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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 3/8/13

Mar 08, 2013

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OILSEEDS:  U.S. soybean supply and use projections for 2012/13 are unchanged this month, leaving ending stocks at 125 million bushels.  Although soybean export commitments through February exceeded last year's pace, U.S. exports are expected to decline in the months ahead as increased competition from a record South American soybean crop limits additional U.S. sales during the second half of the marketing year.  Soybean crush is also ahead of last year's pace, but is projected to slow in the second half of the marketing year on declining soybean meal exports as competition from South America, especially Argentina, increases with the new-crop harvest.

The projected season-average price range for soybeans is narrowed 25 cents on both ends of the range to $13.80 to $14.80 per bushel.  Soybean oil prices are forecast at 48.5 to 51.5 cents per pound, down 1 cent at the midpoint.  Soybean meal prices are projected at $425 to $445 per short ton, down 10 dollars at the midpoint.

Global oilseed production for 2012/13 is projected at 466.8 million tons, down slightly from last month as reduced soybean and sunflowerseed production is mostly offset by increased rapeseed and cottonseed production.  Foreign production, projected at 374.1 million tons, accounts for all of the change.  Argentina soybean production is projected at 51.5 million tons, down 1.5 million.  Despite widespread rains in recent weeks, the extended dry period during planting and early crop development limited plantings and reduced yield prospects.  China rapeseed production is projected at 13.5 million tons, up 0.9 million based on increased area and yield indicated in recently released official government statistics.  Other changes include higher rapeseed production for Australia and India, reduced sunflowerseed production for Argentina, and increased palm oil production for Malaysia.  Cottonseed production is increased for China and reduced for Pakistan and Brazil.

WHEAT:  U.S. wheat exports for 2012/13 are projected 25 million bushels lower this month boosting projected ending stocks by the same amount.  Continued strong competition, particularly from EU-27 and FSU-12, further reduce prospects for U.S. wheat shipments.  Projected exports for Hard Red Winter wheat are lowered 25 million bushels.  Exports are also lowered 10 million bushels and 5 million bushels, respectively, for White and Hard Red Spring wheat, but raised 15 million bushels for Soft Red Winter wheat.  All-wheat imports are unchanged, but small adjustments are made among the classes.  Trade changes largely reflect the pace of sales and shipments to date.  The projected range for the season-average farm price for wheat is lowered 10 cents at the midpoint and narrowed to $7.65 to $7.95 per bushel.

Global wheat supplies for 2012/13 are raised 1.8 million tons with higher production.  India production is increased 1.0 million tons based on the latest revisions by the government of India for the crop harvested nearly a year ago.  EU-27 production is raised 0.5 million tons based on the latest production estimate released by the government of Lithuania.  Production is estimated 0.3 million tons higher for Nepal in line with historical revisions to the country's production series this month.

Global wheat trade is projected higher for 2012/13.  Imports are raised 1.0 million tons for Iran, 0.5 million tons for South Korea, 0.3 million tons for Algeria, and 0.2 million tons each for China and Japan.  Partly offsetting are reductions of 1.0 million tons for Egypt and 0.2 million tons for Kenya.  Exports are raised 1.0 million tons for EU-27, 0.5 million tons for Brazil, and 0.3 million tons for Ukraine, more than offsetting this month's reduction for the United States.  World wheat feed use is increased 1.3 million tons with 0.5-million-ton increases for Australia, Canada, and South Korea, and a 0.1-million-ton increase for Japan outweighing a 0.3-million-ton decrease for Egypt.  Lower expected food use in India, Egypt, and Kenya limit the increase in global wheat consumption.  World wheat ending stocks for 2012/13 are projected 1.5 million tons higher with the largest increases for India, Iran, and the United States.  The biggest reductions in ending stocks are for Australia, Egypt, EU-27, Brazil, Canada, and Ukraine.

COARSE GRAINS:  Projected 2012/13 U.S. corn ending stocks are unchanged this month as an increase in imports and lower exports support higher expected feed and residual disappearance.  Corn imports are raised 25 million bushels reflecting the strong pace of shipments reported through January.  Corn exports are lowered 75 million bushels based on the slow pace of sales and shipments to date and stronger expected competition from South American corn and from competitively priced feed quality wheat.  Feed and residual disappearance for corn is raised an offsetting 100 million bushels with continued expansion in poultry production and a 10-million-bushel reduction in projected sorghum feed and residual use.  Sorghum exports are projected 10 million bushels higher based on the strong pace of sales and shipments.  Smaller trade changes are projected for barley and oats based on shipments to date.

The projected season-average farm prices for corn and sorghum are each lowered 20 cents on the high end of the range to $6.75 to $7.45 per bushel and $6.70 to $7.40 per bushel, respectively.  The projected farm price ranges for barley and oats are narrowed 10 cents on each end to $6.25 to $6.55 per bushel and $3.70 to $3.90 per bushel, respectively.
 
Global coarse grain supplies for 2012/13 are projected 1.0 million tons lower with a 0.8-million-ton decrease in production.  Corn production is lowered 0.5 million tons for Argentina reflecting extended dryness in February that reduced yield prospects, particularly for late-planted corn.  South Africa corn production is reduced 0.5 million tons as dryness and heat reduce yield prospects in the western areas of the maize belt.  Sorghum production is lowered 0.5 million tons for Australia as excessively high temperatures have reduced harvested area as indicated by the latest government estimates and yield prospects as confirmed by satellite imagery.  India corn production is raised 0.4 million tons as planting progress reports for the winter crop indicate a year-to-year increase in area. 

