanding shipment schedule in the short term. The scheduled load on ships from November 11 to 30 reaches 125,500 tons, when in the same period last year, this figure reached 156,500 tons, and more than 440,000 tons in 2018.
2) Wheat business for delivery from November reaches 1.19 Mt, below the last two seasons
The lower scheduled loading on ships for the first weeks of November is correlated with a drop in the volume committed to discharging this month in the domestic market, and with the scarce competitiveness of grain in international markets. Indeed, according to the records of SIO Grains, the businesses committed for delivery in Gran Rosario as of November reach 1.2 million tons, below the last two campaigns, and the same trend can be seen for the business with delivery from December. Uncertainty about yields has led producers to adopt a conservative attitude when closing deals.
3) Harvest prices in the current campaign are the highest since 2013 measured in dollars
As for the market outlook, the prices that the producer is finding at the time of starting the threshing are the best since 2013, measured at the dollar with which the operations are settled, with a slate price that on Wednesday 13 reached US $ 215 / t. This trend in prices is mainly explained by the poor harvest that is expected to consolidate the campaign, as well as by factors related to external markets.
Concerning local factors, the supply outlook seems increasingly tight. The production estimate for the 2020/21 wheat campaign in our country was again cut, as a result of a drop in expected yields in the provinces of Santa Fe and Córdoba, only partially offset by a better outlook for crops in the province of Buenos Aires. The Strategic Guide for Agriculture (GEA) in its latest monthly report, estimated a production of 16.7 million tons, in what would be the worst harvest in the last five years, even despite representing the second largest area planted since the 2007/08 campaign.
4) The 2019/20 wheat production estimate is cut to 16.7 Mt, the lowest production in the last 5 seasons
The lower total supply for the campaign cuts the exportable balance for the new cycle to 10 million tons, placing it 17% below the previous year, and in what would mark the lowest record since 2015/16. With a domestic consumption that is not expected to undergo large variations, final stocks are adjusted to 2.6 million tons.
5) The final wheat stock of the main exporters worldwide would reach 62.4 Mt in the 2020/21 season, below the average of the last 20 years.
On the international front, the latest monthly Supply and Demand Estimates report published by the US Department of Agriculture (USDA) on Tuesday gave an upward boost to the commodities market, with the balance sheet for wheat specifically presenting an estimate of the final world stock for the 2020/21 campaign slightly lower than that estimated in September. Even so, the weekly accumulated was negative for wheat, cutting part of the rise that led it to hit maximums in 5 and a half years at the end of October.
The reduction in stocks arises from an upward revision in domestic use projected at a global level of 1.6 Mt, and a cut in world production from 0.7 Mt to 772.4 Mt. On the other hand, an increase in the production estimate for Russia up to 83.5 Mt (↑ 0.5 Mt), implying higher exports for that country. For the European Union, production was cut slightly and the volume of exports also rose.
Despite the cut, global stocks at the end of the new season are still expected to reach the highest value in history, at 320.5 million tonnes. However, if we analyze the panorama considering the main exporters worldwide, whose stocks are more correlated with price trends due to their participation in export markets, the panorama is not so comfortable. The final stock for Argentina, Australia, Kazakhstan, the European Union, Russia, Ukraine, and the United States would be at a very similar level to last season, with just over 62.4 million tons, which is significantly below the average of the last 20 years.
WBL Shipping Agency
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