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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 4/9/14

Apr 09, 2014

 WASDE Report 4/9/14


 

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 WHEAT:  U.S. wheat ending stocks for 2013/14 are projected 25 million bushels higher with lower imports more than offset by a reduction in feed and residual use.  Imports are projected 5 million bushels lower based on available shipment data.  Feed and residual use is projected 30 million bushels lower based on disappearance during the December-February and September-November quarters as indicated by the March 1 stocks and revisions to the December 1 stocks, both from the March 31 Grain Stocks report.  Projected feed and residual use is lowered 10 million bushels each for Hard Red Winter, Hard Red Spring, and White wheat.  The all wheat export projection is unchanged, but small by-class adjustments are made to exports as well as imports.  The projected season-average farm price for all wheat is unchanged at $6.75 to $6.95 per bushel.

Global 2013/14 wheat supplies are raised 0.5 million tons with higher projected beginning stocks, mostly because of reductions in European Union and Ukraine consumption for 2012/13.  World production for 2013/14 is lowered 0.2 million tons with mostly offsetting changes to several countries of 0.1 million tons or less. 

World wheat imports for 2013/14 are lowered 1.7 million tons mostly reflecting a 1.5-million-ton reduction for China.  Smaller import reductions are made for Bangladesh, the European Union, Pakistan, and South Africa, but these are mostly offset by increases for Mexico, Nigeria, and Russia.  Global exports are lowered with 0.5-million-ton reductions each for Australia, Canada, India, and Ukraine, and a 0.3-million-ton reduction for Brazil.  Most of the export reductions reflect the pace of shipments reported to date, but reductions for Australia and Canada are also related to the lower import outlook for China.  For Ukraine, the latest trade data indicate a shift in export business from wheat to corn.  Partly offsetting the reductions is a 1.0-million-ton increase for Kazakhstan exports with reports of larger rail shipments to Russia and strong sales to Iran and China. 

Global wheat consumption for 2013/14 is lowered 2.4 million tons mostly on a 2.0-million-ton reduction in China wheat feeding.  A number of smaller and mostly offsetting changes are also made in consumption for other countries.  Global wheat ending stocks for 2013/14 are projected 2.9 million tons higher with the largest increases for Ukraine, the United States, the European Union, Australia, and China.

COARSE GRAINS:  U.S. feed grain ending stocks for 2013/14 are projected lower this month with reductions for corn, barley, and oats.  A 125-million-bushel increase in projected corn exports reduces corn ending stocks by the same amount.  Continued strong export sales and a rising weekly shipment pace for U.S. corn during March support the higher expected export level as does an increase in projected global corn demand.  U.S. barley ending stocks for 2013/14 are projected 7 million bushels lower with projected imports decreased and projected exports increased based on the pace of shipments to date.  Oats ending stocks are projected 10 million bushels lower with feed and residual use raised 10 million bushels on higher-than-expected December-February disappearance as indicated by the March 1 stocks.  Sorghum exports are projected 20 million bushels higher based on the high level of outstanding sales and the sharp increase in weekly shipments during March.  Sorghum ending stocks, however, remain unchanged with an offsetting reduction made in domestic use based on the higher-than-expected March 1 stocks estimate.

The 2013/14 season-average farm price for corn is raised 10 cents at the midpoint with the projected range also narrowed to $4.40 to $4.80 per bushel, compared with $4.25 to $4.75 per bushel last month.  The projected range for the sorghum farm price is also raised 10 cents to $4.15 to $4.55 per bushel.  The barley and oats price ranges are narrowed 5 cents on each end to $6.00 to $6.20 per bushel and $3.65 to $3.75 per bushel, respectively.  The June-May marketing year for barley and oats is nearing an end with most of the two crops already marketed and priced.

Global coarse grain supplies for 2013/14 are raised 3.6 million tons with increases in foreign corn production far exceeding reductions for millet, sorghum, and barley.  Revisions to coarse grain production for a number of Sub-Saharan African countries account for much of the change in world production this month.  Notable changes, however, are made for several major producing and exporting countries. 

