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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 5/9/14

May 09, 2014

 WASDE Report 5/9/14


 

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WHEAT:  U.S. wheat supplies for 2014/15 are projected down 10 percent from 2013/14 with beginning stocks, production, and imports all expected lower.  Supplies for the new marketing year are projected to be the lowest since 2007/08.  Production is projected at 1,963 million bushels, down 8 percent from last year.  The all wheat yield is projected at 42.7 bushels per acre, down 4.5 bushels from the 2013/14 record.  The survey-based forecast for 2014/15 all winter wheat production is down 9 percent on the year with the harvested-to-planted ratio just above last year’s 11-year low and the yield forecast at its lowest level since 2007/08.  Most of the decline year to year in winter wheat reflects lower area and yields for Soft Red Winter wheat.  This year’s lower Hard Red Winter (HRW) wheat yield forecast is offset by higher harvested area, leaving HRW production just above last year’s very low level.  Continued drought and April freeze events have sharply reduced yield prospects for HRW wheat.  White Winter wheat production is forecast lower on the year with reduced area and yields.  Spring wheat production for 2014/15 is projected to decline 6 percent as higher area is more than offset by lower projected yields.  Durum yields last year were well above trend and other spring yields were record high.

Total U.S. wheat use for 2014/15 is projected down 11 percent year to year as feed and residual disappearance and exports are expected to fall with tighter supplies and higher prices.  Projected feed and residual disappearance is down 50 million bushels as abundant feed grain supplies and lower feed grain prices limit wheat feeding during the summer months.  Partly offsetting are a 10-million-bushel increase in domestic food use and a 2-million-bushel increase in seed use.  Exports for 2014/15 are projected at 950 million bushels, down 235 million from this month’s higher 2013/14 projection, as large supplies in other major exporting countries and tight domestic supplies of HRW wheat limit U.S. shipments.  U.S. ending stocks are projected to decline for a fifth consecutive year.  At 540 million bushels, 2014/15 ending stocks would be down 43 million from 2013/14.  The all wheat season-average farm price is projected at $6.65 to $7.95 per bushel. 

Global 2014/15 wheat supplies are projected down less than 1 percent from 2013/14 as reduced beginning stocks and production in the United States offset higher foreign beginning stocks.  World wheat production is projected at 697.0 million tons, down 2 percent from the 2013/14 record.  Foreign production is projected 12.4 million tons lower in 2014/15 with increases for Argentina, the European Union, China, Brazil, Kazakhstan, Mexico, and India more than offset by reductions for Canada, Turkey, Morocco, Ukraine, Australia, Iran, and Syria.  Lower area and a return to trend yields also reduce production in Canada from last year’s record high.  In the Middle East, persistent dryness and early April freezes have severely damaged winter wheat crops from Turkey to northeastern Iran.  For Ukraine, lower reported area and a return to trend yields reduce expected output.

Global wheat consumption for 2014/15 is projected 1 percent lower than in 2013/14 with a reduction in world wheat feeding only partly offset by higher expected food use.  Global import demand for 2014/15 is lower with reductions for China, Iran, Brazil, Mexico, and Algeria more than offsetting increases for the European Union and Turkey.  Exports are lower for the European Union, India, Canada, Ukraine, Turkey, and Australia, but higher for Argentina and Russia.  Global ending stocks for 2014/15 are projected at 187.4 million tons, up 0.9 million from 2013/14.
 
COARSE GRAINS:  U.S. feed grain supplies for 2014/15 are projected at a record 403.3 million tons, up 2 percent from 2013/14 mostly on larger corn beginning stocks.  Corn production is projected at 13.9 billion bushels, up slightly from the 2013/14 record with higher expected yields more than offsetting the year-to-year reduction in planted area.  The corn yield is projected at 165.3 bushels per acre, up 6.5 bushels from 2013/14, based on a weather adjusted yield trend model and assuming normal mid-May planting progress and summer weather.  (See Westcott and Jewison, Weather Effects on Expected Corn and Soybean Yields, USDA-ERS, July 2013,www.ers.usda.gov/publications/fds-feed-outlook/fds-13g-01.aspx.)  Corn supplies for 2014/15 are projected at a record 15.1 billion bushels, up 330 million from 2013/14.

