Corn

Based on the September 30 Grain Stocks report, USDA raised ending stocks 208 million bushels from September to 1.128 billion bushels for the 2010/11 marketing year. Changes were a 15 million bushel decrease in food use for sweeteners and starch; a 197 million bushel decrease in feed and residual use; and a 3 million bushel decrease in imports. The season average price for the 2010/11marketing year is estimated at $5.18 bushel. World ending stocks for 2010/11 increased 215 million bushels to 5.109 billion. Changes made in the 2011/12 projection on the production side were a 64 million bushel reduction in production to 12.433 billion bushels compared to the average pre report guess of 12.479 billion bushels. Planted acres were lowered 385,000 acres and harvested acres lowered 452,000 acres. The yield was left at 148.1 bushels per acre, the same as September and slightly lower than the average trade guess. Supplies are forecast 144 million bushels higher than the September report. Usage is projected 50 million bushels lower on a 50 million bushel decrease in exports with increased foreign competition. Ending stocks for 2011/12 are projected at 866 million bushels, an increase of 194 million bushels from September and 36 million bushels higher than the average trade guess of 804 million bushels. The stocks to use ratio is estimated at 6.8%. The season average price projected to range from $6.20 to $7.20 a bushel, a decrease of 30 cents on both ends. Global corn stocks are estimated to increase 228 million bushels from the September report to 4.850 billion bushels on higher beginning stocks, increased production and increased usage. Global corn production is raised 213 million bushels on increases in China, Ukraine, and Russia. Global consumption was raised 200 million bushels mostly on increases in China usage. Overall, this is considered a bearish corn report, but offering support to the market has been the unconfirmed report of a 59 million bushel sale to China either from the U.S. or South America. USDA forecast Chinese imports for 2011/12 at 79 million bushels so this could be an indication that China will need more corn than forecast and U.S. exports will be increased in future reports. This is also an indication that end users are buying the price break from the late summer-early fall highs. The U.S. Dollar has weakened 2.4% since last Friday as Europe looks to a solution on their financial crisis. December corn closed down 4 ¼ cents at $6.40 ¾ a bushel after being up the 40 cent limit on Tuesday. Technical indicators have a hold bias with support at $6.15 and resistance at $6.67 a bushel. I am currently 50% forward priced for 2011 and 25% priced using a December $6.90 Put option that has been offset with a 42 cent profit. If storage is available, I would look to store the remainder with a price target in the $6.80 – $7.00 range. There is price risk in storing un-priced grain, so storage should be evaluated carefully.  Over the past 30 years the average difference between the October projection for U.S. ending stocks and the final estimate has been 321 million bushels with 16 years below the final estimate and 14 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 November 9, 2011.

Supply and Demand Projections and Historical Data Source: USDA

Cotton

USDA’s projection for the 2011/12 or current crop marketing year reflects a 500,000 bale increase in ending stocks at 3.9 million bales on a 50,000 bale increase in supply from last month, a 500,000 bale decrease in use, and a 50,000 bale increase in unaccounted. Production is estimated at 16.61 million bales, with harvested acres unchanged at 9.85 million acres and overall yield raised 2 pounds per acre to 809 pounds. Production increases in several states, mainly Georgia, offset a decrease in estimated production in Texas. The trade was looking for a decrease in production. Domestic mill use is left unchanged at 3.8 million bales while exports were lowered 500,000 bales to 11.5 million bales reflecting lower foreign import demand. The projected price range for 2011/12 was narrowed 2.5 cents on both ends at 87.5 to 102.5 cents per pound. The stocks to use ratio is estimated at 25.5% and while higher than the last two years is below the five year average. World projections reflect higher beginning stocks of 900,000 bales, increase in world production of 1.2 million bales, and a reduction of nearly 850,000 bales in world consumption. Global ending stocks are forecast at 54.83 million bales, an increase of 2.92 million bales. The global stocks to use ratio of 48% is marginally above the five year average. December futures closed at 100.51 cents per pound, down 2.96 cents.  Technical indicators have a strong sell bias with support at 97.06 cents and resistance at 105.72 cents. Current quotes on 2011 equities are in the 40.50 cent range. Keep in contact with your cotton buyer on current quotes. I would be 45% priced at this time. At this time, I would use any rallies in the 104 – 111 cent range to price the remainder. Barring some dramatic downward adjustment in production, cotton prices will struggle to maintain much above a dollar a pound. An economic recovery in the U.S. and the world is needed for demand to improve which would help prices. Although there are signs that we are out of the recession, the recovery looks to be one of very slow growth. Over the past 30 years the average difference between the October projection for U.S. ending stocks and the final estimate has been 1.2 million bales with 9 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. The next USDA Supply & Demand report will be released November 9, 2011.