Global corn production is raised 6.4 million tons with a 2.0-million-ton increase for Brazil and 1.0-million-ton increases each for South Africa and Russia.  For Brazil, favorable precipitation in March and early April has supported the developing safrinha corn crop with yields now expected just below last year’s levels in the areas where this second-season corn crop is grown.  For South Africa, improved rains in late February and March have boosted yield prospects for corn grown in the normally lower-yielding western areas.  Corn production is raised for Russia based on recent revisions to official production statistics.  Corn production is also raised 0.2 million tons for Mexico, in line with the latest government estimates.  Global sorghum production is lowered 1.1 million tons mostly on changes to the Sub-Saharan Africa countries, but production is also lowered 0.4 million tons for Argentina and raised 0.3 million tons for Brazil.  Global barley production is lowered with a 0.8-million-ton reduction for China.  Global millet production is reduced 1.7 million tons with more than half of the decline for India.    

Global coarse grain trade for 2013/14 is raised with higher corn and sorghum imports.  Corn imports are increased for the European Union, Algeria, Iran, Egypt, and Vietnam.  In addition to the United States, corn exports are increased for South Africa, Ukraine, Mexico, Russia, and Vietnam.  Sorghum imports are raised for China.  Global corn consumption is higher with increases in feeding for Argentina, Russia, and Algeria.  A reduction in European Union corn feeding is more than offset by an increase in food, seed, and industrial use.  Corn use is also raised for several of the Sub-Saharan Africa countries led by increases of 1.0 million tons for Uganda and 0.9 million tons for Ethiopia.  World corn ending stocks for 2013/14 are lowered 0.5 million tons with reductions for the United States and Ukraine outweighing increases for Brazil, Russia, and several other countries.

RICE:  No changes are made on the supply side of the U.S. all rice and rice-by-class 2013/14 balance sheets.  Total 2013/14 all rice use is raised 1.0 million cwt to 221.0 million—all on the combined medium- and short-grain rice side.  All rice domestic and residual use is increased 4.0 million cwt to 124.0 million with long-grain and combined medium- and short-grain domestic and residual use each raised 2.0 million to 91.0 million and 33.0 million, respectively.  Partially offsetting the increase in domestic and residual use is a 3.0 million cwt decline in projected total exports to 97.0 million—the lowest since 2008/09.  The 2013/14 long-grain export projection is lowered 2.0 million cwt to 65.0 million, and combined medium- and short-grain exports are lowered 1.0 million to 32.0 million.  The rough rice export projection is lowered 2.0 million to 33.0 million, and milled exports are lowered 1.0 million (rough-equivalent basis) to 64.0 million.  The export pace has dropped off to some markets in the Western Hemisphere including Venezuela, Nicaragua, Costa Rica, and Haiti, largely due to stronger competition from exporters in South America and Vietnam.  Additionally, U.S. exports to African markets and Japan have been slower than expected.

The increase in domestic and residual use is based primarily on total use implied from the March 1 rice stocks, as reported by the National Agricultural Statistics Service on March 31.  USDA’s March 1 rice stocks were lower than expected and lower than most trade expectations.  The all rice 2013/14 August 1 stocks are lowered 1.0 million cwt to 27.3 million, the lowest since 2003/04—all in combined medium- and short-grain stocks.

The 2013/14 long-grain season-average price range is forecast at $15.30 to $15.90 per cwt, unchanged from last month, and with the midpoint forecast at $15.60 per cwt—the highest on record (series starts in 1982/83).  The medium- and short-grain season-average price range is forecast at $19.70 to $20.30 per cwt, up $1.00 per cwt on each end of the range from a month ago, and with the midpoint forecast at $20.00 per cwt—the highest price since the 2008/09 record of $24.80 per cwt.  The all rice season-average price range is forecast at $16.60 to $17.20 per cwt, up 30 cents on each end of the range, and with the midpoint at $16.90 per cwt—the highest price on record.  The reduced prospects for 2014/15 medium- and short-grain production in the Sacramento Valley of California due to drought and reduced irrigation supplies have significantly raised medium-grain prices in California.  USDA’s Prospective Plantings (March 31) reported intended plantings of medium-grain rice in California at 420,000 acres, down 18 percent from the previous year and the smallest since 1998.  Additionally, old-crop supplies of medium-grain rice in California are drawing down, tightening the current supply situation.  Finally, Australia’s drought is also increasing medium-grain prices as Australia is a major exporter of medium-grain rice and a primary U.S. export competitor.

