WASDE REPORT FOR 2/8/2018
Feb 08, 2018
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Hedge means to take risk off the table, not add to it. How is it possible for a hedge service to recommend buying back your corn when above $4.00, please tell me how that is a hedge? We were hedging and improving our hedges then.
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WHEAT: Projected 2017/18 U.S. ending stocks are raised this month by 20 million bushels as higher food use is more than offset by lower exports, while export forecasts for several major competitors are increased. Estimated food use is increased by 5 million bushels to 955 million, based on the NASS Flour Milling Products report, which indicated higher-than-expected use in the first half of 2017/18. Additionally, implied flour extraction rates were lower in the second quarter, as compared to last year, and a continuation of this trend is expected to support increased wheat for food usage into the second half of 2017/18. No other supply or use categories are changed this month. Based on NASS prices reported to date and price expectations for the rest of the marketing year, the projected season-average farm price (SAFP) remains unchanged at the midpoint of $4.60 per bushel. However, the projected SAFP range is narrowed by 5 cents at both ends of the range to $4.55 to $4.65. Global 2017/18 wheat supplies increased, primarily on higher production forecasts for Argentina and Ukraine. Argentina’s wheat production increased by 500,000 tons to 18.0 million based on higher-than-expected yields from the later harvest stages. Ukraine wheat production increased 481,000 tons to 27.0 million based on updated government data. World 2017/18 trade is raised this month as higher exports from Russia, Argentina, and Canada more than offset reduced exports from the EU and the United States. Projected imports are increased for Indonesia and several African countries while reduced for India, the EU, Iran, Brazil, and Mexico. Indonesia’s imports are raised 1.0 million tons to 12.5 million on increases for both food and feed use. Indonesia is now the leading global wheat importer, surpassing Egypt, the traditional leader. Total world consumption is projected 3.1 million tons higher, primarily on greater usage from Indonesia and China. Projected global ending stocks are 1.9 million tons lower this month at 266.1 million but remain significantly higher than a year ago.
COARSE GRAINS: This month’s 2017/18 U.S. corn outlook is for increased exports and reduced stocks. Exports are raised 125 million bushels, reflecting U.S. price competitiveness and reduced exports for Argentina and Ukraine. With no other use changes, U.S. corn ending stocks are lowered 125 million bushels from last month. The season-average corn price received by producers is projected at $3.30 per bushel, up 5 cents at the midpoint. The U.S. sorghum supply, use, and midpoint price forecasts are unchanged relative to last month.
Global coarse grain production for 2017/18 is projected 2.3 million tons lower to 1,321.9 million. This month’s foreign coarse grain outlook is for lower production, greater consumption, and lower stocks relative to last month. Global corn production is lowered 2.8 million tons largely reflecting reductions for Argentina and Ukraine. For Argentina, persistent heat and dryness during January and early February reduced yield prospects for early-planted corn in key central growing areas.
Production is lowered for Ukraine based on the latest official statistics. Small increases for Moldova, Mexico, Bangladesh, and Thailand are partly offsetting. Barley production is raised for Argentina. Mexico sorghum production is increased. Major global trade changes for 2017/18 include higher projected corn exports for the United States and Brazil, with reductions for Argentina and Ukraine. Corn imports are raised for Turkey, the EU, and Brazil. Foreign corn ending stocks are down from last month, mostly reflecting reductions for Argentina and Ukraine that more than offset increases for Mexico, Brazil, and Turkey. Global corn ending stocks, at 203.1 million tons, are down 3.5 million from last month.
RICE: The U.S. 2017/18 rice supply and demand estimates are unchanged this month. The projected season-average farm price for all rice is lowered 10 cents at the midpoint of the range. The reduction is primarily attributed to lower-than-expected long-grain prices reported by NASS. Global 2017/18 rice supplies are lowered 1.3 million tons on reduced beginning stocks and lower production. Total world production is only down fractionally primarily on a smaller Bangladesh crop. Exports are up 1.0 million tons to a record 46.8 million. Export changes are led by a 0.5-million-ton increase for India and a 0.3-million-ton increase for Burma. Imports are raised 0.8 million tons for Bangladesh and 0.5 million for Indonesia. Total global use is raised 0.6 million tons for 2016/17 but reduced 1.0 million for 2017/18. For the 2017/18 marketing year, consumption is lowered 0.2 million tons each for Bangladesh, Burma, and India, while it is raised 0.3 million for China. Ending stocks are down 0.3 million tons but remain the highest since 2000/01.
OILSEEDS: This month’s 2017/18 U.S. soybean outlook is for reduced exports and increased ending stocks. Soybean exports for 2017/18 are projected at 2,100 million bushels, down 60 million from last month, reflecting shipments and sales through January and increased export competition on larger supplies in Brazil. With soybean crush unchanged, soybean ending stocks are raised 60 million bushels to 530 million. The U.S. season-average soybean price range for 2017/18 is projected at $8.90 to $9.70 per bushel, unchanged at the midpoint. Soybean oil prices are forecast at 31 to 34 cents per pound, down 1 cent at the midpoint. Soybean meal prices are projected at $305 to $335 per short ton, up $5 at the midpoint. Global oilseed production for 2017/18 is projected at 578.6 million tons, down 1.5 million with lower soybean production partly offset by higher cottonseed. Soybean production is reduced 1.7 million tons to 346.9 million. Soybean production for Brazil is projected at 112.0 million tons, up 2.0 million, as favorable weather throughout the growing season
has raised yield prospects. Argentina production is reduced 2.0 million tons to 54.0 million on lower harvested area and reduced yields resulting from periods of unseasonable warmth and dryness. Soybean production is also reduced for several other countries including Paraguay, Bolivia, India, Ukraine, and South Africa. Other changes include reduced sunflowerseed production for South Africa, increased cottonseed production for China, and lower cottonseed production for India. Global oilseed crush for 2017/18 is projected at 487.5 million tons, down 1.0 million. Reduced soybean crush for Argentina and India accounts for most of the change. Global oilseed stocks are projected lower with reduced soybean stocks for Argentina, Bolivia, Paraguay, and India more than offsetting an increase for the United States.
