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EHedger Report

RSS By: Dustin Johnson

Dustin works with a wide net of large producers throughout the Midwest. His analytical market approach and objective hedge strategy development is specific to the needs of every individual.

WASDE Report Bearish

May 10, 2013

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Grains and oilseeds closed lower on Friday on higher carryout forecasts were reported in the May WASDE report.  December corn settled 12 cents lower at $5.29 ½, November soybeans down 13 ½ cents at $12.05 ½, and July wheat down 19 ¼ cents at $7.04 ¼.
 
I have included a snapshot of the report in the table below.  Basically the biggest numbers that jump out as bearish are the US carryout estimates for 2013.  They lowered corn yield to 158 bpa which is roughly 6 bushels below trendline yield.  Some will say this is not low enough but to the opposing point we believe demand is slightly overstated.  The USDA has total feed usage jumping 21% from 2012 which we find unrealistic. Our total feed estimate is 4.65 billion, a mere 5.6% increase from 2012 which is only because we think prices are heading lower and demand will eventually pick up from increased feed margins. The government believes prices are going much lower as well. They have the average price of corn pegged at $4.30.  This is an estimate of average corn prices for new crop 2013.  Obviously we started the year at much loftier price levels and have to fall well below $4.30 for that number to be realized.  More to that point, there is no indication that the higher feed usage predicted by the USDA will happen other than the fact that they believe prices will be lower and demand will have to "fill-in" to meet the supply. The longer we stay in the mid $5 range for Dec corn the less likely we will see those demand numbers met or else corn will only have to get even cheaper later in the marketing year.
At the same time we feel that soybean exports are also well overstated when South America’s crop is the size it is this year.  We feel that exports will be closer to 1.3 billion bushels which is 150 million less than the USDA is predicting.  For now we want to remain with the EHedger recommendations.
 
USDA U.S. Wheat Production        
  Friday 2013-2014 Estimate Average Range 2012 Production  
All Wheat 2.057 2.059 1.832 - 2.165 2.269  
All Winter What 1.486 1.477 1.359 - 1.555 1.645  
Hard Red Winter 0.768 0.765 0.676 - 0.834 1.004  
Soft Red Winter 0.501 0.496 0.473 - 0.524 0.420  
White Winter 0.217 0.217 0.204 - 0.226 0.222  
           
USDA U.S Grain Carryout        
  Friday 2012-13 Estimate 2012-13 Analyst Estimate April 2012-13 USDA Friday 2013-14 Estimate 2013-14 Analyst Estimate
Soybeans 0.125 0.124 0.125 0.265 0.239
Corn 0.759 0.754 0.757 2.004 1.973
Wheat 0.731 0.731 0.731 0.670 0.627
Soyoil 1.635 N/A 1.700 1.530 N/A
Soymeal 300,000 N/A 300,000 300,000 N/A
           
USDA World Carryover        
  Friday 2012-13 Estimate 2012-13 Analyst Estimate April 2012-13 USDA Friday 2013-14 Estimate 2013-14 Analyst Estimate
Wheat 180.2 181.5 182.3 186.4 186.4
Corn 125.4 125.8 125.3 154.6 156.3
Soybeans 62.5 62.3 62.6 75.0 70.5
Soymeal 9.33 N/A 9.71 9.85 N/A
Soyoil 3.41 N/A 3.42 3.25 N/A
           
USDA World Grain Production        
  Friday 2012-13 Estimate 2012-13 Analyst Estimate April 2012-13 Estimate    
Argentina Corn 26.5 25.4 26.5    
Argentina Beans 51.0 50.9 51.5    
Brazil Corn 76.0 75.2 74.0    
Brazil Beans 83.5 82.8 83.5    
Ukraine Corn 26.0 N/A 20.92    
 
We think December corn is headed lower but there is a chance that it tries to fill the technical gap shown below. If you need to catch up on sales, place orders at or below $5.52.December 2013 Corn
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EHedger  |  866.433.4371

Premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.
EHedger is a premier full service commodity brokerage offering risk management services for the agricultural sector as well as professional traders.

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