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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.

World Agricultural Supply and Demand Estimates 5/11/11

May 11, 2011

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World Agricultural Supply and Demand Estimates 5/11/11


OILSEEDS: U.S. oilseed production for 2011/12 is projected at 99.0 million tons, down 1 percent from 2010/11. Reduced soybean production accounts for most of the decline, but sunflowerseed, canola, and peanut production are all projected below last year's crops. Soybean production is projected at 3.285 billion bushels, down 44 million from the 2010 crop mostly due to lower harvested area. Soybean yields are projected at a trend level of 43.4 bushels per acre, down 0.1 bushels from 2010. Soybean supplies are projected at 3.47 billion bushels, down less than 1 percent from 2010/11 as larger beginning stocks partly offset lower production. Soybean ending stocks for 2010/11 are projected at 170 million bushels, up 30 million from last month due to reduced exports.

Soybean crush for 2011/12 is projected at 1.655 billion bushels, up fractionally from 2010/11 as a lower extraction rate offsets reduced total soybean meal demand. Lower soybean meal export demand projected for 2011/12 is only partly offset by a small increase in domestic soybean meal use, leaving total soybean meal use down 1 percent from 2010/11. Domestic soybean oil consumption is projected to increase 7 percent mostly due to biodiesel production gains. Soybean oil used for biodiesel production is projected at 3.5 billion pounds, up 1 billion from 2010/11 reflecting a higher biodiesel use mandate.
With lower 2011/12 U.S. soybean supplies and higher South American soybean supplies on hand this fall, U.S. soybean exports are projected at 1.54 billion bushels, slightly below the 2010/11 level despite a projected increase in global import demand led by China. Ending stocks for 2011/12 are projected at 160 million bushels, down 10 million from 2010/11, leaving the stocks-to-use ratio at 4.8 percent.
The U.S. season-average soybean price for 2011/12 is projected at $12.00 to $14.00 per bushel compared with $11.40 per bushel in 2010/11. Soybean meal prices are forecast at $350 to $380 per short ton, compared with $350 per ton for 2010/11. Soybean oil prices are projected at 56 to 60 cents per pound compared with 53.5 cents for 2010/11.

Global oilseed production for 2011/12 is projected at a record 459.2 million tons, up 2.2 percent from 2010/11. Global soybean production is projected to increase less than 1 percent to 263.3 million tons. The Argentina crop is projected at 53 million tons, up 3.5 million from 2010/11 crop based on a higher harvested area and yields. The Brazil soybean crop is projected at 72.5 million tons, down 0.5 million from the projected record 2010/11 crop. A 3 percent increase in harvested area is more than offset by a return to trend yields. China soybean production is projected at 14.8 million tons, down 0.4 million from 2010/11 due to lower area and yields. Higher rapeseed production for Canada, Australia, China, and Ukraine more than offsets lower production for EU-27. For sunflower seed, production gains for Russia, Ukraine, and EU-27 more than offset reduced production in Argentina. Led by gains in global oilseed production, 2011/12 oilseed supplies are up 2.4 percent from 2010/11. With global crush projected to increase 3.5 percent, global oilseed stocks are projected to decline 1.5 million tons to 72.2 million.
Global protein meal consumption is projected to increase 3.6 percent in 2011/12. Protein meal consumption is projected to increase 7.8 percent in China, accounting for 54 percent of global protein consumption gains. Global soybean exports are projected at 98.7 million tons, up 2.8 percent from 2010/11. China soybean imports are projected at 58 million tons, up 3.5 million from 2010/11. Global vegetable oil consumption is projected to increase 3.5 percent in 2011/12, led by increases for China, India.


