Apr 18, 2014
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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.

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May 10, 2013

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WHEAT:  U.S. wheat supplies for 2013/14 are projected at 2,917 million bushels, down 7 percent from 2012/13.  Wheat production is projected at 2,057 million bushels, down 9 percent from last year with reduced prospects for Hard Red Winter wheat.  The all wheat yield, projected at 44.1 bushels per acre, is down 2.2 bushels from the record levels of 2012/13 and 2010/11.  The survey-based forecast for winter wheat production is down 10 percent with the lowest harvested-to-planted ratio since 2006/07 and lower yields as persistent drought and April freezes reduce crop prospects in the southern and central Plains.  Partly offsetting is higher forecast Soft Red Winter wheat production with higher area.  Spring wheat production for 2013/14 is projected to decline 8 percent as reduced durum area and a return to trend yields reduce prospects for durum and other spring wheat. 

Total U.S. wheat use for 2013/14 is projected down 7 percent year-to-year with lower domestic use and exports.  Feed and residual disappearance is projected 70 million bushels lower as larger supplies and lower prices for feed grains in 2013/14 limit wheat feeding by late summer.  Partly offsetting is a 13-million-bushel increase in domestic food use as flour extraction rates fall from a very high level in 2012/13 and consumption grows with population.  Exports for 2013/14 are projected at 925 million bushels, down 100 million from the 2012/13 projection.  Large crops for major export competitors limit opportunities for U.S. wheat.  U.S. ending stocks are projected to decline for a fourth consecutive year.  At 670 million bushels, ending stocks would be down 61 million bushels from the 2012/13 projection.  The all wheat season-average farm price is projected at $6.15 to $7.45 per bushel, down from the record $7.80 projected for 2012/13 as world prices for wheat and coarse grains are expected to decline sharply by fall.

Global 2013/14 wheat supplies are projected 3 percent higher than in 2012/13 with a 51.2-million-ton increase in foreign production more than offsetting a 19.3-million-ton reduction in global beginning stocks and lower forecast production in the United States.  At the projected 701.1 million tons, global production would be a record and up 45.5 million from 2012/13.  Production for 2013/14 is projected higher in all of the world's major exporting countries with the largest increases expected in the FSU-12 and EU-27, up 29.9 million tons and 6.7 million tons, respectively.  Production is projected higher for Australia, Argentina, and Canada, up a collective 6.2 million tons from the current year.  Also affecting global trade prospects in 2013/14 are year-to-year production increases for major importers, the Middle East and North Africa, where weather has been favorable for winter crops since seeding last fall.

Global wheat exports for 2013/14 are projected higher than in 2012/13 with increases expected for FSU-12, Argentina, and India more than offsetting reductions for EU-27 and Australia.  Global wheat consumption is projected 20.0 million tons higher with increases in both feeding and food use.  Wheat feed and residual use is raised for FSU-12 and EU-27 with larger production.  The largest increase in food use is for in India, but lower prices support small increases for many countries.  Global ending stocks for 2013/14 are projected at 186.4 million tons, up 6.2 million on the year.
 
COARSE GRAINS:
  U.S. feed grain supplies for 2013/14 are projected at a record 400.5 million tons, up 25 percent from 2012/13 with higher area and yields expected for corn, sorghum, and oats.  Corn production for 2013/14 is projected at 14.1 billion bushels, up 3.4 billion from 2012/13 when extreme drought and heat reduced yields to their lowest levels since 1995/96.  The 2013/14 corn yield is projected at 158.0 bushels per acre, 5.6 bushels below the weather adjusted trend presented at USDA's Agricultural Outlook Forum in February (www.usda.gov/oce/forum/presentations/Westcott_Jewison.pdf).  The slow start to this year's planting and the likelihood that progress by mid-May will remain well behind the 10-year average reduce prospects for yields.  Corn supplies for 2013/14 are projected at a record 14.9 billion bushels, up 3.0 billion from 2012/13.

U.S. corn use for 2013/14 is projected up 16 percent from 2012/13 on higher feed and residual disappearance, increased use for ethanol, sweeteners, and starch, and a partial recovery in exports.  Feed and residual use for 2013/14 is projected up 925 million bushels reflecting a sharp rebound in residual disappearance with the record crop and an increase in feeding with lower corn prices.  Projected corn use for ethanol is increased 250 million bushels from this month's higher projection for 2012/13.  Lower corn prices and high prices for Renewable Identification Numbers (RINS) support profitability for ethanol producers.
 