The global 2013/14 rice supply and use balance sheet has changed little compared to a month ago, despite many country-level supply and use changes.  World rice production is increased 0.8 million tons to a record 475.6 million tons, primarily due to larger projections for Brazil, Pakistan, and Sub-Saharan Africa.  Global consumption is raised 0.5 million tons, largely due to increases for Brazil, South Korea, Sub-Saharan Africa, Vietnam, and the United States.  Global rice trade for 2013/14 is nearly unchanged from a month ago at 40.8 million tons; however, there were some significant country-level changes including increases in exports for Pakistan and Thailand; and decreases for Vietnam and the United States.  On the importer side, projected rice imports for 2013/14 are raised for Bangladesh, China, Vietnam, and Sub-Saharan Africa.  Global 2013/14 ending stocks at 111.2 million tons are down 0.5 million from last month, but up 1.0 million from the prior year.  Ending stocks projections are raised for China, Brazil, and the European Union, but reduced for Pakistan, Thailand, Vietnam, and the United States.

OILSEEDS:  U.S. soybean supplies for 2013/14 are projected at 3.49 billion bushels, up 30 million on increased imports.  Imports are projected at a record 65 million bushels based on trade reported through February and prospective large shipments from South America during the second half of the marketing year.  Soybean exports for 2013/14 are increased 50 million bushels to 1.58 billion reflecting record year-to-date shipments and large outstanding sales.  Despite relatively high prices and record harvests in South America, U.S. exports have remained strong, especially to China, where imports from the United States have already exceeded the previous marketing-year record.  Soybean crush is reduced 5 million bushels to 1.685 billion with lower domestic soybean meal consumption more than offsetting a small increase in projected soybean meal exports.  Seed use is raised in line with the record plantings reported in the March 31 Prospective Plantings report, while residual use is reduced based on indications from the March 31 Grain Stocks report.  U.S. soybean ending stocks are projected at 135 million bushels, down 10 million from last month.

Projected prices for soybeans and soybean products are all raised this month.  The projected range for the season-average soybean price is raised 5 cents at the midpoint to 12.50 to $13.50 per bushel.  Soybean oil prices are projected at 38 to 40 cents per pound, up 1.5 cents at the midpoint.  Soybean meal prices are projected at $460 to $490 per short ton, up 5 dollars at the midpoint.

Global oilseed production for 2013/14 is projected at 504.5 million tons, up 0.2 million from last month with lower soybean production mostly offsetting increases for other crops.  Global soybean production is projected at 284.0 million tons, down 1.4 million from last month but still a record.  Brazil soybean production is forecast at 87.5 million tons, down 1.0 million from last month with higher harvested area more than offset by lower yields.  Lower yields primarily reflect the effect of warm temperatures and limited rainfall through mid-February in the south.  India soybean production is reduced 0.8 million tons to 11.0 million reflecting lower-than-average yields resulting from excessive rainfall during much of the growing season.  Changes for other crops include higher rapeseed production for India and the European Union, increased sunflowerseed production for Russia, and increased peanut production for Argentina, Brazil, and India.

Global oilseed supplies, exports, and crush for 2013/14 are projected higher this month while ending stocks are projected lower.  Higher rapeseed crush in China and higher sunflowerseed crush in Argentina and Russia more than offset reduced soybean crush in the United States, Brazil, and India.  Global oilseed stocks are projected at 82.6 million tons, down 1.4 million.

SUGAR:  Projected U.S. sugar supply for fiscal year 2013/14 is decreased 73,000 short tons, raw value (STRV), from last month, as a result of lower production and slightly lower beginning stocks.  Sugar production is projected down 71,000 STRV, based on processor reports, with 41,000 of the decline from beet sugar and 30,000 from cane sugar.  The 2,000 STRV reduction in 2013/14 beginning stocks reflects minor adjustments to estimated 2012/13 cane sugar production and deliveries for food.  Projected 2013/14 use is unchanged from March indications.  The net reduction in projected 2013/14 ending stocks of 73,000 STRV brings the stocks-to-use ratio down to 13.0 percent, from 13.6 percent projected in March.

