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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 for 7/11/13

Jul 11, 2013

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WHEAT: Projected U.S. wheat supplies for 2013/14 are raised slightly this month with lower
beginning stocks more than offset by higher production, both based on the latest survey-based
estimates and forecasts. Beginning stocks are reduced 27 million bushels as indicated by the
June 1 stocks estimate reported in the June 28 Grain Stocks. Production is forecast up 34 million
bushels with lower forecast harvested area from the June 28 Acreage report more than offset by
higher yields. Production is raised 11 million bushels for Hard Red Winter and 30 million bushels
for Soft Red Winter (SRW) wheat. White Winter wheat is forecast down 7 million bushels.

 For durum, a reduction in area is only partly offset by a higher yield with production forecast down 5
million bushels. For other spring wheat, a reduction in area is more than offset by a higher yield
forecast in today's Crop Production report, adding 4 million bushels to this month's production
forecast. July survey-based yield forecasts for durum and other spring wheat are up 1.6 bushels
per acre from last month's trend based projections.


Total U.S. wheat use for 2013/14 is raised 89 million bushels as lower expected domestic use is
more than offset by higher projected exports. Projected feed and residual disappearance is
lowered 10 million bushels with stronger export demand, especially for SRW wheat. Exports are
projected 100 million bushels higher reflecting strong sales, particularly to China. Ending stocks
are projected down 83 million bushels. At 576 million tons, stocks are expected to remain well
above the 60-year low of 306 million in 2007/08. The projected range for the 2013/14 seasonaverage
farm price is raised 20 cents on both ends to $6.45 to $7.75 per bushel. At the $7.20-perbushel
midpoint, this would be down from the record $7.77 per bushel reported for 2012/13.


Global wheat supplies for 2013/14 are lowered 3.5 million tons reflecting lower projected beginning
stocks as world production rises 1.9 million tons. Higher 2012/13 feed use in China accounts for
most of the reduction in beginning stocks with smaller increases in domestic consumption for
Pakistan, Russia, and Iran adding to the decline in 2012/13 global carryout. World production for
2013/14 is raised with increases for Australia, the European Union, and the United States offsetting
a reduction for Kazakhstan. Australia production is raised 1.0 million acres reflecting the latest
government estimates for area and a slightly higher yield outlook as early season conditions have
been especially favorable in the country's southern and eastern growing areas. Production for the
European Union is raised 1.2 million tons, however, the addition of Croatia accounts for most of the
increase. Higher production prospects for Romania, Hungary, United Kingdom, and several

smaller countries outweigh reductions for France, Ireland, and Spain. Production is lowered 0.5
million tons for Kazakhstan with lower planted area reported by the Ministry of Agriculture.
Global wheat consumption for 2013/14 is raised 5.4 million tons mostly reflecting higher expected
feeding in China. Wheat consumption is also raised for India, Pakistan, Iran, and Japan, offsetting
reductions for the European Union and the United States. Global wheat trade is raised with a 5.0-
million-ton increase in China imports. A 0.5-million-ton increase in imports for Iran is offset by the
same size reduction for the European Union. World exports are raised 5.0 million tons with
increases for Australia, the European Union, and the United States. Exports are lowered for India
and Kazakhstan. World ending stocks for 2013/14 are projected 8.9 million tons lower. At 172.4
million tons, stocks would be the lowest since 2008/09, but well above the 128.8 million in 2007/08.

COARSE GRAINS: Projected 2013/14 U.S. feed grain supplies are lowered this month with
reduced beginning stocks for corn and sorghum and lower forecast harvested areas for corn and
sorghum from the Acreage report. Corn beginning stocks for 2013/14 are projected 40 million
bushels lower. Corn production for 2013/14 is lowered 55 million bushels with the lower harvested
area and the projected yield unchanged at 156.5 bushels per acre. Projected production remains
just below 14 billion bushels and would be 858 million above the record in 2009/10. Corn supplies
for 2013/14 are lowered 90 million bushels as a 5-million-bushel increase in imports only partly
offsets the lower beginning stocks and production.

