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Hedging Corn and Soybeans

RSS By: Howard Tyllas, AgWeb.com

Howard Tyllas is currently a member of the Chicago Board of Trade and registered with the Commodity Futures Trading Commission as a floor broker and as a Commodity Trading Advisor.

WASDE Report 1/10/14

Jan 10, 2014

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WASDE Report 1/10/14 

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OILSEEDS:  U.S. oilseed production for 2013/14 is estimated at 97.3 million tons, up 0.9 million tons from last month.  Larger crops for soybeans, cottonseed, and peanuts are partly offset by reductions for sunflowerseed and canola.  Soybean production is estimated at 3.289 billion bushels, up 31 million bushels based on increased yields and harvested area.  The soybean yield is estimated at 43.3 bushels per acre, up 0.3 bushels from the previous estimate.  Soybean crush is raised 10 million bushels to 1.700 billion reflecting higher projected soybean meal exports, which partly offsets a reduction for Argentina.  Soybean exports are increased 20 million bushels to 1.495 billion reflecting record shipments during the first quarter of the marketing year and strong sales through December.  Soybean ending stocks for 2013/14 are projected at 150 million bushels, unchanged for last month.  Soybean oil balance sheet changes include increased production on a higher crush and extraction rate, reduced imports, increased projected exports, and increased ending stocks.

The 2013/14 U.S. season-average farm price forecast for soybeans is narrowed 25 cents on both ends of the range to $11.75 to $13.25 per bushel based on prices reported to date.  The soybean oil price is forecast at 35.5 to 39.5 cents per pound, down 2.5 cents on both ends.  The soybean meal price is projected at $415 to $455 per short ton, up 15 dollars on both ends of the range.

Global oilseed production for 2013/14 is projected at a record 505.9 million tons, up 3.6 million.  Global soybean production is projected at 286.8 million tons, up 1.9 million on gains for the United States and Brazil.  The Brazil soybean crop projection is raised 1.0 million tons to a record 89.0 million.  The increase is due to higher projected area reflecting recent survey data from the Brazilian government.  Global sunflowerseed production is raised 1.3 million tons to 43.7 million on record forecasts for Ukraine, Russia, and the European Union.  The Ukraine crop is raised 1.0 million tons to 12.5 million on higher yields.  Other changes include increased cottonseed production for China and Argentina, lower cottonseed production for Pakistan, and increased rapeseed production for Russia.

Global oilseed trade for 2013/14 is projected at 128.9 million tons, up slightly from last month.  Increased soybean exports for the United States are partly offset by reduced rapeseed export prospects for Australia and Canada.  Lower soybean meal exports for Argentina resulting from lower soybean crush are offset by gains for the United States, Brazil, and Russia.  Increased global soybean oil trade mainly reflects a higher projection for the United States.  Global oilseed ending stocks are projected at 85.1 million tons, up 2.3 million from last month on increased soybean stocks in Argentina and Brazil, increased canola stocks in Canada, and higher sunflowerseed stocks in Russia and Ukraine.


WHEAT:  U.S. wheat supplies for 2013/14 are unchanged this month, but lower expected use raises projected ending stocks 33 million bushels.  Feed and residual use is lowered 60 million bushels reflecting disappearance for June-November as indicated by the December 1 stocks released in the Grain Stocks report.  Feed and residual use is lowered for Hard Red Winter (HRW) and Hard Red Spring, and Soft Red Winter wheat.  Seed use is raised 1 million bushels based on the winter wheat planted area reported today in the Winter Wheat Seedings report.  Wheat exports are projected 25 million bushels higher, with an increase for HRW, on the strong pace of sales and shipments and lower expected competition from Argentina, particularly in Brazil’s milling wheat market.  The 2013/14 season-average farm price is projected 10 cents lower at the midpoint with the range narrowed to $6.60 to $7.00 per bushel.