U.S. corn exports for 2013/14 are projected 550 million bushels higher than this month's lower projection for 2012/13.  At the projected 1.3 billion bushels, 2013/14 exports are expected to rebound from their lowest level since 1970/71.  An expected fourth straight year of record foreign corn production with large crops in South America and the FSU-12 will provide substantial competition for the United States.  U.S. corn ending stocks are projected at 2.0 billion bushels, up 1.2 billion from 2012/13.  The season-average farm price at $4.30 to $5.10 per bushel is down sharply from the record $6.70 to $7.10 for 2012/13.

Global coarse grain supplies for 2013/14 are projected at a record 1,407.6 million tons, up 113.8 million from 2012/13.  Global corn production for 2013/14 is projected at a record 965.9 million tons.  Foreign corn production is up 23.5 million tons.  The largest increases are projected for the FSU-12, EU-27, and China, but large crops are again expected in 2013/14 for Brazil and Argentina.  Global corn trade is projected higher with increased imports for China more than offsetting a reduction for EU-27.  Spurred by lower prices, smaller year-to-year import increases are projected for a number of countries.  Exports are lowered for Brazil, India, and Argentina, but raised for Ukraine and EU-27.  World corn consumption is projected at a record 936.7 million tons, up 72.8 million from 2012/13 with foreign consumption up 41.5 million.  Global corn ending stocks for 2013/14 are projected up 29.2 million tons on the year.  At 154.6 million tons, stocks would be a 13-year high.

RICE:  Tighter U.S. 2013/14 all rice supplies, forecast down 6 percent from 2012/13 and lower projected use, down 7 percent from 2012/13 result in ending stocks that are down 3 percent from the previous year.  Beginning stocks and production for 2013/14 are both forecast lower from a year ago, while imports are forecast 5 percent larger.  U.S. rice production for 2013/14 is projected at 189.5 million cwt, down 5 percent from 2012/13.  Harvested area is estimated at 2.59 million acres based on average harvested-to-planted ratios for the previous 5 years, the lowest area since 1987/88.  Average all rice yield is projected at 7,317 pounds per acre, down 2 percent from the previous year's record. 

U.S. 2013/14 all rice total use is projected at a 213.0 million cwt, 7 percent below the previous year.  Domestic and residual use is projected at 115.0 million cwt, 4 percent below 2012/13.  All rice exports are projected at 98.0 million cwt, 9 percent below 2012/13, and the lowest since 2008/09.  Long-grain rice exports are projected at 69.0 million, 10 percent below the previous year, and combined medium- and short-grain rice exports at 29.0 million, 7 percent below 2012/13.  U.S. long-grain exports will be limited by a tighter U.S. supply situation, and increased competition among the major South American and Asian exporters.  Exports of medium-grain rice will be constrained by tighter U.S. supplies and greater competition from Egypt and Australia.  U.S. all rice ending stocks for 2013/14 are projected at 33.1 million cwt, 3 percent below the previous year.  Long-grain ending stocks are forecast at 21.9 million cwt, 7 percent above 2012/13, and combined medium- and short-grain rice stocks at 9.0 million, 22 percent below the previous year. 

The U.S. 2013/14 long-grain rice season-average farm price is projected at $13.80 to $14.80 per cwt, compared to a revised $14.20 to $14.60 for the previous year.  The combined medium- and short-grain price is projected at $15.50 to $16.50 per cwt, compared to a revised $15.80 to $16.20 for the year earlier.  The 2013/14 all rice price is projected at $14.30 to $15.30 per cwt, compared to a revised $14.70 to $15.10 per cwt for 2012/13.

Global 2013/14 total supply and use are each projected to reach record levels at 584.7 and 476.8 million tons, respectively, resulting in a 2.4-million increase in world ending stocks. Global 2013/14 rice production is projected at a record 479.3 million tons, up 9.0 million from 2012/13.  Record to near-record rice crops are projected in Asia.  Record crops are projected for the major exporters including India, Thailand, and Vietnam. Additionally, large crops are forecast for other exporters including Burma, Cambodia, and Egypt.  On the importer side, record or near-record crops are forecast for Indonesia, the Philippines, and Sub-Saharan Africa.

Global 2013/14 consumption is projected at a record 476.8 million tons, up 1 percent from the previous year.  Global exports in 2013/14 are projected at 38.9 million tons, up marginally from 2012/13.  India and Thailand are forecast to be the largest global rice exporters in 2013/14 with exports of 8.5 million tons each followed by Vietnam at 7.7 million tons.  Large 2013/14 imports are projected for China, the Middle East, and Sub-Saharan Africa with Nigeria the largest in that region.  China's imports have surged since 2011/12-forecast to be 2.9 million tons in 2012/13 and 3.0 million in 2013/14-making China the largest global rice importer in 2013/14.  China's annual consumption needs have overtaken production since 2012/13.  Strong domestic prices in China have encouraged imports of lower-priced rice from Burma, Pakistan, and Vietnam.  Global 2013/14 ending stocks are expected to increase 2.4 million tons to 107.8 million, the largest since 2001/02. 

