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July 2011 Archive for MGEX Research

RSS By: Joe Victor, AgWeb.com

Joe Victor is a Business Development Specialist with Minneapolis Grain Exchange, Inc., where he monitors cash grain activity and cash grain opportunities. He provides marketing advice through this blog.

2009 is the One Other Year

Jul 22, 2011

United States Department of Agriculture (USDA) estimates current Hard Red Spring Wheat (HRSW) heading of 60 percent which is the second lowest for week 28 of the calendar year dating back to 1981. The lowest HRSW heading percentage was 57 percent in 2009. The third lowest heading occurred in 1995 at 64 percent. HRSW headed an average of 84 percent between 1981 and the current crop year. Past USDA estimates show heading increases of as much as 27 percent in a

single week.

Does the present low heading suggest reduced end stocks to use and have an impact on the HRSW futures price?

USDA releases a weekly publication of Crop Progress and Conditions both present and past, which provides the status of multiple crops, including Hard Red Spring Wheat (HRSW).

USDA’s 2009 World Agriculture Supply and Demand Estimates (WASDE) monthly reports indicated increasing levels of end stocks to use for HRSW from 33 percent in July 2009 to 58 percent the following January. The July to January 1995 WASDE provided a range high of 26 percent in August, a low of 22 percent in December and 23 percent in the January annual. Present HRSW end stocks to use are 32 percent.

In 1995 HRSW futures bottomed in August and then consolidated through February. On the first day of October 2009, HRSW futures found a bottom price and had price consolidation into February. The price consolidation was nearly double in 2009 than 1995, but remember the end stocks to use were larger for 1995.

MGEX welcomes your questions.........Joe Victor

www.mgex.com

800.827.4746

Information used to compile this update is from publicly available sources. Nothing contained herein should be construed as a trading recommendation of MGEX, its employee or its members. For informational purposes only.

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First Insight into 2011-2012

Jul 15, 2011

The United States Department of Agriculture’s (USDA) World Agriculture Supply and Demand Estimates (WASDE) report for July provided the first details of supply and demand for Other Spring and Durum wheat for the 2011-2012 market year.

The WASDE report estimated 2011-2012 end stocks to use at 11.67 percent for Durum and 31.6 percent for Other Spring Wheat. The Durum number marks the second lowest end stocks to use since 1995. Only 2008"s 11.29 percent is lower. By the time the January annual WASDE report was released in 2009, the end stocks to use for Durum had increased to 19.63 percent and futures prices declined

30 percent.

The end stocks to use in the July 2011 WASDE report estimated end stocks to use for Other Spring Wheat at 31.67 percent which closely resembles the 33.33 percent reported by the USDA in July 2009. When the USDA WASDE report was released the following January, end stocks to use increased to 57.67 percent and the futures price fell 25.5 percent.

From the July to the January WASDE, the Durum and Other Spring Wheat end stocks to use increased 44 percent over the past 16 years. Thirty-eight percent of the time the end stocks to use had one variety of wheat higher the other variety lower.

As this data shows, restrictive end stocks to use reported in the July WASDE does not necessarily mean higher futures prices when the subsequent January report is released.

MGEX welcomes your questions.........Joe Victor

www.mgex.com

800.827.4746

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Quarterly Grain Stock Records

Jul 06, 2011

When the most recent quarter’s grain and oilseed use is subtracted from the previous quarter’s use we can see how demand can effect futures prices. United States Department of Agriculture (USDA) Quarterly Grain Stock’s data released June 30 set two records.

070511

In the third quarter of the 2010-2011 marketing year, 2.853 billion bushels of corn were used versus the second quarter’s 3.517 billion bushels of corn.

Dating back to the 1976-1977 marketing year, corn use has never been 664 million bushels less in the third quarter than the second quarter. The previous record was set in the 2007-2008 marketing year when 588 million bushels less were used in the third quarter than in the second quarter. In that marketing year, corn futures responded by dropping 4.2 percent in July 2008.

Another notable record was set in the soybean data. The third quarter use was 401 million bushels less than the second quarter use which topped the previous record of 369 bushels less in the 2009-2010 marketing year. Following this decrease in soybean use, the July 2010 soybean futures increased by 12.2 percent.

In the same period, wheat use increased by 59 million bushels in the fourth quarter versus the third quarter. This increase is mirrors the 1998-1999 marketing year when the July Hard Red Winter Wheat futures increased 0.9 percent, Soft Red Winter Wheat increased 1.9 percent and Hard Red Spring Wheat futures decreased 2.5 percent.

MGEX welcomes your questions.........Joe Victor

www.mgex.com

800.827.4746

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