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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 4/10/12

Apr 10, 2012

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OILSEEDS: U.S. soybean exports for 2011/12 are increased 15 million bushels this month to 1.29 billion. The increase partly offsets reduced export prospects for South America resulting from drought-reduced soybean crops. The U.S. soybean crush is raised 15 million bushels to 1.63 billion due to stronger-than-expected domestic soybean meal disappearance. Soybean oil balance sheet adjustments include increased production, reduced food use, and increased use for methyl ester production reflecting the most recent data published by the Environmental Protection Agency (EPA). Seed use is lowered to reflect plantings for 2012 reported in the March 30 Prospective Plantings report. Residual use is reduced based on indications from the March 30 Grain Stocks report. U.S. soybean ending stocks are projected at 250 million bushels, down 25 million from last month.

Soybean and soybean product prices are all projected higher this month. The U.S. season-average soybean price range is projected at $12.00 to $12.50 per bushel compared with $11.40 to $12.60 last month. The soybean meal price is projected at $335 to $355 dollars per short ton compared with the previous projection of $310 to $340. The soybean oil price is projected at 52.5 to 54.5 cents per pound compared with the previous projection of 50.5 to 54.5 cents per pound.

Global oilseed production for 2011/12 is projected at 440.6 million tons, down 5.2 million from last month. Foreign production accounts for all of the change. Brazil soybean production is forecast at 66 million tons, down 2.5 million from last month as warm temperatures and a lack of rainfall since late February in the southern state of Rio Grande do Sul further reduced yield and production prospects. Argentina and Paraguay soybean production estimates also are further reduced this month, reflecting the damaging effects of this year's drought. Other changes include higher peanut and sunflowerseed production for Burma, reduced peanut production for Argentina and China, reduced cottonseed production for Australia and India, and reduced palm kernel production for Indonesia.

Global oilseed trade for 2011/12 is projected at 106.4 million tons, down 2 million mainly reflecting reduced soybean trade. Lower soybean exports are forecast for Argentina, Brazil, Paraguay, and Uruguay. Soybean imports are reduced for several countries including Vietnam, Iran, and Mexico. Global soybean ending stocks are projected at 55.5 million tons, down 1.8 million from last month, and down 13.6 million tons from last year.

WHEAT: U.S. wheat ending stocks for 2011/12 are projected 32 million bushels lower. Projected feed and residual use is raised 35 million bushels reflecting higher-than-expected disappearance during the December-February quarter as indicated by the March 1 stocks. Projected seed use is lowered 3 million bushels based on state level seedings as reported in the March 30 Prospective Plantings report. Projected exports for all wheat are unchanged as a 15-million-bushel increase for Soft Red Winter (SRW) wheat is offset by the same size reduction for Hard Red Winter wheat. By-class shifts reflect the pace of sales and shipments to date and the increasing competitiveness of U.S. SRW wheat into Europe, Egypt, and Mexico. The projected range for the 2011/12 season-average farm price is narrowed 5 cents on both ends to $7.20 to $7.40 per bushel.

Global wheat supplies for 2011/12 are lowered 0.5 million tons as reductions in beginning stocks for a number of countries more than offset a 0.3-million-ton increase in global production. Production for 2011/12 is raised for Syria, Pakistan, and South Africa, more than offsetting reductions for Egypt and Iran. Production changes this month have only a limited impact on global trade as world imports rise mostly on higher expected wheat feeding.

Global wheat imports for 2011/12 are projected 1.6 million tons higher. Imports are raised 0.5 million tons for China, 0.3 million tons each for Brazil and Mexico, 0.2 million tons each for Kenya, Morocco, the Philippines, South Africa, and Vietnam, and 0.1 million tons for Israel. Imports are lowered 0.3 million tons for Turkey, and 0.2 million tons each for Iran and Libya. Exports are raised 0.5 million tons each for Argentina and Brazil, 0.4 million tons for Uzbekistan, and 0.3 million tons each for Canada and Pakistan. A 1.0-million-ton reduction for Ukraine and a 0.2-million-reduction for Uruguay are partly offsetting.

