Corn:  In today’s report, USDA updated corn production by lowering the nationwide yield from 148.1 bushels per acre to 146.7 bushels per acre, the lowest since 2003. The average trade guess was 147.9 bushels. Overall production was reduced 123 million bushels from the October estimate to 12.310 billion bushels. This still is the 4th largest production on record. Feed and residual use is lowered 100 million bushels based on the smaller crop and reductions in the outlook for broiler production. Other usage, including exports were unchanged and resulted in projected U.S. ending stocks of 843 million bushels down 23 million bushels from October. The trade was expecting exports to be raised and ending stocks to come in at 801 million bushels. The stocks to use ratio is estimated at 6.7%, just slightly less than last month. The season average price is projected to range from $6.20 to $7.20 a bushel, unchanged from October. Global corn stocks are estimated to decrease 64 million bushels from the October report to 4.786 billion bushels on mainly a drop in production in the U.S and Mexico. This was offset some by increases in production in China and Europe. Fundamentally, this is considered a neutral to bullish corn report as production was cut more than expected. Although ending stocks were higher than expected, the market would most likely assume exports have a good chance of being higher than currently projected. Fundamentals are offering support today as attention is focused on European financial issues and the strength of the U.S. Dollar. The U.S. Dollar at mid-day is up about 2% today on uncertainty in Italy’s financial position as well as lingering concerns in Greece. The Dow is down over 300 points. December corn closed down 4 ½ cents at $6.56 a bushel while technical indicators have a sell bias with support at $6.36 and resistance at $6.75 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.  Over the past 30 years the average difference between the November projection for U.S. ending stocks and the final estimate has been 320 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 December 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 100,000 bale decrease in ending stocks at 3.8 million bales on a 308,000 bale decrease in production from last month, a 200,000 bale decrease in exports, and a 10,000 bale decrease in unaccounted. Production is estimated at 16.30 million bales, with harvested acres unchanged at 9.85 million acres and overall yield lowered 15pounds per acre to 794 pounds. Production decreases were mainly reported in Texas and the Southeast and were a little less than expected. Domestic mill use is left unchanged at 3.8 million bales while exports were lowered 200,000 bales to 11.3 million bales. The projected price range for 2011/12 was narrowed 3.5 cents on the lower end and 6.5 cents on the top end to 84 to 96 cents per pound. The stocks to use ratio is estimated at 25.2%. World projections reflect higher beginning stocks of 350,000 bales (from revisions), decrease in world production of 300,000 bales, and a reduction of 110,000 bales in world consumption. Global ending stocks are forecast at 54.96 million bales, an increase of 130,000 bales. The global stocks to use ratio of 48% is unchanged from last month. December futures closed at 97.18 cents per pound, down 0.44 cents.  Technical indicators have a strong sell bias with support at 95.80 cents and resistance at 98.92 cents. Current quotes on 2011 equities are in the 37 -39 cent range. Keep in contact with your cotton buyer on current quotes. At this time, I am currently at 60% priced and would target any additional rallies to the 105 cent range as a point to evaluate pricing although if cotton is put in the loan, it is more important to watch equity price movement. If equities get to a level that you are comfortable with on your overall pricing (loan, equity, seed, and hauling), have your recap sheets ready for your cotton buyer and price them out. For cotton prices to move much higher, a resolution to the European financial situation and/or stable to low inflation in China is needed. Over the past 30 years the average difference between the November projection for U.S. ending stocks and the final estimate has been 1.1 million bales with 11 years below the final estimate and 19 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 December 9, 2011.

Supply and Demand Projections and Historical Data Source: USDA

Soybeans:  In the 2011/12 marketing year, yields were decreased 0.2 bushels from October at 41.3 bushels per acre compared to pre-report trade estimates of 41.5 bushels per acre. Production was projected at 3.046 billion bushels, a decrease of 14 million bushels from last month and the average trade guess. Ending stocks for 2011/12 are increased 35 million bushels from last month to 195 million bushels as the decrease in production is more than offset by a 50 million bushel reduction in exports. The export reduction was greater than the market expected, but stiff export competition is expected from South American soybeans. The trade was looking for a stocks number of 185 million bushels. The season average price for 2011/12 is estimated to range from $11.60 to $13.60 a bushel, down 55 cents on both ends. Stocks to use ratio is projected at 6.3%.  World ending stocks for 2011/12 are projected to increase 20 million bushels from the October estimate to 2.335 billion bushels as lower beginning stocks are offset by slightly higher production and lower global usage. This is considered a neutral to bearish report for soybeans, but the market is more focused on the strengthening U.S. Dollar. January soybeans closed down 19 ½ cents at $11.85 ½ per bushel. Technical analysis has a strong sell bias with support at $11.65 and resistance at $12.22 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. I would look to store the remainder with a lowered price target in the $12.80 – $13.00 range.  Over the past 30 years the average difference between the November projection for U.S. ending stocks and the final estimate has been 77 million bushels with 8 years below the final estimate and 22 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 December 9, 2011.

Supply and Demand Projections and Historical Data Source: USDA

Wheat:  U.S. projections for 2011/12 lowered ending stocks 9 million bushels from last month to 828 million bushels compared to the average pre report trade guess of 819 million bushels. Production is reduced 9 million bushels on a reduction of 0.2 bushels per acre yield based on updated production estimates for the states resurveyed following the September 30 Small Grains report. Overall, no changes were made in usage. The season average price is estimated to range from $7.05 to $7.75 a bushel, down 5 cents on the bottom side and down 15 cents on the top side. World ending stocks are projected at 7.444 billion bushels, up 8 million bushels from the October estimate as beginning stocks increased, world production increased and consumption increased from the October estimate. July 2012 wheat closed at $6.95, down 20 ¼ cents. Technical analysis shows a strong sell bias with support at $6.73 and resistance at $7.24 a bushel. Overall, this report is bearish wheat as ending stock projections came in above the pre report estimates. However, wheat will follow corn and grains as well as being influenced by outside markets. Weather in the Plains and the Ukraine will bear watching as the winter wheat crop develops. Over the past 30 years the average difference between the November projection for U.S. ending stocks and the final estimate has been 73 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 December 9, 2011.

Supply and Demand Projections and Historical Data Source: USDA

2012 Estimated Profitability:  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 November 9, 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.