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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 6/11/14

Jun 11, 2014

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WHEAT:  Projected U.S. wheat supplies for 2014/15 are lowered this month as an increase in beginning stocks is more than offset by a reduction in forecast winter wheat production.  Beginning stocks are raised with a 10-million-bushel reduction in 2013/14 food use and offsetting 5-million-bushel reductions in 2013/14 imports and exports.  Projected production for 2014/15 is down 21 million bushels as reduced prospects for Hard Red Winter (HRW) wheat in the Southern and Central Plains and White Winter wheat in the Pacific Northwest more than outweigh higher forecast Soft Red Winter wheat production across the South and Midwest.  Projected food use is lowered 10 million bushels for 2014/15 and for 2013/14.  This month’s reduced outlook for food use assumes a higher flour extraction rate for both marketing years.  Exports for 2014/15 are projected 25 million bushels lower with tighter supplies of HRW wheat and stronger competition from major exporters.  Projected ending stocks are raised 34 million bushels.  The projected range for the 2014/15 season-average farm price is lowered 30 cents on both ends to $6.35 to $7.65 per bushel based on the larger expected carryout, higher global production, and recent sharp declines in futures prices.


Global wheat supplies for 2014/15 are raised 4.1 million tons as a 5.2-million-ton increase in foreign production is only partly offset by a 0.8-million-ton reduction in foreign beginning stocks and this month’s lower U.S. production outlook.  Beginning stocks are lowered for Australia, Russia, and Turkey with increases in 2013/14 exports this month.  World production for 2014/15 is projected at 701.6 million tons, up 4.6 million from last month with increases for India, the European Union, China, and Russia more than offsetting the decline in U.S. output.  India production is raised 1.9 million tons based on the latest official government estimate.  European Union production is raised 1.4 million tons as spring and early summer rainfall support higher yield outlooks for France, Germany, Poland, Romania, and Bulgaria.  Production for China and Russia is raised 1.0 million tons each as favorable growing conditions also support higher expected yields.  



Global wheat trade and consumption for 2014/15 are raised with larger foreign supplies.  Trade and consumption are also raised for 2013/14.  Increases in world imports and exports for 2014/15 are relatively small, but world consumption is raised 2.9 million tons with increased feeding expected in China and the European Union and increased food use projected for India, all supported by larger crops.  Exports for 2014/15 are raised 0.5 million tons each for the European Union and Russia, more than offsetting this month’s reduction in U.S. export prospects.  World ending stocks for 2014/15 are projected 1.2 million tons higher with much of the increase in the United States.  At 188.6 million tons, global stocks are up 2.6 million year-to-year.


COARSE GRAINS:  The outlook for 2014/15 U.S. feed grain supplies is virtually unchanged this month with only small changes made to barley and oats imports and exports for 2013/14.  Other feed grain balance sheet items are unchanged for both marketing years.  Projected corn production for 2014/15 is unchanged at a record 13,935 million bushels.  The projected U.S. corn yield remains at 165.3 bushels per acre as a slightly slower-than-normal mid-May planting progress is expected to be offset by very favorable early season crop and weather conditions.  U.S. crop conditions in the most recent Crop Progress report are the best in 4 years for the aggregated 18 reported states and better than any time since 2007 for the Corn Belt.  The projected range for the 2014/15 season-average farm price is unchanged at $3.85 to $4.55 per bushel and below this month’s lower projected 2013/14 range of $4.45 to $4.65 per bushel.  The 2013/14 price range is lowered 10 cents per bushel at the midpoint based on prices reported to date and the recent decline in nearby cash and futures prices. 


Global coarse grain supplies for 2014/15 are projected 2.3 million tons higher mostly with larger corn beginning stocks and production.  Higher 2013/14 corn production for Brazil and India raise 2014/15 beginning stocks for both countries.  Lower 2013/14 corn exports for Argentina also add to 2014/15 beginning stocks.  Higher 2013/14 corn imports boost 2014/15 beginning stocks for Colombia, Egypt, and Turkey.  Ukraine and China 2014/15 corn beginning stocks are lowered with higher 2013/14 exports for Ukraine and lower 2013/14 imports for China.  Despite an increase in 2013/14 South Africa corn production, 2014/15 beginning stocks decline with higher 2013/14 consumption and exports.


Global corn production for 2014/15 is raised 2.0 million tons with increases for Ukraine, the European Union, and Russia.  Ukraine and Russia production are raised 1.0 million tons and 0.5 million tons, respectively, on higher expected yields as the latest trade data for both countries confirm further expansion in the use of imported hybrid seed corn.  European Union production is raised 0.6 million tons with increases for Germany and central Europe reflecting improved early season growing conditions in the region.  Serbia corn output is reduced slightly with less expected area.  


