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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 3/10/14

Mar 10, 2014

 WASDE Report 3/10/14

 

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 WHEAT:  There are no changes to the 2013/14 U.S. all wheat supply and use projections this month.  A 15-million-bushel increase in projected Hard Red Spring wheat exports is offset by a decrease for Soft Red Winter wheat, with both changes reflecting the pace of sales and shipments.  Projected ending stocks for both classes are adjusted accordingly.  The projected season-average farm price for all wheat is raised 10 cents on the bottom end of the range to $6.75 to $6.95 per bushel based on recent strength in prices.

Global 2013/14 wheat supplies are raised slightly with a 0.8-million-ton increase in world production.  Production is raised 1.1 million tons for India and 0.5 million tons for Australia based on the latest government reports.  China is lowered 0.3 million tons, also based on the latest official indications.  Production is lowered for Uruguay and Paraguay, down 0.3 million tons and 0.2 million tons, respectively, reflecting dry growing season conditions in both countries and early season freeze damage in Paraguay that also reduced yields.
 
Strong demand in the Middle East and North Africa boosts 2013/14 world wheat imports 3.0 million tons.  Imports are raised for Iran, Saudi Arabia, Morocco, Syria, Algeria, Iraq, and Turkey.  Exports are raised for the European Union, Russia, Serbia, and Turkey.  European Union exports are raised 1.5 million tons reflecting the strong pace of licenses with higher corn imports and feeding freeing up more wheat for export.  For Russia, higher wheat imports and reduced wheat feeding support a 1.0-million-ton increase in wheat exports.  Export business has remained strong for both countries well into the second half of the 2013/14 marketing year as prices remain attractive for buyers in the Middle East and North Africa.

World wheat consumption is raised slightly for 2013/14 with increased use for India, Iran, Australia, Iraq, and Morocco more than offsetting lower feed use for the European Union and Russia, and for South Korea, where wheat imports are lowered.  Wheat feeding is raised for Australia as drought reduces sorghum supplies and boosts the use of grain in livestock rations.  Global wheat ending stocks are nearly unchanged.

COARSE GRAINS:  Projected U.S. feed grain ending stocks for 2013/14 are reduced with higher corn exports and lower oats imports.  Corn exports are projected 25 million bushels higher on stronger world imports and the rising pace of shipments in recent weeks.  Continued strong export sales also support the higher figure.  Projected corn ending stocks are lowered 25 million bushels.  Oats imports are projected 10 million bushels lower as Canadian logistical problems reduce the availability of importable supplies.  Small reductions in U.S. oats domestic use and ending stocks are projected.  The season-average farm price for corn is narrowed 5 cents on both ends of the projected range to $4.25 to $4.75 per bushel.  Price ranges are similarly narrowed for sorghum and oats.  The barley farm price is raised 10 cents on the low end of the range to $5.95 to $6.25 per bushel based on recently higher reported prices for feed barley. 

Global coarse grain supplies for 2013/14 are projected 1.4 million tons higher with larger corn beginning stocks for Indonesia, higher corn production for China, and higher barley production for Australia.  Partly offsetting is a reduction in expected sorghum output for Australia as a continuation of hot, dry conditions have sharply eroded prospects for this year’s sorghum crop.

Global coarse grain imports for 2013/14 are raised 1.3 million tons with higher corn imports for Indonesia and the European Union and higher barley imports for China.  Higher expected corn and barley feeding in these countries drive the import increases.  Barley feeding is also raised for Australia as drought reduces sorghum supplies and boosts demand for other feed grains.  Sorghum exports are lowered for Australia.  Sorghum imports are reduced for Mexico as strong demand from China has driven U.S. Gulf sorghum prices above those for corn in recent months limiting import opportunities for sorghum feeders in Mexico.  Barley exports are raised for Australia with the larger crop.  European Union corn exports are lowered, but more than offset by this month’s increase for the United States. 

Global coarse grain ending stocks for 2013/14 are raised slightly with higher corn stocks in China and Indonesia more than offsetting lower barley stocks in the European Union and the reductions in corn and oats stocks in the United States.