Global 2013/14 wheat supplies are raised 1.5 million tons to 888.8 million with production increases for China and the FSU-12 more than offsetting reductions for Argentina and the European Union.  Production is raised 1.0 million tons for China reflecting the latest estimate by the China National Grain and Oil Information Center and indications from the National Bureau of Statistics for total 2013/14 grain production.  Production is raised 0.6 million tons for Russia and 0.3 million tons for Tajikistan, both based on the latest official indications.  Production is reduced 0.5 million tons for Argentina with harvested area expected lower.  Production for the European Union is lowered 0.2 million tons with small downward revisions for the United Kingdom, Finland, and Denmark.

Global wheat trade for 2013/14 is raised with higher imports projected for Egypt, Japan, and Syria more than offsetting reductions for the Philippines and Tajikistan.  Exports are raised for the European Union and Russia.  Stronger North Africa and Middle East demand drives increases for the European Union and Russia, whereas reductions in Argentina supplies and exports indicate a shift to U.S. supplies for Brazil.  Foreign wheat feeding is lower mostly reflecting a 1.0-million-ton reduction for the European Union where increased exports reduce supplies available to the domestic market.  Larger barley supplies in the European Union this month support a shift to barley feeding.  Global wheat ending stocks are projected 2.6 million tons higher mostly on increases for China and the United States.

COARSE GRAINS:  U.S. feed grain supplies for 2013/14 are projected lower with reduced production estimated for corn and sorghum.  Harvested area for corn is raised 436,000 acres, but the estimated yield is lowered 1.6 bushels per acre to 158.8, reducing production 64 million bushels to 13.9 billion.  Sorghum harvested area is lowered 148,000 acres and the yield is lowered 2.6 bushels per acre, reducing production 27 million bushels.

Projected corn use for 2013/14 is raised with feed and residual use projected up 100 million bushels based on September-November disappearance as indicated by the December 1 stocks estimate.  Corn used to produce ethanol is raised 50 million bushels reflecting continued strong weekly ethanol production, a reduction in expected sorghum use for ethanol, and higher forecast 2014 gasoline consumption in the latest projections from the Energy Information Administration.  A 50-million-bushel reduction in other food, seed, and industrial use offsets the increase in use for ethanol.  Corn ending stocks for 2013/14 are projected 161 million bushels lower at 1.6 billion.  The projected 2013/14 season-average farm price for corn is unchanged at the midpoint with the range narrowed to $4.10 to $4.70 per bushel.

Other 2013/14 feed grain changes include increases in projected feed and residual disappearance for sorghum and oats, but a reduction for barley as indicated by December 1 stocks.  Sorghum exports are projected 20 million bushels lower as higher indicated September-November disappearance limits exportable supplies.  Sorghum food, seed, and industrial use is also lowered 20 million bushels.

Global coarse grain supplies for 2013/14 are projected 1.2 million tons higher despite this month’s reduction in U.S. production and a 1.9-million-ton decrease in global beginning stocks.  Higher 2012/13 corn exports for Brazil reduce beginning stocks for 2013/14.  Global barley production for 2013/14 is raised 1.6 million tons with increases for the European Union, Argentina, and Russia.  Foreign corn production is raised 4.3 million tons with higher China production.  China corn production is raised 6.0 million tons reflecting the latest upward revision by the China National Grain and Oil Information Center, indications from the National Bureau of Statistics for total 2013/14 grain production, and review of growing-season weather.  Favorable weather suggests year-to-year yield increases in most of China’s major corn producing areas.  In the northeastern region, above normal rainfall and favorable temperatures were experienced in nearly all of the corn areas.  Harvested area is also raised for China.

Partly offsetting the China corn increase are reductions in 2013/14 corn output for Argentina, Russia, and the European Union.  Production is lowered 1.0 million tons for Argentina with lower expected area and reduced prospects for yields following December heat and dryness.  Production is lowered 0.5 million tons for Russia based on the latest government data.  European Union production is lowered 0.3 million tons with a reduction for France.