WHEAT: The 2011/12 outlook for U.S. wheat is for reduced supplies with lower carryin and production than in 2010/11. Beginning stocks for 2011/12 are down 14 percent from 2010/11, but remain the second highest in a decade. All-wheat production is projected at 2,043 million bushels, down 7 percent from 2010/11. The survey-based forecast of winter wheat production is down 4 percent, as lower expected harvested area and yields in Colorado, Kansas, Oklahoma, and Texas sharply reduce Hard Red Winter (HRW) wheat production. Partly offsetting is higher production of Soft Red Winter (SRW) wheat with a rebound in area and higher forecast yields. Spring wheat production is expected lower despite higher expected planted area for other spring wheat. A return to trend yields from record levels of the previous 2 years is expected to reduce durum and other spring wheat production. U.S. wheat supplies for 2011/12 are projected at 2,992 million bushels, down 9 percent from 2010/11.

Total U.S. wheat use for 2011/12 is projected down 7 percent as lower projected exports more than offset higher expected domestic use. Food use is projected at 945 million bushels, up 15 million from 2010/11 as flour extraction rates are expected to decline modestly from their historical highs during the past 3 years and consumption grows slightly driven by slowly rising population. Feed and residual use is projected at 220 million bushels, up 50 million from the 2010/11 projection as higher corn prices and a rebound in SRW production encourage more summer quarter wheat feeding.

U.S. exports are projected at 1,050 million bushels, down 225 million from the 2010/11 projection. Export prospects are sharply diminished with reduced HRW production and increasing competition as Black Sea production and exports are projected to rebound. U.S. ending stocks are expected to continue their decline from the recent high in 2009/10. At a projected 702 million bushels, 2011/12 ending stocks are expected down 137 million from 2010/11 and 274 million below 2009/10. The season-average farm price for all wheat is projected at a record $6.80 to $8.20 per bushel, compared with $5.65 for 2010/11.
Global wheat supplies for 2011/12 are projected 1 percent higher as a projected 25.9-million-ton increase in foreign production more than offsets lower beginning stocks and the drop in U.S. production. At the projected 669.6 million tons, global production for 2011/12 would be up 21.4 million from 2010/11. A sharp rebound in FSU-12 production, combined with larger expected crops in India, North Africa, Canada, and EU-27 account for most of the increase in world wheat output for 2011/12.
Global wheat trade is expected higher in 2011/12 with world exports projected up 2 percent to 127.3 million tons. Increased supplies in Russia, Ukraine, and Kazakhstan and a return to exporting are expected to increase competition for EU-27 and U.S. wheat. A recovery in production and improved wheat quality in Canada is also expected to increase export competition. Global wheat consumption is projected up 8.4 million tons or 1 percent with increased feeding and food use expected in 2011/12. Global ending stocks for 2011/12 are projected slightly lower on the year at 181.3 million tons, compared with 182.2 million for 2010/11.


COARSE GRAINS: Projected U.S. feed grain supplies for 2011/12 are nearly unchanged from 2010/11 as record production is offset by the smallest beginning stocks in 15 years. Corn production for 2011/12 is projected at a record 13.5 billion bushels, up 1.1 billion from 2010/11 as a 4.0-million-acre increase in intended plantings and a recovery from last year's weather-reduced yields boost expected output. The 2011/12 corn yield is projected at 158.7 bushels per acre, 3.0 bushels below the 1990-2010 trend reflecting the slow pace of planting progress through early May. The 2011/12 yield is expected to be the third highest on record. Corn supplies for 2011/12 are projected at 14.3 billion bushels. This is below the 2009/10 record of 14.8 billion bushels, but up 75 million from 2010/11, as a 5-million-bushel increase in 2010/11 imports and a 50-million-bushel reduction in 2010/11 exports boost current year carryout this month.Total U.S. corn use for 2011/12 is projected down 1 percent from 2010/11. Corn use for ethanol is projected up 50 million bushels reflecting slow expected growth in gasoline consumption and continued export demand for ethanol in the coming year. Domestic corn feed and residual use is projected 50 million bushels lower than in 2010/11 reflecting increased availability of feed by-products from ethanol production and lower expected residual use as compared with the current year. U.S. corn exports for 2011/12 are projected down 100 million bushels from 2010/11 with larger foreign corn supplies. U.S. corn ending stocks for 2011/12 are projected at 900 million bushels, up 170 million from the current year projection. Stocks remain historically tight with stocks-to-use projected at 6.7 percent compared with the current year projection of 5.4 percent. The season-average farm price is projected at a record $5.50 to $6.50 per bushel compared with the 2010/11 forecast of $5.10 to $5.40 per bushel.