U.S. corn use for 2014/15 is projected 2 percent lower than in 2013/14.  Feed and residual use is projected 50 million bushels lower with animal numbers down from 2013/14.  Exports are projected 200 million bushels lower than this month’s higher projection for 2013/14 as larger expected foreign supplies and lower import demand limit U.S. shipments.  Corn used to produce ethanol in 2014/15 is expected to be unchanged on the year with gasoline consumption expected to remain flat in 2015.  Corn ending stocks are projected at 1.7 billion bushels, up 580 million from the 2013/14 projection.  With the larger carryout, the season-average farm price is projected at $3.85 to $4.55 per bushel, down from $4.50 to $4.80 per bushel for 2013/14.

Global coarse grain supplies for 2014/15 are projected at a record 1,461.0 million tons, up 2 percent from 2013/14 as the year-to-year increase in world beginning stocks more than offsets a reduction in world output.  Projected global corn production for 2014/15, at a record 979.1 million tons, is virtually unchanged from 2013/14.  Expected decreases for Ukraine, Brazil, India, and South Africa are mostly offset by increases for China, Argentina, Russia, and Mexico.  Ukraine production is lowered 4.9 million tons from last year’s record level as the reduced value of the local currency keeps input prices high and reduces expected use of fertilizer and other inputs.  Global sorghum and millet production are projected higher for 2014/15, but reductions are expected for barley, oats, rye, and mixed grains. 

Global corn trade for 2014/15 is projected lower with imports projected down year to year for China and Mexico.  Corn exports for 2014/15 are projected lower for Ukraine and the United States.  Exports, however, are projected higher for Argentina and Paraguay.  World corn consumption is projected at a record 965.8 million tons, up 17.0 million from 2013/14 on higher use in China, Brazil, the European Union, Mexico, and Japan.  Global corn ending stocks for 2014/15 are projected at 181.7 million tons, up 13.3 million tons on the year and at a 15-year high.

RICE:  U.S. 2014/15 all rice supplies are forecast up 6 percent from 2013/14, and total use is up 5 percent—leading to a 17 percent increase in 2014/15 ending stocks.  Beginning stocks for 2014/15 are forecast at 29.3 million cwt, down 20 percent from the previous year.  Projected 2014/15 imports at 22.0 million cwt are unchanged from 2013/14.  U.S. rice production for 2014/15 is projected at 213.0 million cwt, up 12 percent from 2013/14.  Long-grain production is projected at 161.0 million cwt, and combined medium- and short-grain production at 52.0 million.  Harvested all rice area is estimated at 2.85 million acres.  Long-grain harvested area at 2.21 million acres is up 25 percent from the previous year.  Combined medium- and short-grain harvested area at 0.65 million acres is down 8 percent from 2013/14.  The decline in California medium-grain plantings due to drought and water restrictions have attracted more acres of medium-grain rice in the Delta where plantings in 2014 are projected up 39 percent.  All rice average yield is projected at 7,468 pounds per acre, down 3 percent from the previous year’s record—based on trend analysis by rice class.

U.S. 2014/15 all rice total use is projected at 230.0 million cwt with domestic and residual use at 128.0 million, and exports at 102.0 million.  Long-grain rice exports are projected at 72.0 million cwt, and combined medium- and short-grain rice exports at 30.0 million.  Larger long-grain supplies in 2014/15 and lower projected prices are expected to expand exports, but competition for markets is expected to be strong.  Exports of medium-grain rice will be constrained by tighter U.S. supplies because of reduced plantings in California.  U.S. all rice ending stocks for 2014/15 are projected at 34.3 million cwt, with long-grain ending stocks at 24.3 million cwt, and combined medium- and short-grain rice stocks at 7.7 million.