Global wheat consumption for 2011/12 is raised 2.8 million tons on higher expected feed and residual usage. Wheat feeding is raised for China, Saudi Arabia, Mexico, the Philippines, and Vietnam. A revision to the India usage series, in order to better reflect residual losses, raises feed and residual use for the country by 2.9 million tons, but reduces food, seed, and industrial use by an offsetting amount. Global ending stocks for 2011/12 are projected 3.3 million tons lower. Stocks are lowered for a number of countries with the biggest reductions for China, Iran, Argentina, Saudi Arabia, Uzbekistan, Japan, Canada, and Egypt. Partly offsetting are increases for Ukraine, Syria, and Jordan with smaller increases made for several other countries.

COARSE GRAINS: U.S. feed grain balance sheets for 2011/12 are unchanged this month. The projected ranges for the season-average corn and sorghum farm prices are both narrowed 10 cents on each end to $6.00 to $6.40 per bushel and $5.90 to $6.30 per bushel, respectively. The barley and oats farm price ranges are both narrowed 5 cents on each end to $5.25 to $5.45 per bushel and $3.40 to $3.50 per bushel, respectively.

Corn used to produce ethanol in 2011/12 is projected at 5.0 billion bushels, unchanged again this month. The latest monthly data from the Energy Information Administration (EIA) indicates that average daily ethanol disappearance fell to a 23-month low in January pushing ethanol stocks to a new record high. Weekly EIA ethanol production data suggest average daily ethanol production during February and March has continued to fall hitting its lowest level since early last fall.

Projected 2011/12 corn feed and residual use is unchanged at 4.6 billion bushels. March 1 stocks indicate a September-February feed and residual disappearance 238 million bushels lower than during the first 6 months of the 2010/11 marketing year. Prospects for feed and residual disappearance during the remainder of 2011/12 will be limited by an improving outlook for summer wheat feeding and the potential for 2012 new-crop corn use during August. Prospects remain favorable for a large year-to-year increase in winter wheat production with planted area up 1.1 million acres and crop condition ratings substantially improved from last spring at this time, particularly in the Hard Red Winter wheat states. Larger expected supplies and competitive prices for wheat relative to corn suggest an increase in summer wheat feeding compared with last year. The quick start to corn planting this spring and more intended acres across the South raise the potential for a substantial increase in new-crop corn use before the September 1 start of the new marketing year.

Global coarse grain supplies for 2011/12 are projected 4.3 million tons lower mostly on a 4.0-million-ton reduction in corn beginning stocks in China with higher 2010/11 corn feed and residual use. Global barley supplies for 2011/12 are also lowered 0.6 million tons mostly on lower 2010/11 and 2011/12 production for Iran. Partly offsetting is an increase in global sorghum supplies reflecting higher 2010/11 and 2011/12 production in China that more than offsets a 0.5-million-ton reduction in 2011/12 sorghum production for Mexico.

Global 2011/12 corn production is nearly unchanged with a number of notable, but offsetting changes made, many of which reflect the latest available updates to officially reported statistics. Corn production is raised 1.7 million tons for Egypt, 0.6 million tons for Indonesia, 0.4 million tons for Cambodia, and 0.2 million tons each for Colombia and Thailand. Production for Mexico is lowered 1.5 million tons based on lower harvested area as government harvest reports suggest last summer's crop suffered greater losses than previously thought from late planting, sporadic dryness, and an early frost in eastern areas of the south-central Corn Belt. Production for Argentina is reduced 0.5 million tons with lower yields reported for the early planted crop. South Africa production is lowered 0.5 million tons as dryness and late-season heat that persisted through mid-March reduced yield prospects in western areas of the Corn Belt. The resumption in rainfall in late March came too late for much of the crop. Venezuela production is lowered 0.4 million tons with lower reported area and yields and Laos production is lowered 0.3 million tons on lower reported area.

Global coarse grain imports and exports for 2011/12 are raised slightly with several countries adjusted based largely on the pace of trade to date. A 0.5-million-ton increase for Brazil corn exports is partly offset by a 0.1-million-ton decrease in corn exports for Mexico. Corn imports are lowered for Egypt, Thailand, and Colombia, but raised for Mexico, Indonesia, and Venezuela. Argentina sorghum exports are lowered 0.2 million tons. Sorghum imports are lowered for Japan. Kazakhstan barley exports are raised 0.2 million tons. Barley imports are raised for Morocco and Iran.