Global coarse grain production for 2011/12 is projected at a record 1,146.8 million tons, up 6 percent from 2010/11. A 52.4-million-ton increase in global corn output to 867.7 million tons accounts for 84 percent of the year-to-year increase in coarse grain production. Foreign corn production is projected up 25.5 million tons with the largest increases expected in Argentina, China, Russia, Mexico, and Ukraine. Global 2011/12 production is raised for barley, oats, and rye, mostly reflecting a recovery in production in Russia. World production for all three crops remains below recent highs as more attractive returns for corn and oilseeds limit area expansion in these traditional coarse grains. Global corn exports are projected higher for 2011/12 with increases for Argentina, Russia, and Ukraine more than offsetting reductions for the United States, Canada, and Brazil. Global corn consumption is projected at a record 860.8 million tons, up 22.2 million from 2010/11, with nearly all of the increase in foreign markets. World corn ending stocks for 2011/12 are projected at 129.1 million tons, up 7.0 million from 2010/11.


RICE: Projected smaller U.S. 2011/12 total rice supplies, combined with a modest decline in total use, results in lower projected ending stocks. U.S. rice production in 2011/12 is projected at 211.0 million cwt, 13 percent below 2010/11. Planted area in 2011, based on the NASS Prospective Plantings report, is estimated at 3.02 million acres, down 17 percent from 2010 and the smallest area since 2008. Harvested area is estimated at 3.0 million acres. Average rice yield is projected at 7,033 pounds per acre, up 5 percent from the previous year's crop, which was damaged by excessive summer heat. The projected yield is calculated from the 5-year Olympic average (2006/07-2010/11) by rice class. Imports for 2011/12 are projected at 18.0 million cwt, up 3 percent from the previous year, but below the 2007/08 record.

U.S. 2011/12 total rice use is projected at a 236.0 million cwt, 2 percent below the previous year's record level. U.S. domestic and residual use is projected at a near-record 127.0 million, unchanged from 2010/11 as per capita use of rice has shown virtually no growth in recent years. Exports are projected at 109.0 million cwt, 5 percent below revised 2010/11 exports. Despite an expected increase in global trade, competition for key markets will be keen as U.S. and competitor supplies are expected to be large. U.S. ending stocks in 2011/12 are projected at 48.6 million cwt, 13 percent below the previous year. Ending stocks of long-grain and combined medium- and short-grain rice are 32.8 and 14.4 million cwt, respectively (unclassified broken rice totals 1.4 million cwt).

The average milling yield used for 2011/12 is 70.75 percent. It is based on the 2007/08-2009/10 average milling rate calculated from data supplied by the USA Rice Federation in its monthly rice stocks reports. The 2010/11 market year is excluded from the calculation because milling yields are well below average, largely the result of unfavorable weather.

The U.S. 2011/12 long-grain rice season-average farm price is projected at $11.00 to $12.00 per cwt compared to a revised $11.00 to $11.30 for the previous year. The combined medium- and short-grain price is projected at $15.00 to $16.00 per cwt, compared to a revised $16.85 to $17.15 for the year earlier. The 2011/12 all rice price is projected at $12.00 to $13.00 per cwt, compared to a revised $12.35 to $12.65 per cwt for 2010/11. Large domestic and global supplies and expected lower Asian prices will pressure U.S. prices in 2011/12.