The U.S. 2014/15 long-grain rice season-average farm price is projected at $13.50 to $14.50 per cwt, compared to a revised $15.20 to $15.80 for the previous year.  The combined medium- and short-grain price is projected at $18.50 to $19.50 per cwt, compared to a revised $17.70 to $18.30 for the year earlier.  The 2014/15 all rice price is projected at $15.00 to $16.00 per cwt, compared to a revised $15.80 to $16.40 per cwt for 2013/14.

Global 2014/15 total rice supply and use are each projected to reach record levels at 592.0 and 482.2 million tons, respectively, and results in a 1.5-million decrease in world ending stocks.  Global 2014/15 rice production is projected at a record 480.7 million tons, up 4.6 million from 2013/14.  Record to near-record rice crops are projected in Asia—assuming normal weather.  Record crops are projected for the major exporters including India, Thailand, and Vietnam.  Additionally, large crops are forecast for other exporters including Burma, Cambodia, and Egypt.  On the importer side, record or near-record crops are forecast for Indonesia, the Philippines, and Sub-Saharan Africa.  Global 2014/15 consumption is projected at a record 482.2 million tons, up 1.5 percent from the previous year.  Global exports in 2014/15 are projected at a record 41.4 million tons, up 1.0 million from 2013/14.  Thailand is forecast to be the largest global rice exporter in 2014/15 with exports of 10.0 million tons followed by India at 9.0 million and Vietnam at 6.7 million.  Large 2014/15 imports are projected for China, the Middle East, and Sub-Saharan Africa.  China’s imports have surged since 2011/12 and are forecast to be the largest importer with imports of 3.7 million tons in 2014/15.  China’s annual consumption needs have overtaken production since 2012/13 resulting in declining stocks.  Strong domestic prices in China have encouraged imports of lower-priced rice from Burma, Pakistan, and Vietnam.  Global 2014/15 ending stocks are expected to decrease 1.5 million tons to 109.8 million.  The largest year-to-year stocks reductions occur in India and China—down 1.0 million tons and 0.65 million, respectively.

OILSEEDS:  U.S. oilseed production for 2014/15 is projected at 107.9 million tons, up 11 percent from 2013/14.  Higher soybean production accounts for most of the increase.  Soybean production is projected at a record 3.635 billion bushels, up 346 million from the 2013 crop on record yields and harvested area.  Yield is projected at a trend level of 45.2 bushels per acre, up 1.9 bushels from 2013.  Supplies are projected at 3.78 billion bushels, up 7.4 percent from 2013/14 as a larger crop more than offsets lower beginning stocks and imports.

The U.S. soybean crush for 2014/15 is projected at 1.715 billion bushels, up 20 million from 2013/14 mainly reflecting increased domestic soybean meal consumption.  Despite lower prices, soybean meal exports are projected up only slightly with Argentina soybean meal exports accounting for most of the gains in global soybean meal trade.  U.S. soybean exports are projected at 1.625 billion bushels, up 25 million from 2013/14 on record supplies and competitive prices.  Despite gains in use, ending stocks for 2014/15 are projected at 330 million bushels, up 200 million from 2013/14, increasing the stocks-to-use ratio to 9.6 percent.  The U.S. season-average soybean price for 2014/15 is forecast to decline to $9.75 to $11.75 per bushel compared with $13.10 per bushel in 2013/14.  Soybean meal prices are forecast at $355 to $395 per short ton, compared with $485 per ton for 2013/14.  Soybean oil prices are forecast at 37 to 41 cents per pound compared with 40 cents for 2013/14.