Global 2014/15 coarse grain trade is mostly unchanged this month except for small increases in corn and barley imports for Turkey.  Global corn consumption is raised 1.8 million tons with increased feed use projected for Turkey, the European Union, Ukraine, and Russia.  Global corn ending stocks for 2014/15 are projected 0.9 million tons higher with increases for Argentina, Brazil, Colombia, Egypt, India, and Russia partly offset by reductions for China, Ukraine, and South Africa.


RICE:  Rice supply and use 2014/15 balance sheets are changed little from last month.  All rice beginning stocks for 2014/15 are raised 3.0 million cwt, long-grain rice stocks are raised 2.0 million, and combined medium- and short-grain stocks are up 1.0 million.  The 2014/15 beginning stocks changes flow through the balance sheets to 2014/15 ending stocks.  All rice 2014/15 ending stocks are raised 3.0 million cwt to 37.3 million—the largest stocks since 2011/12.  Long-grain ending stocks are raised 2.0 million cwt to 26.3 million—the largest since 2010/11.  Combined medium- and short-grain ending stocks are raised 1.0 million cwt to 8.7 million.


All rice 2013/14 exports are lowered 3.0 million cwt to 92.0 million, long-grain exports are lowered 2.0 million to 62.0 million, and combined medium- and short-grain rice exports are lowered 1.0 million to 30.0 million.  Rough rice exports and milled rice exports for 2013/14 are each lowered 1.5 million cwt to 31.5 million and 60.5 million (rough-equivalent basis), respectively.  U.S. exports and export commitments to Central America, Africa, Venezuela, and Northeast Asia are lagging through May compared to a year ago.  


The 2014/15 U.S. long-grain rice season-average farm price is projected at $12.80 to $13.80 per cwt, down 70 cents per cwt on each end from a month ago and compares to a revised $15.10 to $15.70 per cwt for 2013/14.  The 2014/15 combined medium- and short-grain rice season-average farm price is $18.20 to $19.20 per cwt, a decrease of 30 cents per cwt on each end from last month and compares to a revised $17.40 to $18.00 per cwt for 2013/14. The 2014/15 U.S. all rice season-average farm price is projected at $14.40 to $15.40 per cwt, down 60 cents per cwt on each end from a month ago and compares to a revised $15.70 to $16.30 per cwt for 2013/14.


Global 2014/15 rice supply and use is little changed from a month ago.  Global rice production is projected at a record 480.7 million tons, unchanged from a month ago.  Global 2014/15 trade (imports and exports) are unchanged from a month ago.  Global 2014/15 consumption is lowered slightly from last month.  Ending stocks for 2014/15 are raised 0.9 million tons due mostly to an increase for India.  Rice production for 2013/14 in India is raised 1.3 million tons to a record 106.3 million tons based on official statistics from the government of India.


OILSEEDS:  This month’s U.S. soybean supply and use projections for 2014/15 include a small reduction in beginning and ending stocks.  Lower beginning stocks reflect a higher crush projection for 2013/14.  Soybean crush for 2013/14 is raised 5 million bushels to 1,700 million reflecting an increase in projected soybean meal exports.  Soybean meal exports are projected at 11.5 million short tons, up 0.4 million from last month reflecting stronger-than-expected shipments this spring.  Soybean ending stocks for 2013/14 are projected at 125 million bushels, down 5 million from last month.  Ending stocks for 2014/15 are also reduced 5 million bushels to 325 million.


The 2014/15 season-average price for soybeans is projected at $9.75 to $11.75 per bushel, unchanged from last month.  Soybean meal and soybean oil prices are projected at $355 to $395 per short ton, and 37 to 41 cents per pound, respectively.  Product price projections are also unchanged from last month.


Global oilseed production for 2014/15 is projected at 516.0 million tons, up 0.8 million from last month.  Rapeseed production for the European Union is raised 0.5 million tons to 22.0 million on improved yield prospects, mainly for the United Kingdom, Germany, Poland, and Romania.  Other changes include increased soybean production for the European Union and increased cottonseed production for the United States.  Cottonseed production is also raised for India for 2013/14.


SUGAR:  The Mexico 2013/14 forecast for sugar production is lowered from last month by 250,000 metric tons (MT) to 6.10 million MT as output continues to lag well behind last year’s pace.  Given lower supplies and sharply higher domestic prices, total exports are reduced by 121,000 MT to 2.278 million.  However, exports to the United States are raised based on the pace to date, and exports to the rest of the world are forecast lower.  Ending stocks fall by 129,000 MT to 818,000 MT, or 19.0 percent of consumption.  For 2014/15, beginning stocks and exports are forecast lower.  However, relatively higher prices in the U.S. sugar market provide the incentive for increased 2014/15 exports to the United States.