Global 2011/12 total supply and use are each projected to reach record levels at 554.9 and 458.7 million tons, respectively, resulting in a modest decline in world ending stocks. Global 2011/12 rice production is projected at a record 457.9 million tons, up 6.6 million or 1.5 percent from 2010/11. Large crops are projected for most of Asia including record or near-record crops in Bangladesh, Burma, Cambodia, Indonesia, the Philippines, Thailand, and Vietnam. In contrast, rice crops in many Western Hemisphere nations including Argentina, Brazil, Peru, the United States, and Uruguay are forecast lower than the previous year. Global 2011/12 consumption (which includes residual) is projected at a record, led by increases for Bangladesh, Cambodia, China, Laos, Pakistan, Sri Lanka, and Thailand. Global exports in 2011/12 are projected at a marketing-year record 32.2 million tons, up 0.8 million from 2010/11 with increases expected for India, Pakistan, and Vietnam, while exports from the U.S., Cambodia, and Brazil are expected to decline. Larger imports are projected for Middle Eastern, Sub-Saharan Africa, and Western Hemisphere markets, although the expected increases are slight. Global ending stocks are expected to decline 0.9 million tons from 2010/11 to 96.2 million. The stocks-to-use ratio for 2011/12 is calculated at 21.0 percent, down from last year's 21.6 percent.

SUGAR: Projected U.S. sugar supply for fiscal year 2011/12 is down 5 percent from 2010/11. Lower imports more than offset higher beginning stocks and production. Beet sugar production is unchanged and reflects trend yields, while cane sugar production increases with a rebound in Florida. Imports under the tariff rate quota (TRQ) reflect the minimum of U.S. commitments to import raw and refined sugar and projected shortfall. The Secretary will establish the TRQ at a later date. Imports from Mexico are sharply lower due to reduced supplies and increased domestic use in Mexico. Total use is up less than 1 percent.
Mexico's 2011/12 sugar supply is down 3 percent with lower beginning stocks and imports more than offsetting higher production. Production is projected to increase due to improved cultivation of sugarcane in Mexico. Imports reflect mainly U.S. exports. Domestic sugar consumption is up, reflecting flat demand for corn-based sweeteners in the soft drinks sector. Exports decline, assuming reasonable ending stocks.
For 2010/11, the major change from a month ago is higher U.S. imports following the announced increase in the TRQ and a stronger-than-expected pace of imports from Mexico.

LIVESTOCK, POULTRY, AND DAIRY: Total U.S. meat production in 2012 is projected to be about unchanged from 2011 as lower beef production largely offsets higher pork and poultry production. Declines in cattle inventories will diminish the pool of cattle available for placement during 2012 which in turn will reduce the number of fed cattle available for slaughter. Placements will also be constrained in 2012 if producers begin rebuilding herds by retaining heifers from the 2011 calf crop for addition to the breeding herd. Pork production is expected to increase gradually, largely due to increases in the number of pigs per litter; growth in farrowings is expected to be modest. Both broiler and turkey production for 2012 are forecast higher as returns improve following expected production cutbacks during the latter part of 2011. However, as feed prices remain relatively high, the rate of expansion during the year is expected to be modest. Little expansion is expected in 2012 egg production as returns during 2011 will be squeezed. Egg production declines, which are forecast to begin in 2011, will likely carry into the first part of 2012 before production increases.


