Corn

USDA in this month’s report raised ending stocks 55 million bushels from April to 730 million bushels for the 2010/11 marketing year, compared to the average trade guess of 665 million bushels. Changes made in the U.S. numbers include a 5 million bushel increase in imports and a 50 million bushel reduction in exports.  The stocks to use ratio is still at a tight 5.4%.  The season average price for 2010/11 is forecast to range from $5.10 – $5.40, a decrease of 10 cents on the lower end and a decrease of 20 cents on the top side. World ending stocks for 2010/11 decreased slightly to 4.810 billion bushels. In its initial assessment of the 2011/12 marketing year, USDA is using the March 31 planting intentions acreage of 92.2 million acres with harvested acres of 85.1 million. This first real look at 2011/12  is using a below trend line yield of 158.7 bushels per acre, no doubt influenced by the lateness in planting of this year’s corn crop. This will be a number to watch as the growing season develops, but some analysts suggest that the production number of 13.505 billion bushels has nowhere to go, but down as some corn acreage may not get planted and great growing conditions will be needed to average 158.7 bushels per acre, which would be the third highest yield on record, if realized. Projected usage for the next marketing year is estimated to fall 95 million bushels as a 5 million bushel increase in food and seed and a 50 million bushel increase in ethanol is more than offset by a 50 million bushel decrease in feed and residual use and a 100 million bushel decrease in exports. Ending stocks would rebuild slightly at 900 million bushels with a still historically tight stocks to use of 6.7%. The trade was looking for an ending stock number of 811 million bushels. Global corn stocks are estimated to increase 157 million bushels to 6.392 billion bushels. This is considered a bearish report with ending stocks for the current and next marketing year higher than the average trade estimates. July futures closed down 30 cents at $6.77 a bushel.  September corn closed down 30 cents at $6.51 ¼ a bushel. Technical’s have a sell bias with support at $6.28 and resistance at $6.97 a bushel. I am currently 50% priced for 2011 and would hold at this level until we get further along in the growing season. As the crop develops, there may be pricing opportunities from weather scares, acreage concerns, or increases in demand.  Over the past 30 years the average difference between the May projection for U.S. ending stocks and the final estimate has been 672 million bushels with 14 years below the final estimate and 16 years above.   

Supply and Demand Projections and Historical Data Source: USDA

Cotton

USDA’s projection for the current marketing year estimates U.S. ending stocks at 1.75 million bales, up 150,000 bales from the April report. This is on a 100,000 bale increase in domestic use and a 250,000 bales decrease in exports, reflecting cancellations for the last month.  This still puts the stocks to use ratio at a tight 9.1%. The projected range for the 2010/11 marketing year is left at 81 to 84 cents per pound.  World ending stocks were raised about 1 million bales to 42.52 million bales for the current marketing year. Looking toward the 2011/12 marketing year; USDA projects ending stocks of 2.50 million bales and a 14.5% stocks to use ratio.  Planted acreage of 12.57 million acres reflects the March 31 intentions report with harvested acreage of 10.8 million and a yield of 800 pounds per acre based on a higher than average abandonment and slightly below average yields due to the severe drought conditions in the Southwest. Acreage in the Mid-South and Southeast may have trouble reaching its intended acres from the slow start planting and degree of flooded acres, however, that may be somewhat offset by additional acres in Texas from abandoned wheat. Increased world production to 124.72 million bales is expected to put pressure on U.S. exports, dropping them 2 million bales to 13.5 million bales for 2011/12. Domestic demand is expected to hold constant at 3.8 million bales. Global ending stocks are expected to increase 5.4 million bales to 47.9 million bales on increased production.  December futures closed at 125.19 cents per pound, down .73 cents.  Technical’s have a sell bias with support at 120.62 cents and resistance at 128.54 cents. Keep in contact with your cotton buyer on current prices as well as forward pricing alternatives. I would be 45% priced at this time and wait until the crop is up and growing good before pricing more. Over the past 30 years the average difference between the May projection for U.S. ending stocks and the final estimate has been 1.7 million bales with 20 years below the final estimate and 10 years above.