Global 2013/14 coarse grain consumption is raised 4.2 million tons with the higher corn use in the United States and higher barley feeding in the European Union and Russia.  World corn trade for 2013/14 is lowered with a 2.0-million-ton reduction in imports expected for China.  Recent rejections of U.S. corn shipments by China and larger domestic corn supplies in China are expected to limit imports during the 2013/14 marketing year.  China sorghum imports, however, are raised 0.5 million tons.  Corresponding reductions in Mexico sorghum imports and feeding raise corn import needs for Mexico.  Corn imports are raised for Mexico and the Philippines, up 0.5 million tons and 0.3 million tons, respectively.  Corn exports for Argentina are lowered 1.0 million tons also supporting this month’s unchanged U.S. corn export projection.  Global corn ending stocks are projected 2.2 million tons lower with an increase for China more than offset by reductions for the United States and Brazil.


SUGAR:  Projected U.S. sugar supply for fiscal year 2013/14 is decreased 94,000 short tons, raw value, from last month, mainly due to lower production in Louisiana.  Total use is unchanged.

LIVESTOCK, POULTRY, AND DAIRY:  The forecasts for total red meat and poultry production for both 2013 and 2014 are lowered from December.  For 2013, beef production is raised, but pork, broiler, and turkey production are reduced.  The forecast for 2014 is reduced as lower pork and turkey production more than offset an increased beef production forecast.  The Quarterly Hogs and Pigs report, released on December 27, indicated that the September-November pig crop was fractionally below a year earlier which will constrain supplies of slaughter hogs in early 2014.  Although producers intend to farrow more sows in the first half of 2014, the impacts of the Porcine Epidemic Diarrhea virus (PEDv) will likely slow growth in pigs per litter and keep supplies of market hogs relatively tight during 2014.  Beef production is raised for 2014 as higher-than-expected placements in the later part of 2013 and expected availability of winter pasture support increased cattle marketings and slaughter during the year.  No change is made to 2014 broiler production.  Egg production is reduced slightly for 2013 and 2014.

Beef imports are unchanged for 2013, but are raised slightly for 2014.  Beef exports are raised for both 2013 and 2014 as the pace of exports over the past several months has been strong.  Pork imports and exports for both 2013 and 2014 are unchanged from last month.  The 2013 broiler export forecast is raised slightly based on exports to date, but the forecast for 2014 is unchanged.  Turkey exports for 2013 and 2014 are unchanged from last month.

Animal product prices for 2013 are adjusted based on December data.  For 2014, the cattle price forecast is raised from last month as demand for fed cattle remains strong.  Hog prices are raised as the production forecast is lowered.  Broiler and turkey price forecasts are raised from last month.  Demand for broiler meat is firm, supported by tight supplies of beef.  Turkey prices are expected to be supported by lower forecast production in early 2014.  Egg prices are forecast higher, reflecting current price strength.

The 2013 milk production estimate is reduced from last month, based on recent milk production data.  The forecast for 2014 is raised as improving returns are expected to support a more rapid increase in output per cow.  Fat basis imports are reduced for 2013 and 2014 on lower expected imports of butterfat.  On a skim-solids basis, imports are reduced slightly for 2013 but are unchanged for 2014.  Fat basis exports are raised for both 2013 and 2014 on relatively strong demand for cheese and other products.  Skim-solids exports are reduced slightly for 2013 as NDM exports lagged in November.  However, exports are expected to strengthen in 2014 and the skim-solids export forecast is raised.

Dairy product and milk prices for 2013 are adjusted to reflect December data.  For 2014, cheese, butter, and nonfat dry milk (NDM) prices are raised as export and domestic demand are expected to strengthen, but the forecast for dry whey is unchanged.  The Class III price is raised due to the higher cheese prices and the Class IV price forecast reflects higher butter and NDM prices.  The all milk price is forecast at $20.60 to $21.40 per cwt for 2014.

COTTON:  The U.S. cotton estimates for 2013/14 are revised slightly to reflect higher production.  Production is raised 118,000 bales from last month, due mainly to an increase for Texas.  Domestic mill use is unchanged, but exports are raised to 10.5 million, leaving ending stocks unchanged at 3.0 million bales.  The marketing-year average price is projected in a narrower range of 72-77 cents per pound, with the midpoint of 74.5 cents raised marginally from last month.