The total meat production forecast for 2011 is raised from last month as higher beef, pork, and turkey production more than offset a small decline in broiler production. Higher-than-expected first-quarter placements of cattle on feed and continued relatively heavy cow slaughter support a higher beef forecast for 2011. Pork production is raised on continued heavy carcass weights. Broiler production is lowered from last month. First quarter production was higher than expected but forecast production in the middle of the year is reduced as poor returns are expected to weigh on the sector. The turkey production forecast is raised from last month, with a more moderate decline in production forecasts for late in the year.
Tight supplies of U.S. beef and increasing supplies of competitor beef are expected to constrain U.S. beef exports in 2012. Pork exports in 2012 are expected to increase from 2011 as world economic growth supports demand for U.S. pork. Broiler exports are forecast higher for 2012 as the U.S. continues to diversify its export markets. Beef imports are expected to be higher in 2012 as U.S. cow slaughter declines. The 2011 red meat export forecast is unchanged from last month. Broiler exports are forecast lower than last month on slower-than-expected sales to several markets.
In 2012, cattle prices are forecast to rise above 2011 as cattle supplies continue to tighten. Hog prices are little changed from 2011. Broiler and egg prices are forecast to be above 2011 but turkey prices are forecast lower. For 2011, cattle price forecasts are raised from last month as demand for fed cattle remains relatively strong. Hog and broiler prices are unchanged from last month, but turkey and egg prices are forecast higher.


Milk production for 2012 is forecast to increase as the decline in milk cows is expected to be offset by growth in milk per cow. Although inventories are expected to expand during 2011, weakening milk prices and relatively high feed costs will set the stage for herds to contract slightly in 2012. Growth in milk production also reflects an additional milking day in 2012. Commercial exports are forecast to increase as the global economy improves. Imports will be lower as domestic supplies increase. With increasing domestic production, cheese, butter, nonfat dry milk, and whey prices are forecast lower. Both Class III and Class IV prices are forecast lower, consistent with the lower product price forecasts. The all milk price is forecast at $17.35 to $18.35 per cwt for 2012.


Forecast milk production in 2011 is lowered from last month primarily reflecting slower growth in milk per cow despite more rapid growth in cow numbers. Imports are reduced and exports are raised from last month due to an increase in global dairy demand and a weak U.S. dollar. All dairy product prices are raised from last month with Class prices increased to reflect higher product prices. The milk price is forecast to average $18.95 to $19.45 per cwt.

COTTON:The U.S. cotton projections for 2011/12 include lower supplies and offtake relative to last season, resulting in higher ending stocks. With beginning stocks sharply lower than 2010/11, production is projected at 18.0 million bales, reducing the total supply. Projected production is based on planted area from the March Prospective Plantings, combined with above-average abandonment and slightly below-average yields due to severe drought conditions in the Southwest. Domestic mill use is projected at 3.8 million bales, the same as 2010/11, while exports are reduced due to lower U.S. supplies and increased foreign production. Ending stocks are projected at 2.5 million bales, 43 percent above 2010/11, but still the second-lowest level since 1990/91. The forecast range for the average price received by producers is a record 95.0 to 115.0 cents per pound.

The initial world cotton projections for 2011/12 show a sharp increase in production to a record 124.7 million bales, with India, China, and Pakistan accounting for 70 percent of the increase. A partial easing of supply constraints, combined with projected world economic growth, is anticipated to raise consumption 3.0 million bales, above the 3 preceding years but below the peak levels of 2006/07 and 2007/08. World trade is projected at 40 million bales, mainly reflecting higher import demand by China. World ending stocks are projected to rise to nearly 48 million bales, a 13-percent increase from the beginning level; however, the stocks-to-consumption ratio of 40 percent remains relatively tight.


For 2010/11, U.S. production is virtually unchanged from last month, reflecting the final season estimate. Domestic mill use is raised 100,000 bales to 3.8 million, based on indications of higher-than-expected use from Farm Service Agency data. Exports are reduced 250,000 bales as the pace of export sales has fallen sharply over the past month. Ending stocks are now forecast at 1.75 million bales.
Estimated world production for 2010/11 is unchanged from last month, as an increase of 1.0 million bales for China is offset by a like decrease for India. World consumption is reduced, due mainly to reductions for India and Pakistan. China's imports are lowered 1.5 million bales due to a recent fall-off in demand, which is partially offset by increased imports for Pakistan and Turkey. World ending stocks are raised nearly 1.0 million bales.

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