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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 for 11/8/13

Nov 08, 2013

 WASDE Report 11/8/13


 

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OILSEEDS:  U.S. oilseed production for 2013/14 is projected at 96.4 million tons, up 3.3 million from the September estimate due to increased soybean, peanut, cottonseed, and canola production.  Soybean production is forecast at 3.258 billion bushels, up 109 million as higher yields more than offset lower harvested area.  Harvested area is reduced 0.7 million acres to 75.7 million.  The soybean yield is projected at 43.0 bushels per acre, up 1.8 bushels.  Soybean supplies for 2013/14 are projected 4 percent above the September estimate on both increased production and beginning stocks.

U.S. soybean exports for 2013/14 are raised 80 million bushels to 1.45 billion reflecting increased supplies and the record pace of sales through late October.  Soybean crush is raised 30 million bushels to 1.685 billion mostly due to increased soybean meal exports.  Soybean ending stocks are projected at 170 million bushels, up 20 million from the September forecast.

The U.S. season-average soybean price range for 2013/14 is projected at $11.15 to $13.15 per bushel, down $0.35 on both ends of the range.  The soybean meal price is projected at $375 to $415 per short ton, up $15 on both ends of the range.  The soybean oil price range is projected at 40 to 44 cents per pound, down 3 cents on both ends.

Global oilseed production for 2013/14 is projected at a record 499.4 million tons, up 4.3 million from September.  Higher soybean, sunflowerseed, and rapeseed forecasts account for most of the change.  Global soybean production is projected at 283.5 million tons, up 1.9 million as the increase for the United States more than offsets reductions for India, Canada, Russia, and Ukraine.  The India soybean crop is reduced 0.5 million tons to 11.8 million as excessive rainfall during much of the growing season reduced yield potential.  Global sunflowerseed production is increased 1 million tons to a record 42.8 million on gains for Russia, European Union, and Moldova which are only partly offset by a reduction for Argentina.  The increase for Russia reflects sharply higher yields reported in weekly harvest progress reports.  Global rapeseed production is raised to a record 67.9 million tons reflecting gains for Canada, Ukraine, and the European Union.  The increase for Canada is based on higher yields reported in the most recent survey from Statistics Canada.  Almost ideal weather conditions throughout the growing season resulted in a projected record large crop despite the first decline in harvested area since 2006. 

Revisions to the world 2013/14 oilseed supply and demand estimates include reduced soybean exports and increased crush for Argentina and increased soybean exports for Brazil.  Soybean crush is reduced for India and Russia on smaller supplies.  Rapeseed exports are increased for Canada and Ukraine, while imports are raised for China.  Global oilseed stocks for 2013/14 are reduced 0.5 million tons to 80.7 million.  Soybeans account for most of the change, with reduced stocks in Brazil more than offsetting gains in Argentina and the United States.

WHEAT:  Projected U.S. wheat supplies for 2013/14 are raised 26 million bushels with higher estimated production and an increase in expected imports.  Production was raised 14 million bushels in the September 30 Small Grains report.  Production is further raised 2 million bushels for Hard Red Spring (HRS) wheat and slightly for Durum based on the resurvey of North Dakota and Montana producers who had not finished harvesting when the September survey was completed for the Small Grains report. Imports are projected 10 million bushels higher with larger supplies in Canada and stronger food use expected for HRS wheat.  Food use for all wheat, however, is lowered 8 million bushels reflecting the latest flour production data reported by the North American Millers' Association with Hard Red Winter wheat food use reduced.  Feed and residual use is projected 30 million bushels higher based on indicated June-August disappearance from the September 1 stocks.  Projected ending stocks are raised 4 million bushels. 

The projected range for the 2013/14 season-average wheat farm price is narrowed 20 cents on each end to $6.70 to $7.30 per bushel.  The midpoint of the range is unchanged from September at $7.00 per bushel.  Normally 60 percent or more of each year's crop is marketed from June through October and reported farm prices so far for this marketing year have averaged near $7.00 per bushel.

Global 2013/14 wheat supplies are lowered 0.8 million tons as a decline in global output more than offsets higher beginning stocks, mostly in the European Union.  European Union production for 2012/13 is revised higher and domestic consumption is estimated lower boosting 2013/14 beginning stocks.  European Union production for 2013/14 is raised 0.4 million tons with small increases to reported crops in a number of member countries.  Canada production is raised 1.7 million tons in line with official estimates.  Global production, however, declines 2.6 million tons with production lowered 2.5 million tons for Russia, 1.5 million tons for Kazakhstan, and 1.0 million tons for Argentina.  Reductions for Russia and Kazakhstan reflect late-season harvest reports for spring wheat.  The reduction for Argentina is based on lower expected harvested area as dryness and late-season freeze events reduce prospects for a crop which will be harvested over the coming weeks.
 