Global coarse grain exports for 2012/13 are lowered this month mostly reflecting the projected reduction in U.S. corn exports.  World corn feed and residual use is raised with higher expected use in the United States.  Corn feed use is also raised for India and Malaysia.  Corn imports and feeding are lowered for South Korea with higher expected imports of feed quality wheat and increased wheat feeding.  Sorghum imports and feeding are raised for Mexico with the increase in U.S. sorghum exports.  Global coarse grain ending stocks decline 0.6 million tons with small reductions in corn stocks for Brazil, Malaysia, Argentina, and India.

SUGAR:  Projected U.S. sugar supply for fiscal year 2012/13 is increased 91,000 short tons, raw value, from last month, as higher sugar imports from Mexico more than offset lower production and tariff rate quota (TRQ) imports.  Reduced Florida cane sugar production reflects processors' estimates while lower TRQ imports reflect increased shortfall.  Higher imports from Mexico result from increased production which is based on higher-than-expected sugarcane yields to date.  Sugar use is unchanged for the United States and ending stocks are increased for both the United States and Mexico.

LIVESTOCK, POULTRY, AND DAIRY:  The 2013 forecast of total red meat and poultry production is raised from last month as higher beef, broiler, and turkey production is expected to more than offset lower forecast pork production.  Beef production is raised from last month largely due to heavier expected carcass weights.  Steer and heifer slaughter is reduced for the first quarter, but cow slaughter is raised.  Pork production is reduced based on lower slaughter in the first quarter.  The broiler production forecast is raised as producers are expected to respond to stronger forecast first-half broiler prices and lower projected second-half feed meal prices.  Turkey production is forecast higher on heavier bird weights and slightly higher slaughter.  Egg production is raised based on hatchery data.  Poultry and egg production for 2012 is adjusted to reflect revisions in production data.

The beef export and import forecasts for 2013 are lowered based on slower-than-expected shipments in January.  Pork exports are lowered from last month as export demand has softened.  The broiler export forecast is unchanged from last month.  Changes in estimates for 2012 trade reflect December data.

Cattle prices for 2013 are lowered from last month, reflecting slightly weaker demand for fed cattle into the second quarter of the year.  Hog and broiler price forecasts are unchanged from last month.  Forecast broiler prices are raised in the first half on strong demand, but are reduced in the second half on production increases.  Turkey prices are lowered on greater production.  Egg price forecasts are unchanged.

RICE:  The changes made to the U.S. 2012/13 rice supply and use balances this month are confined to the trade categories and ending stocks.  The 2012/13 all-rice import forecast is raised 0.5 million cwt to 21.5 million, based largely on the pace of imports reflected in the U.S. Bureau of the Census import data through January-all in long-grain rice.  On the use side, the all-rice export forecast is increased 2.0 million cwt to 108.0 million-all in long-grain rice.  The rough rice and milled export (rough-equivalent basis) forecasts are each raised 1.0 million cwt to 35.0 million and 73.0 million, respectively.  Increased export commitments to Iran and Western Hemisphere markets support the increase in the 2012/13 export projection.  Export commitments for 2012/13 through the end of February are up 19 percent from a year ago according to the latest USDA's U.S. Export Sales report.  All rice ending stocks are projected at 29.1 million cwt, down 1.5 million from a month ago-all in long-grain rice.  Long-grain rice ending stocks are projected at 16.4 million cwt, the lowest stocks since 2003/04.  Medium-/short-grain ending stocks are unchanged at 10.5 million cwt.

The 2012/13 long-grain, season-average price is raised 20 cents per cwt at the midpoint to $14.50, the medium/short grain price is lowered 30 cents per cwt at the midpoint to $15.90, and the all rice season-average price is unchanged at $14.90 per cwt at the midpoint.

Global 2012/13 rice production, consumption, trade, and ending stocks are all up from a month ago.  World rice production is forecast at a record 468.1 million tons, up 2.3 million from last month, largely due to increases for Cambodia and India.  India's rice crop is projected at 102.0 million tons, up 2.0 million from last month, but down 4.3 million from record 2011/12.  The increase in India' s crop is due entirely to the larger Kharif rice crop now forecast by the government of India at 90.7 million tons, up 4.5 million from an earlier forecast.  The Rabi rice crop is expected to be down from last year due to late planting and a lower expected average yield.  World consumption is forecast at a record 470.2 million tons, up 0.9 million from last month, owing mostly to increases for Cambodia, India, and Peru.  The increase in global trade is relatively small.  Global 2012/13 ending stocks are projected at 103.3 million tons, up 1.4 million from a month ago, but down 2.2 million from last year.

This month's 2012/13 world cotton estimates show higher production, consumption, and trade, with ending stocks reduced marginally.  World production is raised about 900,000 bales from last month, including a 1.0-million-bale increase in the China crop, based on recent statistical reports for the eastern provinces and on classification data for Xinjiang.  Production also is raised for Uzbekistan, Mexico, and Turkmenistan, but is reduced for Pakistan and Brazil.  Consumption is raised for China, India, and Bangladesh.  World trade is raised 1.5 million bales, due mainly to higher imports by China, Pakistan, and Bangladesh.  Exports are raised for India, the United States, Australia, Turkmenistan, and Uzbekistan, but are lowered for Pakistan.  Global ending stocks are now forecast at 81.7 million bales. 
 

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