Rabobank, Media Release, 16 May 2022

The United States Department of Agriculture’s (USDA’s) first outlook on the 2022/23 global Grains, Oilseeds and Cotton marketing year– contained in its May World Agricultural Supply and Demand Estimates (WASDE) – supports an ongoing high price environment.

The outlook shows 2022/23 may be the first year since 2012/13 in which the world has to consume less grain than the previous year – due to high prices and low supply, says Rabobank senior commodities analyst Cheryl Kalisch Gordon.  “This is forecast to be a drop of only 0.1%, but that compares to average annual growth of 2.1% over the past decade,” she said.

“However, even if less grain is consumed globally in 2022/23, this won’t prevent stocks falling to their lowest level since 2015/16, according to the USDA outlook.”

Ukraine’s grain and oilseeds (G&O) crop production in 2022/23 is forecast by the USDA to be 40% down from last year’s very strong production and its G&O exports to be down 45% compared to typical export volumes in recent years, Dr Kalisch Gordon said.

The USDA expects another reduction in wheat stocks over the course of 2022/23, taking them to their lowest in six years.  “This is bullish for wheat, especially in the short-term given this comes in below the average of trade expectations for ending stocks for the next year, and is supportive of global wheat pricing remaining elevated over the course of 2022/23,” she said. “Equally, it paves the way for ongoing exaggerated volatility in pricing in response to new developments in global wheat supply and demand – and this is ringing true as we open this week with the market digesting last Friday night’s announcement from India that it would ban wheat exports except government exports to food-deficit nations.”  

An expected year-on-year fall of 3% in global corn production – and steady consumption – is expected to eat into global corn stocks by about 1%, meaning the global coarse grain market, including for barley and sorghum, will also remain supported, Dr Kalisch Gordon said.  “This outlook should keep prices strong and the US would need to pull off a record corn yield to result in massive price pressure, but that’s something we’ll only know by September or October,” she said.

The USDA expects global oilseed production for 2022/23 to be 647.1 million tonnes, up 50.3 million tonnes from 2021/22, which was markedly lower due to drought-affected South American soybean and Canadian canola crops.  “The USDA’s forecast should underpin some softening, though not a lot, in global oilseed prices, including those for canola.  However the market will be closely watching the USDA’s forecast for Ukrainian and Canadian canola production and their expectations of the US soybean crush, so that softening is in no way guaranteed just yet,” Dr Kalisch Gordon said.  “This is especially so because the USDA forecast for Brazilian soybean production is based on trend production given that the crop is still so far from even being planted.” 

The USDA forecasts cotton ending stocks to fall again in 2022/23, but by just 1%, compared with 2021/22’s drop of 5% and the 9% drop of 2020/21. This is supportive of cotton pricing in 2022/23.

Read Rabobank global Agri Commodity Markets Research’s full analysis on the May WASDE here.