Global wheat consumption for 2013/14 is lowered 3.0 million tons with reductions in foreign feed and food use projected this month.  Feed use is lowered for China, Russia, and the European Union, more than offsetting a small increase for South Korea.  Food use is lowered for India, Russia, and the European Union.  Global wheat trade, in the aggregate, is mostly unchanged this month with imports raised for several African countries and Mexico, but lowered for China, the European Union, and the Philippines.  World exports decline slightly as reductions for Argentina, Kazakhstan, and Russia more than offset increases for Canada, the European Union, and India.  World wheat stocks are projected 
2.2 million tons higher with the biggest increases for the European Union, Canada, and Argentina.

COARSE GRAINS:  Projected U.S. feed grain supplies for 2013/14 are raised with higher estimated beginning stocks and increases in corn and sorghum production with the November Crop Production report.  Corn production is forecast 146 million bushels higher at a record 13,989 million bushels.  A 
1.9-million-acre reduction in harvested area is more than offset by a 5.1-bushel-per-acre increase in the forecast yield.  At 160.4 bushels per acre, the national average yield remains 4.3 bushels per acre below the record in 2009/10.  Despite a late planted crop and July and August dryness across much of the Corn Belt, cooler-than-normal summer temperatures and an extended growing season have supported higher-than-expected yields for most producers.  Higher yields are forecast this month across the Plains, Corn Belt, and South.  Sorghum production is also higher, up 20 million bushels from the September forecast as higher area boosts production despite a lower yield.  A very small decrease is reported for oats production with the resurvey of North Dakota and Montana producers.  Production for both barley and oats were previously lowered in the Small Grains report.

U.S. corn supplies for 2013/14 are projected 307 million bushels higher at a record 14,837 million bushels as this month's increase in production combines with higher beginning stocks from the September 30 Grain Stocks report.  Total corn use is raised 275 million bushels, offsetting much of the supply increase.  Feed and residual use is raised 100 million bushels with the larger crop.  Corn exports are projected 175 million bushels higher with larger supplies and lower prices that have increased the competitiveness of U.S. corn as indicated by strong outstanding export sales and rising export shipments in recent weeks.  Ending stocks for 2013/14 are projected 32 million bushels higher at 1,887 million.  The projected season-average farm price range for corn is lowered 30 cents at both ends to $4.10 to $4.90 per bushel.  Cash and futures prices have responded to rising yield prospects over the past 2 months, sharply reducing the outlook for 2013/14 farm prices.

Other notable feed grain changes this month include higher projected 2013/14 exports for sorghum and small revisions to 2012/13 corn and sorghum use.  Corn and sorghum trade changes for 2012/13 are based on final August export data reported by the U.S. Census Bureau.  Corn use for ethanol production is lowered 17 million bushels for 2012/13 and 9 million bushels for 2011/12 based on revisions to calendar year 2012 ethanol production by the Energy Information Administration.  Sorghum food, seed, and industrial use for 2012/13 is also reduced based on lower 2012 ethanol production.

Global coarse grain supplies for 2013/14 are projected 20.6 million tons higher compared with the September projection.  A combination of higher 2012/13 and 2013/14 production and reduced consumption for 2012/13, mostly for corn, boost 2013/14 coarse grain supplies.  Global 2013/14 coarse grain production is raised with a 6.2-million-ton increase in corn production.  More than half of the increase is for the United States.  Corn production is also raised for Russia, India, and the European Union.  Corn production for Brazil is reduced with lower expected area as declines in interior corn prices push expected returns into negative territory for the safrinha crop, which will not be planted until January.  Mexico production is also lowered.

Global 2013/14 corn consumption is raised 5.5 million tons with foreign consumption up 3.0 million.  Corn feeding is raised for Mexico, Russia, Ukraine, Egypt, India, Colombia, and Turkey.  Industrial use is raised for Brazil, but a larger reduction for China leaves foreign food, seed, and industrial use lower, partly offsetting the global increase in feed use.  World corn exports for 2013/14 are raised 7.7 million tons as lower prices are expected to boost demand.  Corn imports are raised for Mexico as sorghum imports are reduced.  Sorghum imports, however, are raised for China.  Corn imports are also raised for Egypt, the European Union, Colombia, and Turkey; all driven by higher expected feeding.  Corn imports are lowered for South Korea with an increase in wheat feeding.  In addition to the increase in U.S. corn exports, 2013/14 exports are also raised for Brazil, the European Union, and Russia.  Global corn ending stocks for 2013/14 are projected 12.9 million tons higher with most of the increase in China where consumption has been lowered for both 2012/13 and 2013/14.  Corn stock changes elsewhere are mostly offsetting. 