Global coarse grain consumption for 2011/12 is lowered 3.4 million tons mostly on a 3.0-million-ton reduction in corn feed and residual use in China. An increase in China wheat feeding is mostly offsetting. Mexico corn feeding is reduced 0.4 million tons, also with higher expected wheat feeding. Corn feeding is raised 0.5 million tons for Indonesia and 0.4 million tons for Egypt. A 0.5-million-ton reduction in Brazil corn feeding is offset by the same size increase in food, seed, and industrial use for the country. Sorghum consumption is raised for China, but lowered for Mexico and Japan. Barley feeding is lowered for Saudi Arabia. Global coarse grain ending stocks for 2011/12 are lowered 0.9 million tons, with a 1.8-million-ton decline for corn partly offset by increases for barley and sorghum.


SUGAR: Projected U.S. sugar supply for fiscal year 2011/12 is decreased 250,000 tons, raw value, from last month, due to lower imports more than offsetting higher production. Beet sugar production is raised 130,000 tons to reflect the higher sugarbeet area in the March 2012 Prospective Plantings report. Imports from Mexico are reduced 385,000 tons, while high-tier tariff imports are raised 5,000 tons. Mexico's sugar production is reduced and domestic consumption is raised, both in line with their respective pace. Mexico's ending stocks are raised to reflect Mexico's assumed stock needs relative to consumption.

LIVESTOCK, POULTRY, AND DAIRY: The 2012 forecast of total red meat and poultry production is raised from last month. Beef production is forecast slightly higher as higher midyear production is largely offset by lower-than-expected slaughter in the first quarter. The pork production forecast is raised as the March Quarterly Hogs and Pigs report pointed to a slightly higher-than-expected first-quarter pig crop. The broiler production forecast is raised for the first half of the year based on production data to date and stronger forecast first-half prices. Turkey production is forecast higher as turkey price forecasts are raised. The egg production forecast is raised slightly.

The beef export forecast for 2012 is lowered, reflecting the current pace of trade. Imports are raised on larger expected supplies in Oceania. Pork exports are raised. The broiler export forecast is reduced slightly from last month on higher prices.

The cattle price for 2012 is lowered from last month based on weaker forecast second-quarter prices. The 2012 hog price is lowered based on revised first-quarter prices and a slightly weaker forecast for prices over the middle quarters. Broiler and turkey price forecasts are raised as current prices remain strong. Egg price forecasts are raised on stronger expected midyear prices.

The milk production forecast for 2012 is raised on increased milk cow numbers and gains in milk per cow. The skim solids import forecast is raised. The fat-basis export forecast is reduced on lower butter exports, but skim solids exports are forecast higher on stronger nonfat dry milk (NDM) sales. Ending stock forecasts are raised on both a fat and skim-solids basis.

With higher forecast 2012 milk production and weaker than expected product demand, price forecasts for cheese, butter, NDM, and whey are lowered. As a result, both Class III and Class IV price forecasts are reduced from last month. The all milk price for 2012 is lowered to $17.25-$17.75 per cwt.

COTTON: This month's 2011/12 U.S. cotton supply and demand estimates include lower production and higher exports, resulting in a decrease of 500,000 bales in forecast ending stocks. Production is reduced 119,000 bales based on USDA's Cotton Ginnings report, released March 23, 2012, while exports are raised 400,000 bales, reflecting very strong shipments in recent weeks. Domestic mill use is unchanged. Ending stocks are now forecast at 3.4 million bales, equivalent to an ending stocks-to-use ratio of 23 percent. The forecast range for the average price received by producers of 89 to 93 cents per pound is raised 1 cent on the lower end.

The forecast for 2011/12 world cotton ending stocks is raised sharply this month, due partly to historical adjustments for India that increase beginning stocks by 3.25 million bales and ending stocks by 1.6 million bales. Analysis of India's reported exports for the months of August-December 2011 indicates that stocks were significantly higher on August 1, 2011, than estimated previously (see http://www.fas.usda.gov/psdonline/circulars/cotton.pdf for further details). In addition, the government of China's accumulation of cotton in the national reserve is constraining free supplies, thereby boosting its imports while limiting consumption. As a result, China's stocks are raised 3 million bales to 23.1 million, a level that assumes minimal release of reserve stocks before the end of the marketing year on July 31. China's forecast ending stocks now account for 35 percent of world stocks.