Supply and use estimates for Mexico for 2012/13 and projections for 2013/14 are unchanged this month.

LIVESTOCK, POULTRY, AND DAIRY:  The 2014 forecast of total red meat and poultry production is lowered from last month as higher beef production is more than offset by lower pork, broiler, and turkey production.  For beef, production is forecast higher as lower forecast slaughter in the first quarter is more than offset by higher slaughter in the second half.  The larger forecast second-half slaughter reflects larger placements of cattle during the first half.  Pork production is reduced from last month as the Quarterly Hogs and Pigs report estimated a year-over decline in the December-February 2014 pig crop and revised the June-August 2013 pig crop lower.  Although producers indicated intentions to increase sows farrowing in March-May and June-August 2014, the loss of piglets due to the Porcine Epidemic Diarrhea virus is expected to result in lower slaughter during the remainder of the year.  Although carcass weights are forecast higher, those gains will be insufficient to offset the reduced slaughter numbers and the pork production forecast is reduced from last month.  Broiler production and hatchery data points to slower growth in eggs set and chicks placed. Production is also reduced as feed prices are forecast higher.  Turkey production for the first quarter is reduced based on February production, but forecasts for production in subsequent quarters are unchanged.  Egg production forecasts for 2014 are unchanged.

The beef import forecast for 2014 is raised from last month as demand for processing-grade beef remains strong and the export forecast is raised on continued strong sales to Asian markets.  Pork imports are raised on high U.S. pork prices, but the export forecast is reduced as tighter supplies and high prices are expected to constrain sales.  The broiler export forecast is reduced based on February export data.  Turkey exports are lowered on weaker sales.  Egg import and export forecasts are lowered.

Cattle prices for 2014 are raised from last month, reflecting continued price strength for fed cattle. The hog price forecast is raised on current prices and expected tight supplies of market hogs. Broiler and turkey prices are raised as higher cattle and reduced broiler production support higher prices.  The egg price is raised on continued strong demand.

The milk production forecast for 2014 is raised from last month as strong returns are expected to encourage a more rapid expansion in cow numbers and increased milk per cow.  Fat-basis exports are raised on higher sales of cheese and butter, but the skim-solids export forecast is lowered on weaker-than-expected nonfat dry milk (NDM) sales.  Skim-solid imports are reduced slightly due to lower imports of milk protein concentrate and casein.  
 
Product price forecasts for cheese, butter, and whey are higher, supported by strong demand and price strength to date.  However, the NDM price is unchanged at the midpoint as export demand is weaker than expected.  Class III and Class IV prices are raised on higher product prices.  The all milk price is forecast at $22.55-23.05 per cwt.

COTTON:  The 2013/14 U.S. cotton estimates include lower production and ending stocks compared with last month.  Production is reduced 320,000 bales to 12.9 million based on USDA’s final Cotton Ginnings report, released March 25.  Domestic mill use and exports are unchanged.  Ending stocks are reduced to 2.5 million bales, which is the smallest stock level since 1951.  The stocks-to-use ratio of 17.5 percent is the smallest since 2010/11.  The marketing-year average price received by producers is now forecast at 76 to 79 cents per pound, up 1 cent on both ends of the range, reflecting recent higher market prices.

This month’s world cotton 2013/14 estimates feature a 1.0-million-bale increase in expected imports by China, based on stronger-than-expected imports to date and the likely release of new import quotas.  World production is reduced marginally as the decrease for the United States is mostly offset by increases for Brazil, Burkina Faso, and others.  Slight historical revisions are made for Australia beginning in 2000/01 based on a review of data sources.  World trade is raised 1.2 million bales, as increases in imports by China, Pakistan, and Vietnam are partially offset by reductions for India and Indonesia.  Exports are raised for Australia, India, and Burkina Faso, but are lowered for Brazil and Pakistan.  World stocks are raised marginally.


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