Global oilseed production for 2014/15 is projected at a record 515.2 million tons, up 2.4 percent from 2013/14 with increased soybean and peanut production partly offset by lower rapeseed, sunflowerseed, and cottonseed production.  Mostly due to a larger U.S. crop, global soybean production is projected at 299.8 million tons, up 5.6 percent.  The Brazil soybean crop is projected at a record 91 million tons, up 3.5 million on small gains in area and yield.  The Argentina soybean crop is projected at 54.0 million tons, unchanged from 2013/14 with lower area offset by higher yields.  China soybean production is projected at 12 million tons, down 0.2 million as producers continue to shift area to more profitable crops.  Global production of high oil-content seeds (rapeseed and sunflowerseed) is projected down 4.0 percent from 2013/14 on reduced rapeseed production in Canada and Ukraine, and reduced sunflowerseed production in Russia, Ukraine, and the European Union.  With crush projected to increase 2.4 percent, global oilseed ending stocks are projected at 94.8 million tons, up 14.6 million. 

Global protein meal consumption is projected to increase 3.2 percent in 2014/15.  Protein meal consumption is projected to increase 3.5 percent in China which accounts for 30 percent of global protein consumption gains.  Global soybean exports are projected at 112.3 million tons, up 1.5 percent from 2013/14.  China soybean imports are projected at 72 million tons, up 3 million from the 2013/14 projection.  Global vegetable oil consumption is projected to increase 4.1 percent in 2014/15 led by increases for China, India, and Indonesia.

SUGAR:  Projected U.S. sugar supply for fiscal year 2014/15 is down 5.6 percent from 2013/14, as lower beginning stocks and imports overwhelm a 0.2 percent rise in production.  Lower beet sugar production reflects reduced area and a return to trend yields, while higher cane sugar production is based on trend yields.  Imports under the tariff rate quota (TRQ) assume minimum U.S. commitments to import raw and refined sugar and projected shortfall.  The Secretary will establish the TRQ at a later date.  Total use is down 2.4 percent and ending stocks are 31.2 percent below a year earlier.

For Mexico, 2014/15 supplies are down 4.5 percent from 2013/14, as lower beginning stocks are only partially offset by higher production.  Domestic use is flat, in keeping with recent trends, and ending stocks are unchanged, based on trends in population and reasonable carryover requirements.  Exports are projected lower, with shipments to the U.S. market down 23.0 percent from 2013/14.

LIVESTOCK, POULTRY, AND DAIRY:  Total U.S. red meat and poultry production in 2015 is projected to be above 2014 as higher pork and poultry production more than offsets continued declines in beef production.  Pork production is expected to increase as producers respond to the Porcine Epidemic Diarrhea virus (PEDv) by increasing farrowings and feeding hogs to heavier weights.  However, a slow recovery in growth in pigs per litter is expected to constrain increases in availability of market hogs in 2015.  Broiler and turkey production are forecast higher as lower forecast feed prices and record 2014 wholesale broiler and turkey prices encourage expansion.  However beef production is forecast lower as a declining beef cattle inventory and potential heifer retention during late 2014 and into 2015 is expected to limit cattle placements in late 2014 and into 2015.  Thus, despite expectations of heavier slaughter weights, tight supplies of fed cattle for slaughter and reduced cow slaughter will result in lower beef production.  Egg production for 2015 is forecast to expand as producers respond to lower feed costs and record 2014 egg prices.  For 2014, the total red meat and poultry production forecast is lowered from last month on lower pork and broiler production.  Pork supplies reflect limited availability of hogs due to the impacts of PEDv on pigs per litter.  However, the decline in hog numbers may be partly offset by heavier carcass weights.  Broiler production is lowered on the pace of slaughter and a slow increase in egg sets and chicks placed.  Beef production is about unchanged from last month.  Turkey production is increased slightly based on the current pace of slaughter.  Egg production for 2014 is raised as higher table egg production more than offsets reduced hatching egg production.

