PF Reaction to December Reports: Slightly Bearish

December 9, 2011 02:36 AM
 

** CROP PRODUCTION REPORT **

  • COTTON: 15.827 million bales; trade expected 16.1 million bales
    -- compares to Nov. est. of 16.3 mil. bales; 18.1 mil. bales in 2010

USDA's cotton crop estimate came in roughly 300,000 bales below the average pre-report guess. USDA cut 473,000 bales from its cotton crop estimate this month on a sharp reduction in yield. The national average cotton yield was slashed 23 lbs. from November to 771 lbs. per acre and is now down 38 lbs. since October.


** 2011-12 U.S. CARRYOVER **

  • CORN: 848 million bu.; up from Nov. proj. of 843 million bu.
    -- compares to 1.128 billion bu. in 2010-11
  • BEANS: 230 million bu.; up from Nov. proj. of 195 million bu.
    -- compares to 215 million bu. in 2010-11
  • WHEAT: 878 million bu.; up from Nov. proj. of 828 million bu.
    -- compares to 861 million bu. in 2010-11
  • COTTON: 3.5 million bales; down from Oct. proj. of 3.8 million bales
    -- compares to 2.6 million bales in 2010-11

USDA raised its corn carryover projection 5 million bu. from last month. Traders were expecting a 5-million-bu. cut to ending stocks. No changes were made to the supply side of the balance sheet. On usage, USDA cut 5 million bu. from projected food, seed and industrial use, to 6.405 billion bushels. That cut was added straight to the bottom line. USDA now projects a national average on-farm cash price of $5.90 to $6.90 -- down 30 cents on both ends of the range from last month.

USDA increased its 2011-12 soybean carryover projection by 35 million bu. from last month. That was a greater increase than traders were expecting. No changes were made to total supply. On the demand side of the balance sheet, USDA cut 25 million bu. from projected exports, which now stand at 1.30 billion bushels. USDA also cut 10 million bu. from projected crush, to 1.625 billion bushels. USDA now projects a national average on-farm cash price of $10.70 to $12.70 -- down 90 cents on both ends of the range from November.

Traders were expecting just a minor uptick in projected wheat ending stocks. But USDA increased its wheat carryover forecast by 50 million bu. from last month as a result of a like cut to projected exports, which are now seen at 925 million bushels. No other changes were made to the balance sheet. USDA now projects an average on-farm cash price of $7.05 to $7.55, steady on the bottom end of the range and down 20 cents on the top end.

For cotton, total supplies dropped 470,000 bales due to the cut in the crop estimate. That was only partially offset by a 200,000-bale cut to domestic use, which is now projected at 3.6 million bales. USDA also upped unaccounted "use" by 30,000 bales. The net result is a 300,000-bale reduction to projected ending stocks. USDA tightened its average on-farm price projection by 1 cent on both ends of the range from last month, to 85 cents to 95 cents.


** 2011-12 GLOBAL CARRYOVER **

  • CORN: 127.19 MMT; up from 121.57 MMT in Nov.
    -- compares to 128.27 MMT in 2010-11
  • BEANS: 64.54 MMT; up from 63.56 MMT in Nov.
    -- compares to 68.43 MMT in 2010-11
  • WHEAT: 208.52 MMT; up from 202.60 MMT in Nov.
    -- compares to 199.75 MMT in 2010-11
  • COTTON: 57.67 mil. bales; up from 54.96 mil. bales in Nov.
    -- compares to 45.49 million bales in 2010-11

 

The big move higher in global corn ending stocks is the result of a 7.25-million-metric-ton upward revision to the Chinese corn crop. USDA's Chinese corn crop projection is now in line with the official figure from China's National Bureau of Statistics.

The rise in projected global wheat ending stocks is the result of bigger crop forecasts for Australia and Argentina.

The 2.7-million-bale jump in projected global cotton carryover is the result of lower consumption.


** 2011-12 GLOBAL PRODUCTION HIGHLIGHTS**

  • ARGENTINA BEANS: 52.0 MMT; compares to 52.0 MMT in November
    -- compares to 49.0 MMT in 2010-11
  • BRAZIL BEANS: 75.0 MMT; compares to 75.0 MMT in November
    -- compares to 75.5 MMT in 2010-11
  • ARGENTINA WHEAT: 14.5 MMT; compares to 13.0 MMT in November
    -- compares to 16.1 MMT in 2010-11
  • AUSTRALIA WHEAT: 28.3 MMT; compares to 26.0 MMT in November
    -- compares to 27.89 MMT in 2010-11
  • CHINA WHEAT: 117.92 MMT; compares to 117.0 MMT in November
    -- compares to 115.18 MMT in 2010-11
  • CANADA WHEAT: 25.26 MMT; compares to 24.2 MMT in November
    -- compares to 23.17 MMT in 2010-11
  • EU-27 WHEAT: 137.49 MMT; compares to 137.49 MMT in November
    -- compares to 135.67 MMT in 2010-11
  • RUSSIA WHEAT: 56.0 MMT; compares to 56.0 MMT in November
    -- compares to 41.51 MMT in 2010-11
  • FSU-12 WHEAT: 112.45 MMT; compares to 112.45 MMT in November
    -- compares to 81.36 MMT in 2010-11
  • CHINA CORN: 191.75 MMT; compares to 184.5 MMT in November
    -- compares to 177.25 MMT in 2010-11
  • ARGENTINA CORN: 29.0 MMT; compares to 29.0 MMT in November
    -- compares to 22.5 MMT in 2010-11
  • SOUTH AFRICA CORN: 12.5 MMT; compares to 12.5 MMT in November
    -- compares to 10.92 MMT in 2010-11
  • BRAZIL CORN: 61.0 MMT; compares to 61.0 MMT in November
    -- compares to 57.5 MMT in 2010-11
  • CHINA COTTON: 33.5 mil. bales; compares to 33.5 mil. bales in November
    -- compares to 30.5 mil. bales in 2010-11

** WHAT ARE THE CALLS? **

Opening calls following USDA's reports are wide-ranging. Based on the report data and outside markets, we expect corn to open 8 to 12 cents lower, soybeans 15 to 20 cents lower and wheat 10 to 15 cents lower. But it wouldn't surprise us to see calls slide as the open approaches.


 

 

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