Crop Update for the 2018–2019 Season

GMO Maksud/Adobe Stock

Spend Matters welcomes this guest post from Verity Michie, market analyst at Mintec.

Last week the U.S. Department of Agriculture released the new agricultural crop fundamentals for the upcoming 2018–2019 season, and there have been some surprising results.

At the end of April, there was news that shook the commodities markets following adverse cold and wet weather conditions in the U.S. throughout the first five months of 2018. Reports said that less than half of the 2018–2019 season spring crops had been planted compared to the average size of plantings for the past five years. Now that we have the official USDA figures, let’s see the influence that the weather has had on the upcoming season.

Maize

U.S. maize ending stocks for 2018–2019 have been forecast down 23% year-over-year to 42.7 million tonnes. This is the lowest level since the 2013–2014 season and has been driven by expectations of lower domestic production, forecast down 4% y-o-y, caused by a 2% decline in the harvested area. The continued cold and wet weather in the U.S. has been detrimental to the crop, causing the planted area to be lower than expected.

 

Cotton

U.S. cotton production for 2018–2019 has been forecast to fall 7% y-o-y to 19.5 million bales, driven by a 7% fall in yields, at a three-year low. However, large carry-over stocks from the 2017–2018 season have caused ending stocks to be forecast up 11% y-o-y. This means that overall supply for the upcoming 2018–2019 season will still remain above demand, with the stocks-to-use ratio up 3% y-o-y to 27.5%.

  

Wheat

U.S. wheat production has been forecast up 5% y-o-y for 2018–2019, despite the winter wheat struggling to develop well in the adverse cold and wet weather conditions. This is due to spring and durum wheat combined production expected to rise 34% y-o-y.

Although reduced domestic production has been forecast for cotton, higher cotton stocks are likely to outweigh any effect that reduced production would have on prices. For the other crops however, the fundamentals point towards maize prices rising and wheat prices falling. Unless any unexpected severe weather conditions occur throughout the season, we should expect prices to behave in this way.

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