The Zhitong Finance App learned that Huatai Securities released a research report saying that in May, the USDA released the first 2024/25 supply-demand balance report. The market's focus on this report focused on the impact of the floods in southern Brazil on soybean production and the world's first supply and demand forecast for newly cropped soybeans. Compared with 2023/24, global soybean, wheat, and rice production is expected to increase; corn production is expected to decline at a high level. Global soybean and soybean supply and demand are relaxed. In the future, we need to pay attention to the impact of La Niña weather on soybean production and the report on the planting area of soybeans at the end of June (whether it exceeds 84.5 million acres); the global corn supply and demand pattern is tightening; the rice/wheat sales ratio is low, and the supply and demand pattern is still tightening. Furthermore, the USDA slightly lowered the Brazilian soybean production forecast by 1 million tons due to the severe flooding in southern Brazil. The impact is still ongoing, and continuous follow-up is required.

The main views of Huatai Securities are as follows:

Soybeans: Brazil's old products have been slightly revised, and the balance sheet between supply and demand for new products is relaxed

1) According to Xinhua News Agency, Brazil's Rio Grande do Sul state (accounting for 14% of soybean production) has experienced continuous torrential rain and flooding since the end of April. Based on this, the USDA slightly lowered Brazil's soybean production forecast by 1 million tons to 154 million tons. Global soybean inventory sales fell slightly by 0.5pct to 20.1% at the end of the 2023/24 period compared to the 2023/24 period. Third-party agencies' expectations are more pessimistic, and the impact on production is expected to be 2 million tons. We believe that the impact of the floods continues, and the expected soybean production data may be adjusted; 2) Global soybean production is expected to reach a high level of 422 million tons in 2024/25. Among them, Brazil, the US, and Argentina are +8.9%/6.4%/2.0%, respectively, and the inventory ratio is 22.1%, the highest in nearly ten years. The supply and demand for soybeans are relaxed, and inventory sales are in the 80% fraction over the past ten years. In the future, we need to pay attention to the impact of La Niña weather on soybean production and the reported performance of the soybean planting area at the end of June (whether it exceeds 84.5 million acres).

Corn: Production and inventory expectations have declined, and the gap between corn production and demand in China has narrowed

In May, the USDA estimated that global corn production in 2024/25 is expected to drop by 8.16 million tons year on year to 1.22 billion tons. Among them, production in the United States/Argentina, which is the main producer, declined year on year, while corn production in China and Brazil increased year on year. As a result of the pest infestation, the desire of Argentine farmers to grow corn declined slightly, and the area under cultivation of new corn in Argentina decreased year over year. Total consumption declined due to a year-on-year decline in exports. In the end, the global corn inventory and sales ratio at the end of the year was basically flat, at the 50% quantile over the past ten years, and the supply and demand pattern is tightening. Further attention should be paid to La Niña's impact on second-season corn production in Brazil. The US corn inventory sales ratio at the end of the season is 80% in the past ten years, and supply and demand are relaxed. Chinese corn farmers are highly motivated to grow food, and the soil conditions are better than last year. Yield and planting area both increased year-on-year, production increased, balances increased, and the production and demand gap narrowed.

Wheat: Inventory sales ratio declined again at the end of the period, and the supply and demand pattern tightened

The overall increase in new wheat production is mainly driven by a year-on-year increase in production in China/India/US, and a year-on-year decline in EU/Russia production is expected. Among them, Russian production is expected to drop 3.5 million tons year on year, mainly due to early droughts and low temperatures. Affected by the decline in initial stocks in China and Russia, the total global supply of wheat fell 0.5% year-on-year to 1.27 billion tons in 2024/24. Total consumption in 2024/25 is expected to increase due to the expected year-on-year increase in domestic demand for seeds and food. In the end, in 2024/25, global wheat inventory fell 1.6% year on year, and the year-end inventory sales ratio fell 0.5 pct year on year, the lowest level in nearly ten years.

Rice: New crops are expected to increase production, and inventory sales are low

Global rice production in 2024/25 is expected to increase by 10.27 million tons (+2.0%) year-on-year to 528 million tons, the highest since 2016/17. Among them, China and India increased by 1.38 million tons (+0.95%) and 4 million tons (+2.9%) year-on-year respectively to 146 million tons and 138 million tons. The increase in production offset the impact of the decline in stocks at the beginning of the period, and the total supply of newly cropped rice increased year-on-year. Driven by increased consumption in India, the Philippines, and Indonesia, total consumption of newly cropped rice is expected to increase year over year. In the end, global rice stocks at the end of the year increased 0.7% year on year to 176 million tons; the year-end inventory sales ratio remained flat year on year, the lowest level in nearly 8 years.

Risk warning:

Natural disaster risk; geopolitical risk; risk of changes in import and export policies.