Supply and Demand Projections and Historical Data Source: USDA

Soybeans

In a slight surprise, USDA raised ending soybean stocks 30 million bushels from last month to 170 million bushels for the current marketing year. The trade was expecting a number of 153 million bushels. The only adjustment was made in lowering exports 30 million bushels. The season average price for 2010/11 was estimated at $11.40 a bushel.  Global ending stocks for 2010/11 were raised 106 million bushels at 2.345 billion bushels mainly on record production in Brazil. The first look at 2011/12 projects ending stocks of 160 million bushels compared to the average trade guess of 176 million bushels. Production is based on acreage from the March 31 planting intentions report using a yield of 43.4 bushels per acre. There is uncertainty in the acreage for this year as what does not get planted to corn, cotton,  or spring wheat will probably go to soybeans, but that is tempered with when and if flooded acres get planted to soybeans and their yield potential. Demand is expected to drop 15 million bushels as crush is increased 5 million bushels, exports decreased 10 million bushels, and seed and residual use decreased 10 million bushels from 2010/11. The season average price for 2011/12 is estimated to range from $12.00 to $14.00 a bushel.  World ending stocks for 2011/12 are projected to drop 72 million bushels from 2010/11 to 2.272 billion bushels as increases in consumption offset increases in production. November soybeans closed down 1 ½ cents at $13.21 per bushel. Technical’s have a sell bias with support at $12.93 and resistance at $13.42 a bushel. I am currently 50% priced for 2011 and would hold here until the crop is planted. Over the past 30 years the average difference between the May projection for U.S. ending stocks and the final estimate has been 110 million bushels with 8 years below the final estimate and 22 years above.  

Supply and Demand Projections and Historical Data Source: USDA

Wheat

USDA left wheat ending stocks of 839 million bushels the same as in April as compared to the pre report guess of 844 million bushels. The season average price for all wheat was raised 5 cents on the average to $5.65 a bushel for the 2010/11 marketing year which ends this month. Global wheat supplies were lowered 23 million bushels to 6.695 billion bushels. Projections for 2011/12 reflect lower production despite higher planted acres as a higher than average abandonment and lower overall yields are forecast. This may be the highest production number we will see as yields and acreage may be hard pressed to reach projections with the ongoing drought in the Plains states and planting concerns on spring planted wheat. Domestic use is expected to increase 60 million bushels on a 15 million bushels increase in food use, a 5 million bushel decrease in seed use, and a 50 million bushel increase in feed and residual use. Exports are forecast to drop 225 million bushels as world production is expected to rebound. Ending stocks are projected at 702 million bushels compared to the average trade guess of 674 million bushels. The season average price is estimated to range from $6.80 to $8.20 a bushel. World ending stocks are projected at 6.660 billion bushels, down 35 million bushels from the 2010/11 marketing year. July wheat closed down 39 ¾ cents at $7.59 a bushel. Technical’s have a strong sell bias with support at $7.25 and resistance at $8.21 a bushel. On my comments, I am currently 50% priced for 2011 and would hold at this level. Over the past 30 years the average difference between the May projection for U.S. ending stocks and the final estimate has been 140 million bushels with 17 years below the final estimate and 13 years above. These numbers can and will change, but do reflect the best information and estimates at the time of the report. The next USDA Supply & Demand report will be released June 9, 2011.

Supply and Demand Projections and Historical Data Source: USDA

 Profitability

This table should be used as a guide as yields, prices, and expenses will vary among producers and locations. This table looks at crop prices as of May 11, 2011 and can give a glimpse of what crop profitability is in Tennessee as of this date. One of the expense items that has to be watched is fertilizer. For reference, in variable expenses below, fertilizer expense per acre is estimated as follows: cotton – $ 137, Soybeans – $48, Corn – $153 (includes 150 units of N), and Milo – $123. Farm diesel cost has risen with fuel cost based on a $3.50 per gallon farm diesel cost. Additional adjustment to costs of production reflecting a later planted crop as well as re application of some weed control measures were made as follows: Cotton + $21, Soybeans +$12, Corn +$4 , Milo +$9 per acre. Producers with owned land and or cash rent can use Returns Over Variable as a guide in decision making. Producers with share rent ground should use Returns Over Variable and Land Costs as a guide with their appropriate share rent calculated. A land cost of 25% of revenue is used in the table as a guide or method of comparison and should not be construed as the appropriate rent for a particular area. Producers who are not making major equipment changes can use UT budgets and this table as a guide in developing their own cropping decision budgets. If equipment changes are being made, then a whole farm financial plan would be better suited as a decision aid. Please contact your local County Extension office or Area Specialist – Farm Management for assistance in developing your own budget or farm financial plan.

Some differences have occurred due to rounding.