This month's changes to corn use for 2012/13 and 2013/14 largely reflect the lateness of the 2013
crop and expectations for extremely tight supplies later this summer and into early fall. Feed and
residual disappearance for 2012/13 is raised 50 million bushels as early harvest of new-crop corn
is expected to be sharply reduced from last year. A 10-million-bushel increase in projected imports
for 2012/13 also reflects the tight supply situation expected for old-crop corn during the summer
quarter. Imports for 2013/14 are raised because the tight supply situation is expected to continue
into September. Feed and residual use for 2013/14 is lowered 50 million bushels with tighter
beginning stocks and lower production, and also on the lack of early new-crop usage which tends
to boost indicated disappearance during the September-December quarter of the new marketing
year. Projected exports for 2013/14 are lowered 50 million bushels as tight supplies of corn in
early September are expected to limit early season shipments. With lower projected use in
2013/14, ending stocks are raised 10 million bushels and remain just under 2 billion bushels. The
projected 2013/14 season-average farm price for corn is unchanged at $4.40 to $5.20 per bushel.
The 2013/14 other feed grain farm price projections are also unchanged.

Global coarse grain supplies for 2013/14 are projected 3.6 million tons lower with 2.9 million tons of
the decline resulting from the tighter supply situation for corn and sorghum in the United States.
Foreign coarse grain supply and use changes this month are relatively small in the aggregate.
Corn beginning stocks for 2013/14 are lowered for Brazil with higher 2012/13 exports and for
Indonesia with lower 2012/13 production. China corn production for 2013/14 is lowered 1.0 million
tons on lower indicated area. European Union corn production is increased 1.8 million tons when
adjusted for this month's inclusion of Croatia, however, last month's 27-member union is lowered
0.4 million tons. Barley production is raised 0.5 million tons for Canada and 0.2 million tons for
Kazakhstan, both on higher reported area. European Union barley production is raised 0.5 million
tons with the addition of Croatia accounting for less than half the increase.

Global 2013/14 coarse grain trade is mostly unchanged this month with exports down slightly on
the reduction for U.S. corn. Global corn consumption is down 2.6 million tons with half of the
reduction in the United States. Corn consumption is also lowered for Indonesia. Global corn
ending stocks for 2013/14 are projected at 151.0 million tons, down 0.9 million, with reductions for
Brazil and China. World corn stocks are expected to be the highest since 2001/02.

RICE: U.S. all rice supplies in 2013/14 are lowered 10.5 million cwt or 4 percent to 235.6 million
cwt, the lowest since 2000/01, as beginning stocks and production are lowered 1.5 million and 10.0
million, respectively. Conversely, the import forecast is raised 1.0 million cwt to a near-record 23.5
million. Beginning stocks for 2013/14 are lowered 1.5 million cwt as small changes are made to
2012/13 supply and use ? imports are lowered 0.5 million to 21.0 million, and exports are raised
1.0 million to 109.0 million. Rice production in 2013/14 is lowered 5 percent to 179.5 million cwt
this month due entirely to a 5 percent reduction in harvested area as reported in the Acreage report
released on June 28. Harvested area for 2013/14 is dropped 141,000 acres to 2.45 million, down
almost 9 percent from last year, and the lowest since 1987/88.

U.S. all rice total use for 2013/14 is lowered 6.0 million cwt or nearly 3 percent to 207.0 million, the
lowest since 2000/01, as domestic and residual use, and exports are each reduced 3.0 million.
Ending stocks for 2013/14 are projected at 28.6 million cwt, down 4.5 million, or nearly 14 percent
from a month ago, and the lowest since 2003/04.

The 2013/14 long-grain rice U.S. season-average farm price (SAFP) is projected at $14.50 to
$15.50 per cwt, up 60 cents per cwt on each end of the range from last month. The combined
medium- and short-grain SAFP is projected at $15.80 to $16.80 per cwt, unchanged from a month
ago. The 2013/14 all rice SAFP is projected at $14.90 to $15.90 per cwt, up 40 cents per cwt on
each end of the range from last month. Long-grain rice price projection for 2013/14 is raised due
mostly to a decrease in expected supplies. Combined medium- and short-grain rice prices are
expected to remain near last year's level as there will be strong competition from Egypt and
Australia for export markets outside of Northeast Asia.

