Corn

USDA in this month’s report raised ending stocks 150 million bushels from June to 880 million bushels for the 2010/11 marketing year on 145 million bushel decrease in usage and a 5 million bushel increase in imports. Feed and residual use was lowered 150 million bushels, corn for sweeteners was reduced 20 million bushels, exports lowered 25 million bushels and corn for ethanol was raised 50 million bushels.  The season average price for 2010/11 is forecast to range from $5.15 – $5.35, a decrease of 5 cents on the lower end and 15 cents on the top. World ending stocks for 2010/11 increased 135 million bushels to 4.759 billion. The 2011/12 projection followed along the lines of the acreage report by projecting planted acres of 92.3 million acres and harvested acres of 84.9 million acres.  Yields were left at the June level of 158.7 bushel/acre making production of 13.47 billion bushels, an increase of 270 million bushels from last month. On the demand side, feed and residual use was raised 50 million bushels, food and seed cut 5 million bushels, corn for ethanol raised 100 million bushels, and exports raised 100 million bushels. Ending stocks for 2011/12 are projected at 870 million bushels, an increase of 175 million bushels from June. The stocks to use ratio is estimated at 6.4% with the season average price projected to range from $5.50 to $6.50 a bushel, an decrease of 50 cents on both ends. Global corn stocks are estimated to increase 148 million bushels from the June report to 4.553 billion bushels on higher beginning stocks and increased production mainly in the U.S. and increased usage. Global consumption was raised 232 million bushels on higher expected feeding in China, U.S., and Ukraine and higher industrial use in the U.S. and Canada.  Chinese corn imports were raised 59 million bushels to 78.7 million bushels reflecting recently announced sales to China. September corn closed up 21 cents at $6.64 a bushel on what is considered a friendly corn report. Technical’s have a sell bias with support at $6.06 and resistance at $6.98 a bushel. I am currently 50% priced for 2011 and would hold at this level. After today, the market will closely look at the affects of the weather on production, and whether usage will be as strong as projected. Over the past 30 years the average difference between the July projection for U.S. ending stocks and the final estimate has been 510 million bushels with 13 years below the final estimate and 17 years above.  These numbers can and will change, but do reflect the best information and estimates at the time of the report.  

 Supply and Demand Projections and Historical Data Source: USDA

Cotton

 USDA’s projection for the current marketing year estimates U.S. ending stocks at 2.75 million bales, up 500,000 bales from the June report. This is on a 500,000 bales decrease in exports, reflecting continued cancellations and slow shipments.  This puts the stocks to use ratio at a 15% with a season average price of 81.5 cents per pound. World ending stocks were raised 1.16 million bales to 44.4 million bales for the current marketing year on mainly higher ending stocks in the United States and India. The 2011/12 marketing year reflects higher ending stocks at 3.0 million bales despite a 1.0 million bale cut in projected production based on forecasted record 30% abandonment rate from historic drought conditions, mainly in Texas. Beginning stocks were raised 500,000 bales reflecting the 2010/11 numbers with exports reduced 1 million bales due both to reduced U.S. supplies and weaker foreign demand. The projected price range for 2011/12 was lowered 5 cents on both ends at 90 to 110 cents per pound. World projections reflect higher beginning stocks, lower production, and lower usage compared to June.  Global ending stocks are expected to increase 2.75 million bales to 51 million bales. This is a negative or bearish report for cotton as stocks both in the U.S. and world are projected to increase. It is becoming apparent that higher prices earlier in the year have hurt demand as well as the effects of current concerns on the world economy. Concerns center on rising inflation in China and whether Chinese efforts to control inflation will translate in to less cotton demand. Other concerns are on continued European debt issues and the relationship to the U.S dollar. The Southwest crop continues to deteriorate and the Deep South and Southeast crop also is under drought stress so additional reductions in production will most likely be warranted. Will any more cuts in productions offset the drop in demand and/or will demand continue to soften? Recent weaknesses in the cotton market are most likely overdone, but any bounce or uptrend will be dependent on positive economic news.  December futures closed at 104.39 cents per pound, down 4.49 cents.  Technical’s have a strong sell bias with support at 102 cents and resistance at 107.82 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. Over the past 30 years the average difference between the July projection for U.S. ending stocks and the final estimate has been 1.7 million bales with 14 years below the final estimate and 16 years above. These numbers can and will change, but do reflect the best information and estimates at the time of the report.  

 Supply and Demand Projections and Historical Data Source: USDA

Soybeans

 USDA, as about expected, raised ending soybean stocks 20 million bushels from last month to 200 million bushels for the current marketing year. The only adjustment was made in lowering exports 20 million bushels reflecting lower projected imports for China. The season average price for 2010/11 was lowered 5 cents to $11.35 a bushel.  Global ending stocks for 2010/11 were raised 50 million bushels at 2.421 billion bushels. Ending stocks for 2011/12 are decreased 15 million bushels from last month to 175 million bushels on a 60 million bushel cut in production based on the acreage report, a 20 million bushel increase in beginning stocks, and a 25 million bushel decrease in exports. The season average price for 2011/12 is estimated to range from $12.00 to $14.00 a bushel, a decrease of a dollar on both ends.  World ending stocks for 2011/12 are projected to increase 14 million bushels from the June estimate to 2.277 billion bushels. November soybeans closed up 5 ¾ cents at $13.58 ¼ per bushel. Technical’s have a buy bias with support at $13.21 and resistance at $13.85 a bushel. I am currently 50% priced for 2011 and would hold here . Over the past 30 years the average difference between the July projection for U.S. ending stocks and the final estimate has been 99 million bushels with 10 years below the final estimate and 20 years above. These numbers can and will change, but do reflect the best information and estimates at the time of the report.  

 Supply and Demand Projections and Historical Data Source: USDA

 Wheat

 USDA reconciled the 2010/11 wheat ending stocks with the June 30 Grain Stocks report by increasing stocks 52 million bushels this month to 861 million bushels as the 2010/11 wheat marketing year ended May 31. Global wheat supplies were raised 105 million bushels to 6.980 billion bushels. Projections for 2011/12 reflect higher production based on the June 30 acreage report and a 1.5 bushel increase in harvested yield. Beginning stocks were increased 52 million bushels reflecting the year end numbers while imports were reduced 10 million bushels. Seed use was raised 7 million bushels and exports increased 100 million bushels with reduced competition from Canada. Ending stocks were projected at 670 million bushels compared to 687 million bushels last month. The season average price is estimated to range from $6.60 to $8.00 a bushel, a decrease of 40 cents on both ends. World ending stocks are projected at 6.694 billion bushels, down 76 million bushels from the June estimate as world production declined and consumption increased. September wheat closed up 32 ¾ cents at $6.72 a bushel. Technical’s have a sell bias with support at $5.93 and resistance at $7.15 a bushel. Over the past 30 years the average difference between the July projection for U.S. ending stocks and the final estimate has been 125 million bushels with 15 years below the final estimate and 15 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 August 11, 2011.

 Supply and Demand Projections and Historical Data Source: USDA

Profitability Outlook

 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 July 12, 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 from our budgets 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.

 Wheat yield is 2011 Tennessee state average as reported by NASS.