SUGAR: Total sugar supply for 2017/18 is decreased by 57,469 short tons, raw value (STRV). Cane sugar production for 2017/18 is reduced 44,356 STRV to 4.011 million. Based on industry reporting, processing in Louisiana continued later than usual into late January, and production for the crop year totaled 1.859 million STRV, up 38,644 from last month. This gain is more than offset by a processor-forecast reduction in Florida cane sugar production of 83,000 STRV. Beet sugar production is reduced by 37,800 STRV to 5.219 million. Although the sucrose recovery from sliced sugarbeets in December, as reported in Sweetener Market Data (SMD), is down significantly from the previous month, most of the reduction is expected to be made up based on processor-sourced information. Increased beginning stocks of 24,687 STRV offset some of the reduced production, as 2016/17 imported sugar originally recorded as a direct consumption import was revised in SMD as raw sugar imported by a refiner.
Deliveries for human consumption for 2017/18 are reduced by 75,000 STRV to 12.325 million, based on a slower than expected pace in the fourth quarter of 2017. The residually determined change in projected ending stocks for 2017/18 is 1.842 million STRV, up 17,531. The ending stocks-to-use ratio is 14.6 percent, up from 14.4 percent last month. In Mexico, deliveries for human consumption are reduced by 86,626 metric tons (MT) to offset an increase in high fructose corn syrup (HFCS) consumption, as per capita sweetener consumption in Mexico remains equal to the level of last year. The HFCS increase is based on a higher pace-to-date in the fourth quarter of 2017 and expected to continue for the rest of the marketing year, albeit at a slower pace. Stocks are projected at 22.0 percent of consumption to meet needs before the start of production in 2018/19, implying a reduction of 19,058 MT. Exports to non-U.S. destinations are residually projected at 276,981 MT, an increase of 105,683 over last month.
LIVESTOCK, POULTRY, AND DAIRY: The 2018 forecast for total red meat and poultry production is raised from last month, as higher forecast broiler production more than offsets lower beef, pork, and turkey production. The beef production forecast is reduced from the previous month, as expected lower second-half beef production more than offsets higher first-half beef production. NASS’s Cattle report, released January 31, estimated the U.S. cattle inventory continued to increase for the fourth consecutive year, but the report also indicated that fewer numbers of cattle were being held outside
feedlots. The number of cattle placed on feed in the first part of 2018 is expected to be lower, resulting in lower marketings and beef production in the second half of the year. The January NASS Cattle on Feed report showed year-over-year increases in placement numbers in December, implying higher numbers of fed cattle will likely be marketed during the spring quarter. Cattle weights are raised for the first half of 2018 on current weight patterns. Pork production is reduced on the pace of slaughter to date. Broiler production is raised largely on continued growth in bird weights. First-half turkey production is reduced on hatchery data. First-quarter egg production is reduced on a slower laying rate.
Estimates of 2017 meat and egg production are adjusted to reflect December data. For 2018, beef exports are raised as demand from several key trading partners is expected to remain robust; no change is made to the beef import forecast. Pork import and export forecasts are unchanged from last month. First-half broiler export forecasts are raised on expectations of strong demand while turkey exports are reduced on the slow pace of recovery in exports in late-2017 and lower production in 2018.
Livestock, poultry, and egg trade estimates for 2017 are adjusted to reflect December trade data. Fed-cattle prices for the first half of 2018 are raised from last month on continued demand strength. First-quarter hog and broiler price forecasts are raised from last month on stronger prices to date. The first-quarter turkey price is also raised, but the annual forecast remains unchanged.
Egg price forecasts are also raised on continued robust demand. The milk production forecast for 2018 is lowered from last month on expectations of slower growth in milk per cow. The 2018 fat basis export and import forecasts are unchanged from the previous month. On a skim-solids basis, the import forecast is raised slightly while the export forecast is raised on strong global demand for skim milk powder, lactose, and whey products. The 2017 production, trade, and stock estimates are adjusted to reflect December data.
Annual product price forecasts for cheese and butter are lowered from the previous month as demand remains relatively weak. No changes are made to the annual prices for NDM and whey. The Class III price is lowered on the cheese price projection while the Class IV price is down on a lower butter price forecast. The all milk price is forecast is reduced to $15.70 to $16.40 per cwt.
COTTON: The 2017/18 U.S. cotton supply and demand forecasts show slightly lower exports and higher ending stocks relative to last month. Production and domestic mill use are unchanged. The export forecast is lowered 300,000 bales to 14.5 million based on a lagging pace of shipments to date. Ending stocks are now estimated at 6.0 million bales, equivalent to 34 percent of total disappearance. The marketing year average price received by producers is projected to average between 67 and 71 cents per pound, unchanged from January’s range. The 2017/18 world cotton forecasts include slightly higher production, lower consumption, and higher ending stocks. World production is 400,000 bales higher than last month, as
higher estimates for China, Brazil, and South Africa offset lower expectations for India and Australia. Global consumption is forecast 325,000 bales lower, as decreases for India and Thailand offset an increase for Vietnam. World ending stocks are projected 760,000 bales higher as a 1.1-million-bale increase in China’s projected ending stocks— and higher U.S. stocks—offsets declines for India, Australia, Turkmenistan, Tajikistan, and Vietnam.
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