Supply and Demand Projections and Historical Data Source: USDA

 Soybeans

Based on the September 30 Grain Stocks report, USDA lowered old crop ending soybean stocks 10 million bushels from last month to 215 million bushels for the 2010/11 marketing year that ended August 31. Crush was lowered 2 million bushels, exports increased 5 million bushels, and residual use raised 7 million bushels. The season average price for 2010/11 was lowered 5 cents to $11.30 a bushel and the stocks to use ratio is 6.6%.  Global ending stocks for 2010/11 were raised 16 million bushels at 2.545 billion bushels. In the 2011/12 new crop marketing year, yields were decreased .3 bushel from September at 41.5 bushels per acre compared to pre-report trade estimates of 42.1 bushels per acre. Harvested acreage was lowered 147,000 acres from September resulting in production of 3.060 billion bushels, a decrease of 25 million bushels from last month and 42 million bushels less than the average trade guess. Ending stocks for 2011/12 are decreased 5 million bushels from last month to 160 million bushels as the decrease in beginning stocks and production is partially offset by a 40 million bushel reduction in exports and a 9 million bushel increase in residual use. The trade was looking for a stocks number of 186 million bushels. The season average price for 2011/12 is estimated to range from $12.15 to $14.15 a bushel, down 50 cents on both ends. Stocks to use ratio is projected at 5.1%.  World ending stocks for 2011/12 are projected to increase 17 million bushels from the September estimate to 2.315 billion bushels. This is considered a neutral to slightly bullish report for soybeans, but the corn and wheat trades will also influence soybeans. Unconfirmed export sales to China of 25.7 -29.4 million bushels have supported the market this week and helped the up move on Tuesday. Weakness in the U.S. Dollar is also influencing soybean prices. November soybeans closed up 4 cents at $12.39 ½ per bushel. Technical’s have a sell bias with support at $11.97 and resistance at $12.67 a bushel. In weekly comments, I am currently 50% priced for 2011 and 25% priced using a November $14 Put option that has been offset with a $1.62 profit. If storage is available, I would look to store the remainder with a price target in the $13.00 – $13.40 range.  Over the past 30 years the average difference between the October projection for U.S. ending stocks and the final estimate has been 77 million bushels with 6 years below the final estimate and 24 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 November 9, 2011.

Supply and Demand Projections and Historical Data Source: USDA

Wheat

U.S. projections for 2011/12 raise ending stocks 76 million bushels to 837 million bushels compared to the average pre report trade guess of 753 million bushels. Supply is reduced 57 million bushels on a 200,000 reduction in harvested acres, a reduction of 1.3 bushels per acre yield, a 1 million bushel increase in beginning stocks and a 10 million bushels increase in wheat imports. Usage is cut 134 million bushels as seed use is reduced 4 million bushels, feed/residual use cut 80 million bushels, and exports reduced 50 million bushels. The season average price is estimated to range from $7.10 to $7.90 a bushel, down 25 cents on the bottom side and down 45 cents on the top side. World ending stocks are projected at a 10 year high of 7.436 billion bushels, up 286 million bushels from the September estimate as beginning stocks increased, world production increased and consumption decreased from the September estimate. July 2012 wheat closed at $7.06 ¼, down 22 cents. Technical analysis shows a sell bias with support at $6.76 and resistance at $7.43 a bushel. Overall, this report is bearish wheat as reflected by today’s price move. However, wheat does have a tendency to trade as corn trades and if corn should move up, wheat may follow. Over the past 30 years the average difference between the October projection for U.S. ending stocks and the final estimate has been 77 million bushels with 16 years below the final estimate and 14 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 November 9, 2011.                                                                                                                                       

Supply and Demand Projections and Historical Data Source: USDA

 2012 Profitability Outlook

This table should be used as a guide as yields, prices, and expenses will vary among producers and locations. Since producers have starting making decisions on planting wheat for 2012, I am starting to look at projected profitability for the 2012 crop year. Please note that the table below reflects 2012 profitability. This table looks at crop prices as of October 12, 2011 for 2012 and can give a glimpse of what crop profitability is in Tennessee as of this date. One of the expense items that have to be watched is fertilizer. For reference, in variable expenses below, fertilizer expense per acre is estimated as follows: cotton – $ 148, Soybeans – $51, Corn – $169 (includes 150 units of N), Milo – $134, and wheat/soybeans – $130. Production cost will be updated as new information for 2012 becomes available. Please visit with your farm supplier on estimated cost in your area. 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.