SUGAR:  Projected U.S. sugar supply for fiscal year 2013/14 is increased 115,000 short tons, raw value, from last month, as higher production more than offsets lower imports and beginning stocks.  Projected sugar production is increased based on higher forecast sugar crop yields.  Imports from Mexico are lowered slightly, as Mexico exports more to non-U.S. markets.  Ending stocks for 2012/13 are reduced to reflect lower final production estimates and higher sales by the Commodity Credit Corporation (CCC) to ethanol producers.  Sugar held by the CCC is included in ending stocks.

LIVESTOCK, POULTRY, AND DAIRY:  The forecasts for total red meat and poultry production for both 2013 and 2014 are lowered from September.  For 2013, the beef production is nearly unchanged as a lower third-quarter estimate is largely offset by higher expected fourth-quarter production.  Pork production is reduced from last month based on third-quarter data and a lower-than-expected pace of slaughter in October and early November.  The broiler production forecast is lowered as higher third quarter production is more than offset by lower expected fourth-quarter production.  Turkey production is reduced for both the third and fourth quarters.  Hatchery data points to a sharper-than-expected contraction in fourth-quarter production.  For 2014, the beef production forecast is reduced slightly from September on lower placements of cattle in feedlots during 2014.  The pork production forecast is reduced for 2014.  In the September Hogs and Pigs report, producers indicated intentions to expand sows farrowing through early 2014 and increases in farrowings during 2014 will likely be supported by moderating feed costs.  However, the 2014 pork production forecast has been tempered by continuing reports of porcine epidemic diarrhea (PED) outbreaks.  Broiler production is raised as moderating feed costs support continued modest growth in broiler flocks.  The turkey production forecast is reduced as turkey prices in the third quarter were weaker-than-expected and the contraction in production forecast for late 2013 is expected to carry into early 2014.  The egg production forecast is raised for both 2013 and 2014 as hatchery data points to increasing egg-type laying flocks. 

Beef imports are reduced for 2013 as based on the current pace of imports with the lower level carried through into 2014.  Despite lower U.S. beef production, which would increase demand for imports, global supplies are tight and demand by competing importers is expected to limit growth in U.S. imports.  Beef exports are higher for 2013 based on the strength of shipments to date, but the forecast for 2014 is unchanged from September.  Pork exports are reduced from September based on the pace of exports and lowered for 2014 on slightly weaker demand in Asia.  The 2013 broiler export forecast is raised slightly, but the forecast for 2014 is unchanged.  Turkey exports are raised for 2013 but the forecast for 2014 is unchanged.

Cattle prices for 2013 and 2014 are raised from September as demand for fed cattle is strong.  Hog prices for both 2013 and 2014 are raised on tighter-than-expected supplies and firm demand.  The broiler and turkey price forecasts for 2013 are little changed from September and forecasts for 2014 are unchanged.  Egg prices are forecast higher for 2013, reflecting current prices; the forecast for 2014 is reduced on higher forecast production.

The 2013 milk production forecast is reduced from September, reflecting slower growth in third-quarter production.  The production forecast for 2014 is raised as producers are expected to increase cow herds in response to improving returns.  Growth in milk per cow is also expected to be higher than 2013 as moderating feed costs and improved forage availability supports feeding higher quality rations.  Import forecasts are reduced for both 2013 and 2014 on lower expected milk protein concentrate imports.  Exports are raised for both 2013 and 2014 on stronger sales of fat containing products and nonfat/skim milk powders. 

Price forecasts for cheese, butter, and nonfat dry milk (NDM) are forecast higher on strong domestic and international demand.  However, the price of whey is forecast lower, reflecting current prices.  For 2014 higher dairy production is expected to pressure cheese, butter, and whey prices but expected strength in exports supports a higher NDM price forecast.  Pressured by lower whey prices, the Class III milk price is reduced for 2013 and the forecast is reduced for 2014 on reduced price forecast for both whey and cheese.  The Class IV price forecast is raised for both years, largely on higher NDM prices although higher butter prices in 2013 also provide support for the higher forecast.  The all milk price is forecast at $19.80 to $19.90 per cwt for 2013 and $19.30 to $20.20 per cwt for 2014.