RICE:  The changes made to the U.S. 2013/14 rice supply and use balances this month are confined to the trade categories and ending stocks.  The 2013/14 all rice import forecast is raised 1.0 million cwt to 22.0 million, based largely on the pace of imports reflected in the U.S. Bureau of the Census import data through January—all in medium- and short-grain rice.  A large shipment of broken rice from Australia was reported by the Bureau of the Census for December.  On the use side, the all rice export forecast is unchanged at 100.0 million cwt; however 1.0 million cwt is shifted from rough rice to milled- and brown-rice (on a rough-equivalent basis) export category.  No changes are made to the all rice or rice-by-class domestic and residual use projections.  All rice ending stocks are projected at 28.3 million cwt, up 1.0 million from a month ago—all in medium- and short-grain rice.  Long-grain rice ending stocks are projected at 16.3 million cwt, the lowest stocks since 2003/04.  Medium- and short-grain ending stocks are increased 1.0 million cwt to 9.7 million.

The 2013/14 long-grain season-average price range is forecast at $15.30 to $15.90 per cwt, up 20 cents on each end of the range with the midpoint forecast at $15.60 per cwt—the highest price on record (since 1982/83).  The medium- and short-grain season-average price range is forecast at $18.70 to $19.30 per cwt, up $1.50 per cwt on each end of the range with the midpoint forecast at $19.00 per cwt—the highest price since 2008/09.  The all rice season-average price range is forecast at $16.30 to $16.90 per cwt, up 60 cents on each end of the range with the mid-point at $16.60 per cwt—the highest price since 2008/09.  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.  Additionally, old-crop supplies of medium-grain rice in California are drawing down thus tightening the current supply situation.  Finally, Australia’s drought is also increasing medium-grain prices as Australia is a primary U.S. export competitor.  Long-grain rice prices have strengthened as producers in the Delta in 2014 are expected to increase plantings of medium-grain rice and plant less long-grain area, according to trade reports, due to an advantageous price differential between the two rice classes.  There are reports that supplies of southern medium-grain rice seed are fairly tight which could restrict this expansion.

Global 2013/14 rice supplies are raised significantly due to several factors including a supply/use series change for Indonesia, and increased production forecasts for Burma, China, and India.  World 2013/14 beginning stocks are forecast at 111.0 million tons, up 4.1 million from last month due mostly to increases for Burma, Indonesia, and India.  The Indonesia rice supply/use series was modified beginning in 2010/11 based on lower population statistics from the government of Indonesia that indicated lower annual consumption and a corresponding increase in stocks.  The Burma rice production estimates beginning in 2010/11 are raised based on a re-evaluation of the series.  Burma’s 2013/14 rice crop is increased 1.0 million tons to a record 12.0 million—largely due to an increase in area harvested.  China’s rice 2013/14 production is raised 0.8 million tons to 142.3 million based on official statistics from the government of China.  India’s rice production is raised 2.0 million tons to a near-record 105.0-million tons based on a report from the U.S. agricultural office in New Delhi.  Additionally, India’s 2012/13 crop is raised 0.8 million to 105.2 million tons—based on data from the government of India.  Indonesia’s crop is lowered 0.3 million tons to 37.4 million due to a decrease in area harvested.  Sri Lanka’s 2013/14 rice crop is also lowered 0.3 million tons to 2.75 million tons.

Global 2013/14 rice consumption is raised 0.7 million tons to a record 474.0 million tons largely due to increases for Burma and India, partially offset by a decrease for Indonesia and Sri Lanka.  World 2013/14 rice trade is raised slightly due mostly to an increase for Burma.  Global 2013/14 ending stocks are projected at 111.7 million tons, up 6.7 million (+6%) from a month ago, and up 0.7 million from revised 2012/13.  The increase in stocks is due mostly to revisions in Burma, China, India, and Indonesia.

OILSEEDS:  U.S. soybean supply and use projections for 2013/14 include higher imports and exports, reduced crush, and reduced ending stocks compared with last month’s report.  Soybean exports are raised 20 million bushels to a record 1.53 billion reflecting continued strong sales and shipments through February.  Soybean crush is reduced 10 million bushels to 1.69 billion reflecting weaker-than-expected domestic soybean meal use through the first quarter of the marketing year.  Soybean stocks are projected at 145 million bushels, down 5 million from last month.  Soybean oil stocks are reduced on lower production and increased exports.  Other soybean oil changes include reduced use for biodiesel and an offsetting increase for food, feed, and other industrial use.

Soybean and soybean product prices are all projected higher this month.  The season-average price range forecast for soybeans is raised 25 cents on both ends of the range to $12.20 to $13.70 per bushel.  Soybean oil prices are forecast at 36 to 39 cents per pound, up 1.5 cents at the midpoint.  Soybean meal prices are projected at $450 to $490 per short ton, up 25 dollars at the midpoint.