Global 2013/14 rice production, consumption, trade, and ending stocks are all reduced from last
month. Global production is projected at 478.7 million tons, still a record despite decreases totaling
0.5 million mostly due mainly to reductions for the United States and Vietnam. Global exports in
2013/14 are reduced slightly due mostly to an expected decrease in U.S. and Pakistan, which is
partially offset by an increase for China. Global consumption for 2013/14 is reduced due mostly to
decreases for the United States and Nigeria, which are partially offset by increases for Thailand.
World ending stocks for 2013/14 are projected at 108.0 million tons, down 0.6 million from last
month, but 2.6 million above the previous year. The decline in ending stocks is due mostly to
reductions for the United States, Indonesia, and Vietnam, which is partially offset by increases for
China, Nigeria, and Thailand.

Several significant trade changes are made for 2012/13. Global 2012/13 exports are reduced by
0.6 million tons with most of the decrease occurring for Thailand and Pakistan - down 500,000
and 200,000 tons, respectively. This is partially offset by increases in 2012/13 exports for China,
Argentina, and the United States. Imports for 2012/13 are lowered for Indonesia and the
Philippines.

OILSEEDS: U.S. oilseed production for 2013/14 is projected at 100.9 million tons, up 0.2 million
from last month, with increased soybean production mostly offset by reductions for other oilseeds.
Soybean production is projected at 3.42 billion bushels, up 30 million due to increased harvested
area. Harvested area, estimated at 76.9 million acres in the June 28 Acreage report, is 0.7 million
above the June projection. The soybean yield is projected at 44.5 bushels per acre, unchanged
from last month. Soybean supplies are 30 million bushels above last month's forecast reflecting
the production change. With projections for exports and crush unchanged, 2013/14 soybean
ending stocks are raised 30 million bushels to 295 million. U.S. soybean supply and use
projections for 2012/13 are unchanged.

The 2013/14 U.S. season-average soybean price is forecast at $9.75 to $11.75 per bushel,
unchanged from last month. Product prices are also unchanged, with soybean meal prices
forecast at $290 to $330 per short ton and soybean oil prices forecast at 47 to 51 cents per pound.
Global oilseed production for 2013/14 is projected at 492.9 million tons, up 2.1 million from last
month. Higher forecasts for soybeans, rapeseed, cottonseed, and peanuts are only partly offset by
reductions for sunflowerseed. Global soybean production is projected at 285.9 million tons, up 0.6
million with gains for the United States, China, and Canada only partly offset by reductions for
Argentina and Russia.

Argentina soybean production is reduced due to a lower harvested area
estimate for both 2012/13 and 2013/14. Rapeseed production for Canada is projected at 15 million
tons, up 0.5 million based on increased area consistent with the latest survey results reported by
Statistics Canada. Other changes include increased rapeseed production for China and Russia,
reduced sunflowerseed production for Ukraine, and increased cottonseed production for India.

SUGAR: Projected U.S. sugar supply for fiscal year 2013/14 is decreased 647,000 short tons, raw
value, from last month mainly due to lower imports. Higher sugar production, based on higher area
for harvest of both sugar crops, is partially offset by lower beginning stocks. Reduced imports
under the tariff rate quota and the re-export programs combine with lower imports from Mexico to
reduce total imports by 694,000 tons. Total use for 2013/14 is increased in line with the increase
for the previous year. Ending stocks are lowered 667,000 tons to 16.8 percent of use. For Mexico,
lower beginning stocks and higher use reduce ending stocks to 22 percent of domestic
consumption.

LIVESTOCK, POULTRY, AND DAIRY: The forecast for 2013 red meat and poultry production is
reduced from last month on lower beef, pork and turkey production. Beef production is lowered as
steer and heifer slaughter in the second quarter was lower than expected. The lower secondquarter
slaughter more than offsets higher forecast slaughter in the second half of the year. The
pork production forecast is reduced, largely on a reduction in fourth-quarter slaughter.