OILSEEDS:  U.S. oilseed production for 2013/14 is projected at 100.9 million tons, up 9 percent from 2012/13.  Higher soybean production accounts for most of the increase.  Sunflowerseed, peanut, and cottonseed production are each projected below last year's crops.  Soybean production is projected at a record 3.390 billion bushels, up 375 million from the drought-reduced 2012 crop on slightly higher harvested area and higher yields. Soybean yields are projected at a weather-adjusted trend level of 44.5 bushels per acre, up 4.9 bushels from 2012.  Soybean supplies are projected at 3.530 billion bushels, up 10 percent from 2012/13.  Additional soybean meal exports for 2012/13 are offset by reduced domestic consumption, leaving crush unchanged.  Soybean exports and ending stocks for 2012/13 are also unchanged from last month.

The 2013/14 U.S. soybean crush is projected at 1.695 billion bushels, up 60 million from 2012/13 reflecting increased domestic soybean meal consumption and exports.  Despite increased competition from South America, U.S. soybean meal exports are forecast higher on sharply lower prices.  Soybean exports are projected at 1.450 billion bushels, up 100 million from 2012/13 on increased supplies and competitive prices.  Ending stocks are projected at 265 million bushels, up 140 million from 2012/13.  The U.S. season-average soybean price for 2013/14 is forecast at $9.50 to $11.50 per bushel compared with $14.30 per bushel in 2012/13.  Soybean meal and oil prices are forecast at $280-$320 per short ton and 47-51 cents per pound, respectively.

Global oilseed production for 2013/14 is projected at a record 491.3 million tons, up 4.7 percent from 2012/13 mainly due to increased soybean production.  Global soybean production is projected at 285.5 million tons, up 6 percent.  The Argentina soybean crop is projected at 54.5 million tons, up 3.5 million from 2012/13 on record planted area and higher yields.  The Brazil soybean crop is projected at a record 85 million tons as higher harvested area more than offsets lower yields.  China soybean production is projected at 12 million tons, down 0.6 million from 2012/13 as producers continue to shift area to more profitable crops.  If realized, harvested area at 6.6 million hectares would be down 28 percent in the past 4 years.  Global production of high-oil content seeds (rapeseed and sunflowerseed) is projected up 6.1 percent from 2012/13 on increased rapeseed production in Canada, India, EU-27, and Ukraine, and increased sunflowerseed production in Argentina, EU-27, Russia, Ukraine, and Turkey.  Oilseed supplies are up 5.1 percent from 2012/13.  With crush projected to increase 3.4 percent, global oilseed ending stocks are projected at 82.6 million tons, up 12.3 million. 

Global protein meal consumption is projected to increase 2.7 percent in 2013/14.  Protein meal consumption is projected to increase 3.3 percent in China, accounting for 32 percent of global protein consumption gains.  Global soybean exports are projected at 107.1 million tons, up 11.3 percent from 2012/13.  China soybean imports are projected at 69 million tons, up 10 million from the revised 2012/13 projection, leaving soybean supplies up 5 million tons from the previous year.  Global vegetable oil consumption is projected to rise 3 percent in 2013/14, led by increases for China, India, and Indonesia.

SUGAR:  Projected U.S. sugar supply for fiscal year 2013/14 is up 2.1 percent from 2012/13, as higher beginning stocks and imports more than offset lower production.  Lower beet sugar production reflects reduced area and a return to trend yields, while lower cane sugar production is based on trend yields.  Imports under the tariff rate quota (TRQ) reflect minimum U.S. commitments to import raw and refined sugar and projected shortfall.  The Secretary will establish the TRQ at a later date.  Total use is up 1.8 percent and ending stocks are slightly higher than a year earlier.

For Mexico, 2013/14 supplies are down 1.8 percent from 2012/13, as higher beginning stocks are offset by lower production.  Higher domestic use and lower ending stocks are based on trends in population and reasonable carryover requirements, respectively.  Exports to all destinations are lower, but shipments to the U.S. market are up 5.3 percent from 2012/13.

LIVESTOCK, POULTRY, AND DAIRY:  Total U.S. red meat and poultry production in 2014 is projected to be above 2013 as higher pork and poultry production more than offsets declines in beef production.  Tighter cattle supplies and potential heifer retention during late 2013 and into 2014 are expected to limit cattle available for placement, thereby reducing fed cattle slaughter in 2014.  Lower cow numbers and herd rebuilding will also limit non-fed beef production.  Pork production is forecast to increase more rapidly than in 2013 as lower forecast feed costs provide incentives for producers to expand farrowings and increase carcass weights from 2013 levels.  Broiler and turkey production are forecast higher as lower forecast feed prices encourage expansion despite lower poultry prices. Egg production for 2014 is forecast to expand as producers respond to lower feed costs.  