COTTON:  This month's U.S. cotton forecasts for 2013/14 show higher production, offtake, and ending stocks compared with the September report.  Production is raised nearly 2 percent to 13.1 million bales, due mainly to increases for the Delta and Southeast.  Domestic mill use is raised 100,000 bales to 3.6 million based on strong early season activity.  Exports are unchanged at 10.4 million bales.  Accordingly, ending stocks are increased to 3.0 million, the equivalent of 21 percent of total use.  The marketing-year average price received by producers is forecast to range from 69-79 cents per pound, with the midpoint of 74 cents estimated 3 cents below September.

The 2013/14 global ending stocks forecast is raised 1 percent this month, as sharply higher beginning stocks are partially offset by lower production and marginally higher consumption.  Stocks are raised mainly in India, as revisions are made to production and loss beginning in 2006/07 to bring historical stocks to levels which cover reported demand (see www.fas.usda.gov/psdonline/circulars/cotton.pdf for more details).  Production forecasts for 2013/14 are lowered for China and Zambia, but raised for the United States, Brazil, and Greece.  Consumption is raised for Vietnam and the United States, but is lowered for Egypt.  World stocks are now projected at 95.7 million bales and include 57.8 million bales held by China.  This month's forecasts for China's consumption and imports reflect the government of China's announced policies for the acquisition and release of government reserves, which are unchanged from September.  

RICE:  All rice supplies for 2013/14 are increased nearly 3.2 million cwt or 1 percent from the September forecast due entirely to an increase in production.  U.S. all rice production in 2013/14 is forecast at 188.7 million cwt, 3.7 million or 2 percent above the September forecast due to an increase in yield.  Average all rice yield is estimated at a record 7,660 pounds per acre, up 149 pounds per acre from the September estimate.  Harvested area is unchanged at 2.46 million acres.  Long-grain rice production is up 2.5 million cwt to 129.0 million, and combined medium- and short-grain rice production is raised 1.2 million cwt to 59.7 million cwt.  The all rice import forecast is lowered 0.5 million cwt to 22.0 million (all in long-grain) based on U.S. Census Bureau data to date and expectations of import needs for the remainder of the marketing year.

On the use side for 2013/14, all rice domestic and residual use is unchanged from the September forecast; however, the export projection is increased 2.0 million cwt to 100.0 million.  Long-grain rice exports are raised 2.0 million cwt to 68.0 million, and combined medium- and short-grain rice exports are unchanged at 32.0 million.  All rice ending stocks are forecast at 31.2 million cwt, up 4 percent from September, but down 15 percent from a year ago.

The 2013/14 long-grain rice season-average farm price range is projected at $14.50 to $15.50 per cwt, up 50 cents on each end of the range from last month.  The combined medium- and short-grain farm price range is projected at $16.80 to $17.80 per cwt, up 50 cents per cwt on each end of the range.  The all rice season-average farm price is forecast at $15.20 to $16.20 per cwt, up 50 cents per cwt on each end of the range. 

Global total supplies of rice for 2013/14 are lowered more than the decrease in total use resulting in a drop in world ending stocks.  World rice production is lowered 3.6 million tons from the September projection to 473.2 million, still a record, and 4.2 million larger than the preceding year.  The decline in global production is due mostly to lower production forecasts for Brazil, China, India, Nigeria, and Pakistan, which are partially offset by increases for Bangladesh, Colombia, and the United States.  India's 2013/14 rice crop is lowered 3.0 million tons to 105.0 million because of unfavorable weather mostly in eastern and southeastern areas and a decrease in expected harvested area.  Cyclone Phailin and extremely heavy rains in the states of Orissa and Andhra Pradesh have lowered crop prospects.  China's rice crop is lowered 0.5 million tons to 141.5 million based on a recent report from the Agricultural Counselor in Beijing.

Global rice consumption for 2013/14 is lowered 1.5 million tons due mostly to a decline in India.  Global rice trade is changed little from the September projections; however, India's 2013/14 exports are raised 700,000 tons; and Pakistan and Vietnam are lowered 100,000 and 300,000 tons, respectively.  Export projections are also lowered for Argentina, Brazil, Russia, and Turkey.  Nigeria's imports are raised 600,000 tons to 3.0 million.  Global 2013/14 ending stocks are projected at 106.5 million tons, down 0.8 million from the September projection due mostly to decreases for China, India, and Pakistan, which is partially offset by an expected increase for Vietnam.

 


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