USDA's Quarterly Hogs and Pigs report indicated that despite a record number of pigs per litter in March-
May, the pig crop for that period was only fractionally above year-earlier. Turkey production is
lowered as hatchery data points toward sharper declines in second-half production.

The broiler production forecast is unchanged. Egg production is raised on higher table and hatching egg
production. For 2014, the red meat and poultry production forecast is higher based on larger pork
production. Pork production increases are driven primarily by gains in pigs per liter as producers
have indicated intentions to only gradually expand farrowings in the second half of 2013.

Beef and pork exports for 2013 and 2014 are unchanged. The beef import forecast is lowered for
2013 and 2014 due largely to expected tight supplies in Oceania. Pork imports are raised slightly
for 2013 and 2014. Broiler and turkey exports for 2013 are raised on the current strength of trade.
Forecasts for 2014 are unchanged.

The cattle price forecast for 2013 is lowered from last month as prices have weakened recently.
The 2014 price forecast is lowered for the first half of the year. Hog prices are raised as demand
strength carries from 2013 into 2014, but price gains will be limited by higher production. Broiler
prices are higher as strong demand is expected to support prices in 2014. Turkey prices are down
slightly for 2013 while 2014 is unchanged. Egg prices are raised for 2013 on relatively strong
demand.

The 2013 milk production forecast is raised from last month based on growth in milk production to
date. The milk production forecast for 2014 is unchanged from last month. Despite weaker
forecast milk prices, forage supplies and feeding margins will likely continue to support modest
gains in milk production.

The fat-basis import forecast for 2013 is unchanged, but lowered on a skim-solid basis reflecting
slower-than-expected imports of milk protein concentrates. The 2013 fat-basis export forecast is
higher on continued robust exports of cheese. Skim-solid exports for 2013 are higher as nonfat dry
milk (NDM) shipments are expected to remain strong. The United States has gained in export
markets typically served by the European Union which has experienced a slowdown in production.
Export forecasts for 2014 are unchanged.

Fat and skim-solid basis ending stock forecasts for 2013 are raised as stocks of butter and cheese
have remained large. Ending stock forecasts for 2014 are raised as well.
Cheese and butter prices are forecast lower for 2013 on larger supplies. Prices for 2014 are
lowered as the larger carry-in stocks overhang the market. The 2013 NDM price forecast is raised
from last month on strong export demand, but the forecast for 2014 is unchanged. The whey price
forecasts for both 2013 and 2014 are unchanged from last month. The Class III price forecasts are
lowered from last month in line with lower product prices. The Class IV price forecast is
unchanged for 2013 as lower butter prices are largely offset by higher NDM prices. However, the
Class IV price is lowered for 2014, reflecting lower butter prices. The 2013 all milk price is forecast
at $19.50 to $19.80 and the price for 2014 is $18.70 to $19.70 per cwt.

COTTON: The month's U.S. cotton estimates include slightly higher ending stocks in 2012/13 and
2013/14 resulting from a reduction in the current season export estimate, which reflects the recent
pace of shipments. Forecast production for 2013/14 remains at 13.5 million bales, the same as
last month; however, estimates of planted area, harvested area, and average yield have been
updated to reflect recent information. The 2013/14 projections of domestic mill use and exports
are unchanged from last month. The forecast range for the marketing-year average price received
by producers is lowered 3 cents on each end to 70 to 90 cents per pound.

Projections of world cotton stocks are also raised in both 2012/13 and 2013/14 due to a
combination of higher production and lower consumption. For 2012/13, production is raised in
Australia, while consumption is reduced in Pakistan and India, but is raised in Vietnam - these
adjustments reflect recent data revisions. For 2013/14, production is raised in India due to
favorable early season weather conditions, while forecast consumption is lowered in Pakistan and
Russia. The balance sheet for China is unchanged this month and assumes continuation of
current policies regulating the national reserve acquisition and release prices.

 

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