Global oilseed production for 2013/14 is projected at 504.3 million tons, down 1.7 million from last month as reduced soybean and copra production are only partly offset by increases for rapeseed, sunflowerseed, and peanuts.  Foreign production, projected at 407.0 million tons, accounts for all of the change.  Brazil soybean production is projected at 88.5 million tons, down 1.5 million mainly reflecting hot, dry weather in the south when much of the crop was in the flowering and filling stages.  Soybean production is also reduced for Paraguay due to the extended period of hot, dry weather.  China rapeseed production is estimated at 14.4 million tons, up 0.2 million based on increased area and yield indicated in recently released government statistics.  Other changes include higher rapeseed production for Australia and increased peanut production for China, Uganda, and Tanzania.

Global oilseed supplies, exports, and ending stocks for 2013/14 are projected lower this month while crush is projected higher.  Soybean crush is projected higher for the European Union, Paraguay, and Zambia; rapeseed and peanut crush are each raised for China.  Lower soybean stocks in the United States, Brazil, and Paraguay are only partly offset by higher rapeseed stocks in China.  Global oilseed stocks are projected at 84.0 million tons, down 1.9 million.

SUGAR:  Projected U.S. sugar supply for fiscal year 2013/14 is decreased 7,000 short tons, raw value (STRV), from last month, as lower production more than offsets higher beginning stocks.  Forecast use is increased 135,000 STRV.  Higher expected domestic deliveries for food use are based on the pace to date.  A larger forecast for exports of raw sugar under the re-export program is the result of shipments so far in 2013/14.  The net reduction in ending stocks of 142,000 STRV brings the stocks-to-use ratio down to 13.6 percent, from 14.9 percent projected in February.

Supply and use estimates for Mexico for 2012/13 and forecasts 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, continued relatively large cattle placements in the first quarter are expected to result in higher slaughter in 2014.  Coupled with heavier carcass weights and higher expected first-quarter cow slaughter, the beef production forecast is raised.  Pork production is reduced from last month as higher carcass weights are insufficient to offset tighter supplies of hogs.  USDA will release the Quarterly Hogs and Pigs report on March 28.  Broiler production is lowered as hatchery data points to slower growth in eggs set and chicks placed.  Turkey production is reduced as January slaughter and hatchery data were below expectations.  Egg production forecasts for 2014 are unchanged, but historical data are adjusted to reflect recently published data.

The beef import forecast for 2014 is unchanged from last month, but the export forecast is raised on strong sales to Asian markets.  Pork imports are raised as prices are forecast higher, but the export forecast is reduced as high prices are expected to constrain sales.  The broiler export forecast is raised as January exports were higher-than-expected.  Turkey exports are lowered.  The egg export forecast is unchanged.

Cattle prices for 2014 are raised from last month, reflecting tight supplies and continued price strength for fed cattle.  The hog price forecast is raised on expected tight supplies of market hogs and strong demand.  Broiler and turkey prices are largely unchanged but the egg price is raised on higher first-quarter prices.

The milk production forecast for 2014 is unchanged from last month, but historical data are adjusted to reflect revised data for 2012 and 2013.  Fat-basis exports for 2014 are raised on higher sales of cheese and butter.  Skim-solid exports are unchanged as lower lactose and weaker-than-expected early year sales of nonfat dry milk (NDM) offset gains in cheese.  Fat-basis imports are unchanged.  Skim-solid imports are raised on strong demand for milk protein concentrates. 
 
Product price forecasts for cheese, butter, NDM, and whey are higher, supported by strong demand and price strength to date.  Class III and Class IV prices are raised on higher product prices.  The all milk price is forecast at $21.40 to $22.00 per cwt.

COTTON:  This month’s 2013/14 cotton estimates include slightly higher exports and lower ending stocks.  Production and domestic mill use are unchanged from last month.  The export forecast is raised to 10.7 million bales based on strong activity in recent weeks.  Ending stocks are reduced to 2.8 million bales, resulting in a stocks-to-use ratio of 20 percent.  The range for the marketing-year average price received by producers is raised 1 cent per pound on the lower end to 75 to 78 cents, with a midpoint of 76.5 cents.

The global cotton supply and demand estimates for 2013/14 show slightly lower consumption and higher ending stocks.  The world production forecast is virtually unchanged.  Decreases in consumption for China and Pakistan are partially offset by increases for India, Bangladesh, Vietnam, and others.  China’s consumption is lowered 500,000 bales based on increasing concentrations of domestic supply in the national reserve and continued growth in cotton yarn imports.  Pakistan’s consumption also is lowered 500,000 bales, as sluggish imports indicate lower use.  World ending stocks are now forecast at 96.8 million bales. 

 


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