The 2013/14 world cotton supply and demand estimates include higher production and marginally lower consumption, resulting in an increase of 1.2 million bales in ending stocks.  Production is raised mainly for China, where government classing data indicates that Xinjiang production, which accounts for about 60 percent of the total, may exceed 2012/13.  Production also is raised for Argentina, but is reduced for Pakistan, and Pakistan’s consumption also is reduced.  World stocks are now projected at 97.6 million bales, with China accounting for 60 percent of the total.

RICE:  The U.S. 2013/14 rice crop is estimated at 189.9 million cwt, up 1.2 million from the previous estimate.  Average yield is estimated at a record 7,694 pounds per acre, up 34 pounds per acre.  Harvested area is estimated at 2.468 million acres, up 4,000 acres from the previous estimate.  Long-grain rice production is estimated at 131.9 million cwt, up 2.9 million from last month, and combined medium- and short-grain production is lowered 1.7 million to 58.0 million.  Rice imports for 2013/14 are unchanged from last month.

All rice and the long-grain rice 2013/14 domestic and residual use projections are raised 4.0 million cwt from a month ago as indicated by the December 1 stocks with all rice at 120.0 million cwt and long-grain at 88.0 million.  Combined medium- and short-grain domestic and residual use is projected at 32.0 million, unchanged from last month.  The all rice export projection is lowered 1.0 million cwt to 99.0 million—all in the long-grain class.  The pace of exports and sales of long-grain rice have been slow to markets in Sub-Saharan Africa and Central America.  The 2013/14 rough rice export projection is unchanged at 35.0 million cwt.  Exports of milled and brown rice are lowered 1.0 million cwt to 64.0 million (rough-equivalent basis).  All rice ending stocks for 2013/14 are projected at 28.3 million cwt, down 1.8 million from last month, and a decrease of 22 percent from a year ago.  Long-grain rice ending stocks are forecast at 17.3 million cwt, down slightly from last month, and a decrease of 21 percent from 2012/13.  Combined medium- and short-grain rice ending stocks are projected at 8.7 million cwt, down 1.7 million from last month, and a decline of 29 percent from last year.

The Rice Stocks reported total rough rice stocks at 132.8 million cwt as of December 1 and total milled stocks at 6.6 million (9.4 million cwt on a rough-equivalent basis).  Total rice stocks on a rough-equivalent basis are 142.2 million, down 10 percent from a year earlier.  Long-grain stocks as of December 1 are estimated at 89.1 million (rough-equivalent basis) and combined medium- and short-grain stocks at 50.3 million.

The 2013/14 long-grain season-average farm price range is projected at $14.80 to $15.80 per cwt, unchanged from last month.  The combined medium- and short-grain farm price range is projected at $16.30 to $17.30 per cwt, down 50 cents per cwt on each end of the range.  The all rice season-average farm price is forecast at $15.30 to $16.30 per cwt, down 10 cents per cwt on both ends of the range.

Global total supplies of rice for 2013/14 are raised more than the increase in total use resulting in an increase in world ending stocks.  Global rice production is projected at 471.2 million tons, still a record, and up 0.5 million from last month due primarily to increased forecasts for Brazil, Pakistan, and the United States.  Brazil’s crop is raised 0.1 million tons because of an increase in area.  Pakistan’s rice crop is raised 0.4 million tons because of an increase in average yield.  The U.S. rice crop is up on both an increase in area and yield.  Beginning stocks for 2013/14 are increased 0.6 million tons from last month due mostly to increases for Pakistan and Thailand.  Global consumption for 2013/14 is forecast at a record 473.1 million tons due mostly to increases for Brazil and the United States.  Export projections are raised for Argentina and Pakistan, and lowered slightly for the United States.  Imports are raised for the Philippines—up 0.2 million tons to 1.4 million.  Global rice ending stocks for 2013/14 are projected at 105.2 million tons, up 0.9 million from last month, but a decrease of 1.9 million from the prior year.  Ending stocks projections are raised for Pakistan, the Philippines, and Thailand. 


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