World production for 2011/12 is reduced about 500,000 bales, as reductions for India, the United States, and others are partially offset by increases for Pakistan and Sudan. World consumption is reduced 1.0 million bales, due to the reduction for China, and is now estimated at 6 percent below 2010/11. Adjustments to world trade reflect a 2.0-million-bale increase in China's imports to a record 20.5 million, combined with increases for Malaysia, Indonesia, and Vietnam, partially offset by a decrease for Pakistan. Exports are raised for India, the United States, Pakistan, and Brazil.

RICE: On the U.S. 2011/12 supply side, the all rice import projection is raised 0.5 million cwt to 20.5 million (in long-grain) based on the pace of imports as reported by the Census Bureau through January. Forecast beginning stocks and production are unchanged from a month ago. On the use side, all rice domestic and residual use is estimated at 123.0 million cwt, down 1.0 million (in long-grain) from last month, and a decrease of 11 percent from the previous year record. The decrease in the 2011/12 domestic and residual use is based in part on the March 1 Rice Stocks report released by the National Agricultural Statistics Service (NASS) on March 30. NASS reported all rice stocks on a rough-equivalent basis at 112.9 million cwt (rough-equivalent basis), slightly higher than expected, and down 13 percent from a year earlier. Additionally, lower projected seed use of rice in 2012 and a downward trend in the brewers' use of rice also supported a decrease in the domestic and residual use of rice.

The all rice 2011/12 export projection is raised 3.0 million cwt to 92.0 million as net sales for March picked up significantly, and totaled over 325,000 tons (product-weight basis), compared to less than 200,000 tons in February. The long-grain export forecast is raised 1.0 million cwt to 58.0 million, largely due to increased sales to Venezuela. The combined medium- and short-grain export projection is raised 2.0 million to 34.0 million primarily due to increased sales to Turkey and South Korea. Rough rice exports are projected at 32.0 million cwt, up 1.0 million from a month ago, and combined milled- and brown-rice are increased 2.0 million (rough-equivalent basis) to 60.0 million. An increase in food-aid announcements mainly to Africa also contributed to the larger export projection. All rice ending stocks are projected at 39.0 million cwt, 1.5 million below last month, and 9.5 million below the previous year. Projected long-grain ending stocks are lowered 0.5 million cwt to 24.1 million, and combined medium- and short-grain rice stocks are lowered 2.0 million cwt to 12.2 million.

The all rice 2011/12 season average farm price is forecast at $13.80 to $14.20 per cwt, down 10 cents on the low end and a decrease of 30 cents on the high end. The midpoint at $14.20 per cwt is down 20 cents per cwt from last month, but up $1.30 from a year ago. The long-grain price range is projected at $13.10 to $13.50 per cwt, down 10 cents on the low end and a decrease of 30 cents on the high end from last month. The combined medium- and short-grain price range is projected at $15.50 to $15.90 per cwt, and is narrowed 10 cents per cwt on each end of the range from a month ago.

Global 2011/12 rice production and consumption are lowered from a month ago, while trade and ending stocks are increased. World rice production is reduced 1.7 million tons to 463.7 million tons, still a record, largely due to lower projections for Burma, Colombia, Egypt, and Indonesia, which are partially offset by increased projections for Bangladesh, Thailand, and Vietnam. Global consumption is reduced 4.1 million tons to 458.8 million, still a record, largely due to reductions for Burma, Egypt, India, Pakistan, and Thailand, partially offset by increases for China, EU-27, and Iran. Forecast global exports for 2011/12 are raised 0.8 million tons to 33.9 million tons, down nearly a million tons from record 2010/11. Projected imports are raised for China, Egypt, EU-27, and Indonesia. Forecast exports are raised for India, Vietnam, and the United States, and lowered for Burma, China, and EU-27. Global ending stocks are projected at 103.3 million tons, up nearly 3.0 million tons from last month, an increase of almost 5.0 million tons from 2010/11, and the largest since 2001/02. Burma, Indonesia, EU-27, Pakistan, the Philippines, and Thailand account for the bulk of the upward revision in global ending stocks.

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