Lower U.S. beef production is expected to push beef exports lower and imports higher in 2015.  Pork exports are forecast higher in 2015 and imports are forecast lower as production increases.  Broiler and turkey exports are forecast higher on expanded supplies and continued strength in foreign demand.  The 2014 beef export forecast is lowered from last month on March export data.  Imports are forecast higher on strong processing-grade beef demand and tight supplies of domestic processing beef.  Pork exports are unchanged from last month as high March exports are expected to be followed by lower exports later in the year.  Broiler and turkey exports are adjusted to reflect March trade data.

For 2015, fed cattle prices are forecast above 2014 as supplies continue to tighten and demand for beef remains strong.  Hog prices are forecast lower than 2014 as hog supplies increase.  However, broiler and turkey prices are forecast higher despite increased production as demand remains firm in the face of relatively tight red meat supplies.  Egg prices are forecast lower on increased production.  For 2014, the fed cattle price forecast is lowered from last month as prices for mid-2014 are reduced.  Hog prices are up from last month on tight supplies.  Broiler prices are higher as prices remain strong.  Turkey prices are unchanged.  Egg prices are forecast higher on strong to date prices. 
 
Milk production for 2015 is forecast higher as lower feed costs and strong milk prices are expected to support both herd expansion and gains in milk per cow.  Fat-basis exports are forecast lower on increased competition from traditional exporters, primarily in butterfat markets.  Continued strength in nonfat dry milk (NDM) will help limit declines in skim-solids exports.  Fat-basis import forecasts are expected to be about the same as 2014 but skim-solids imports will be lower.  With higher domestic production, cheese, butter, NDM, and whey prices are forecast lower.  Both Class III and Class IV prices are forecast lower.  The all milk price is forecast at $19.70 to $20.70 per cwt for 2015.

Milk production for 2014 is unchanged from last month.  Fat basis imports are forecast lower while skim-solids imports are higher.  Exports are raised on stronger sales of NDM, butterfat and cheese. Butter and whey prices are raised from last month while NDM is lower.  Cheese is unchanged but the range is narrowed.  The Class III price is raised on higher whey prices.  Class IV is up as higher prices for butter more than offset reduced prices for NDM.  The all milk price is forecast to average $22.70 to $23.00 per cwt.

COTTON:  The first U.S. cotton projections for 2014/15 include larger production, lower offtake, and higher ending stocks compared with 2013/14.  Production is forecast at 14.5 million bales, based on the March Prospective Plantings report and the most recent 2-year regional average abandonment and yields.  The U.S. abandonment rate is projected at 24 percent due to persistent severe drought in the Southwest.  Domestic mill use is forecast at 3.7 million bales, 100,000 bales above 2013/14.  Exports are projected at 9.7 million bales, down 7 percent, due to lower anticipated world import demand.  Ending stocks are raised to 3.9 million bales or 29 percent of total use, which is about equal to the previous 10-year average.  The forecast range for the marketing year average price received by producers is 63.0 to 83.0 cents per pound, compared with 77.5 cents estimated for 2013/14.

The initial 2014/15 world cotton projections show world ending stocks of nearly 102 million bales, which would be the fourth consecutive record.  World production is projected 1.4 percent lower than 2013/14 at 115.5 million bales, as reductions, mainly for China, Australia, and India, are partially offset by increases for the United States, Brazil, and Turkey.  World consumption is expected to rise more than 2 percent, due to projected growth in world GDP and expected reductions in China’s price support levels. China’s beginning stocks are expected to reach nearly 60 million bales, more than 60 percent of total world stocks.  China’s imports are projected to fall about one-third in 2014/15, as the government is likely to restrict imports in favor of consumption of domestic cotton.  China accounts for virtually all of the anticipated 10-percent reduction in world trade.  With China’s ending stocks expected to grow slightly, world stocks outside of China would rise about 7 percent. 

For 2013/14, the final U.S. crop production estimate of 12.9 million bales is about unchanged from last month.  China’s imports and India’s exports are raised, but U.S. exports are reduced 300,000 bales due to the recent fall-off in sales.  U.S. ending stocks are raised to 2.8 million bales.  

 

 


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