The total red meat and poultry production forecast for 2013 is lowered from last month as lower pork, broiler, and turkey production more than offsets greater beef production.  Higher cattle placements are expected to support higher fed beef production and cow slaughter has remained relatively high.  However, recent winter storms have affected cattle weights which are lowered slightly from last month.  Pork production is down marginally on lower forecast slaughter in the second of half of 2013.  Broiler production is lowered on hatchery and chick placement data to date, while turkey production is cut on lower poult placements.

Continued year-over-year declines in U.S. beef production are expected to push beef exports lower in 2014.  Pork exports are expected to rebound in 2014 as supplies increase and demand improves.  Broiler exports are forecast higher on expanded supplies and moderating prices.  Beef imports are expected to be higher in 2014 as U.S. cow slaughter declines and domestic non-fed beef supplies tighten.  Pork imports are forecast up fractionally from 2013.

The 2013 red meat export forecast is lowered from last month, largely due to lower expected pork exports.  The beef forecast is adjusted to reflect lower first-quarter exports.  Poultry exports are raised as higher broiler exports more than offset lower turkey exports.

For 2014, cattle prices are forecast to rise above 2013 as supplies continue to tighten. Hog prices are forecast to be slightly lower than 2013 on higher production.  Broiler, turkey, and egg prices are forecast to be below 2013 as production expands.

Cattle price forecasts for 2013 are unchanged from last month. Hog prices are down fractionally from last month on weaker second quarter prices.  Broiler prices are forecast higher as prices remain strong.

Milk production for 2014 is forecast higher as lower feed costs and relatively strong milk prices are expected to support production.  Commercial exports are forecast higher on robust international demand.  Imports will be lower on greater domestic supplies.  With higher domestic production, cheese, butter, and whey prices are forecast lower than last year, while nonfat dry milk (NDM) is higher largely on continued strength in international demand.  Both Class III and Class IV prices are forecast lower.  In the case of Class IV, lower forecast butter prices more than offset higher NDM prices.  The all milk price is forecast at $18.85 to $19.85 per cwt for 2014.

Forecast milk production in 2013 is unchanged from last month.  Imports are raised.  Exports are higher as abundant U.S. supplies and competitive prices are expected to spur foreign demand.  Cheese, butter, and NDM prices are raised from last month while whey is lower.  The Class III price is lowered as lower whey prices more than offset greater cheese prices.  Class IV is up reflecting higher prices for butter and NDM.  The all milk price is forecast at $19.50 to $20.00 per cwt.

COTTON:  The U.S. cotton projections for 2013/14 include lower production, exports, and ending stocks compared with 2012/13.  Projected production is reduced 19 percent to 14.0 million bales, based on regional average abandonment and yields.  Abandonment for the Southwest region is projected at 25 percent due to continued drought conditions.  Domestic mill use is projected at 3.5 million bales, 100,000 bales above 2012/13.  Exports are projected at 11.5 million bales, down 13 percent from 2012/13, due to the smaller available domestic supply and lower imports by China.  Ending stocks are reduced to 3.0 million bales, equal to 20 percent of total use, which is well below the previous 10-year average.  The forecast range for the marketing year average price received by producers is 68.0 to 88.0 cents per pound, compared with 72.0 cents estimated for 2012/13.

The initial 2013/14 world cotton projections show world ending stocks of nearly 93 million bales, the third consecutive seasonal record, as China's policy of stockpiling cotton in its national reserve is assumed to continue.  World production is projected nearly 3 percent lower than 2012/13 at 117.8 million bales, as reductions, mainly for the United States, China, Turkey, Greece, and Mexico, are partially offset by increases for Brazil, India, Pakistan, and Australia.  World consumption is expected to rise 2 percent due to modest growth in world GDP.  World trade is expected to fall 12 percent, as sharply lower imports by China and India are partially offset by increases for Pakistan, Turkey, Mexico and others.  World ending stocks outside of China are projected to fall nearly 2.0 million bales.

China's national reserve stocks are currently expected to reach nearly 40 million bales at the end of 2012/13.  Based on the government of China's current reserve purchase and release prices and import quota policies, USDA is projecting that China will import 12.0 million bales in 2013/14 and will add 10 million bales to ending stocks as reserve purchases exceed reserve sales.  The resulting projected China ending stocks of 58.2 million bales would account for 63 percent of world stocks.

For 2012/13, the final U.S. crop production estimate of 17.3 million bales is virtually unchanged from last month.  U.S. exports are raised 250,000 bales, reflecting recent activity and stronger expected imports by China, which are raised 1.8 million bales from last month.  India's production and consumption also show significant increases.

 

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