Total 2013/14 U.S. supply is forecast to rise by 261,000 short tons, raw value (STRV) with a 10,000 STRV increase in sugar from sugarcane production in Texas and a 251,000 STRV increase in imports.  Imports under the re-export program are raised 100,000 STRV, based on industry estimates, and imports from Mexico are increased 151,000 STRV.  With total use unchanged, ending stocks are forecast to rise to 15.0 percent of use, compared with 12.9 percent in May.  


Total 2014/15 U.S. supply is projected up 811,000 STRV, with increases in beginning stocks and imports more than offsetting reduced production.  Beginning stocks, at 1.857 million STRV, are up 261,000 STRV.  Total sugar production is lowered 140,000 STRV, due to lower sugarcane production in Florida and Louisiana based on processors’ first projections for 2014/15.  Total imports are forecast 690,000 STRV above May due to increased shipments from Mexico.  With no changes in total use, ending stocks are forecast to rise to 15.8 percent of 2014/15 use from 9.1 percent.


LIVESTOCK, POULTRY, AND DAIRY:  The forecast for total meat production in 2014 is lowered from last month as lower beef and broiler production more than offsets increased pork and turkey production.  Beef production is lowered as the pace of steer and heifer slaughter in the second quarter is reduced.  However, carcass weights are forecast slightly higher as feed prices have moderated.  Pork production is forecast higher due to a combination of larger second-quarter slaughter and higher carcass weights for the year.  USDA’s Quarterly Hogs and Pigs report will be released on June 27 and provide an indication of producer farrowing intentions for the remainder of the year.  Broiler production is lowered from last month as the pace of expansion remains slow.  Turkey production is raised on higher second-quarter production.  Egg production is raised as strong table egg prices are expected to support increased production.  For 2015, no change is made to red meat or turkey forecasts, but the forecast for broiler production is reduced for early 2015.


Forecasts for 2014 beef imports are raised as demand for processing grade beef remains strong; no change is made to the export forecast.  Pork imports and exports are raised based on April trade data.  Broiler exports are reduced as production forecasts are lowered from last month.  The slower pace of exports is expected to carry into 2015.  Turkey exports are unchanged from last month.   


Cattle, hog, and turkey price forecasts for 2014 and 2015 are unchanged from last month.  Broiler prices are raised for 2014 as supplies are forecast smaller, but 2015 prices are unchanged from last month.  Egg prices for 2014 are raised from last month as demand remains strong; prices for 2015 are unchanged.    


Milk production forecasts for 2014 and 2015 are unchanged from last month.  Export forecasts are raised on a fat basis for 2014 and 2015 with higher cheese exports.  However, growth in 2014 exports is constrained by weaker butter sales as higher domestic prices have made U.S. butter less competitive on world markets.  Skim-solids exports reflect strength in cheese and nonfat dry milk (NDM) exports.  Imports for 2014 and 2015 are raised on higher imports of food ingredients.  


Cheese and butter prices for 2014 are forecast higher on strong demand for cheese and tight supplies of butter.  The NDM price is lowered, but the whey price forecast is unchanged.  Strength in butter prices is expected to carry into early 2015 resulting in an increase in the 2015 price, but the prices of cheese, NDM, and whey are unchanged from last month.  Class III and Class IV prices for 2014 and 2015 are raised on stronger butterfat values.  The all milk price is forecast at $22.90 to $23.30 per cwt for 2014 and $19.75 to $20.75 per cwt for 2015.


COTTON:  The 2014/15 U.S. cotton projections show higher production and ending stocks compared to last month.  Projected abandonment in the Southwest has been reduced due to recent favorable rainfall, resulting in a production increase of 500,000 bales to 15.0 million.  Overall U.S. abandonment is now projected at 21 percent, below the preceding 2 years, but above the long-run average, due to current subsoil moisture deficits in the Southwest.  Domestic mill use and exports are unchanged from last month, resulting in ending stocks of 4.3 million bales.  The forecast stocks-to-use ratio of 32 percent would be the highest in 6 years.  The marketing-year average price received by producers is projected to range from 60 to 80 cents per pound, down 3 cents on both ends of the range.  At the midpoint of 70 cents, prices would fall 10 percent from 2013/14.


This month’s 2014/15 world projections include higher beginning and ending stocks, equivalent increases in production and consumption, and a decline in world trade.  Beginning stocks are raised due mainly to a higher China import forecast for 2013/14 and higher 2013/14 production for India.  For 2014/15, production is raised for the United States, while consumption is raised for India and Vietnam, but is lowered for Pakistan.  World trade is reduced, as imports are lower for China and Pakistan, but higher for Vietnam.  World stocks are raised nearly 1.1 million bales from last month. 

 


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