Corn

In today’s report, corn, soybeans, and wheat production was unchanged awaiting the January production report for any updates. The only change made in U.S. corn stocks was a 5 million bushel reduction in food and seed resulting in a corresponding 5 million bushel increase in ending stocks to 848 million bushels. The average trade estimate was looking for a 5 million bushel reduction in stocks at 838 million bushels.  Feed and residual use, corn for ethanol, and exports were left unchanged. The stocks to use ratio is estimated at 6.7%, unchanged from last month. The season average price is projected to range from $5.90 to $6.90 a bushel, 30 cents lower on each end and reflective of deliveries on forward prices from this spring. Global corn stocks jumped 221 million bushels or about 5% from last month to 5.007 billion bushels on mainly an increase in foreign production. Despite U.S. production being down, global production is projected at a new record of 34.074 billion bushels with the increase in the last month of 285 million bushels of corn production in China as estimated by their National Bureau of Statistics. Fundamentally, this is considered a neutral on the U.S. numbers, but bearish when considering the increase in global stocks. March corn in early trading was down 11 ¾ cents at $5.88 ½ a bushel while technical indicators have a strong sell bias with support at $5.81 and resistance at $6.08 a bushel. Hopes for a rally for stored corn may depend on the January 12 report which will incorporate the Grain Stocks report which will indicate whether domestic usage has been better than previously estimated. Price targets for stored corn may need to be reset and should consider the positive basis that we are seeing. Cash prices above $6.00 a bushel do need to be considered. Events such as the European Financial crises, MF Global bankruptcy, and estimated increase in China’s corn production have had a negative effect on the market. September corn in early trading was down 10 ¾ cents a bushel at 5.70 ½. Watch for opportunities over the next few months to start marketing the 2012 crop.   Over the past 30 years the average difference between the December projection for U.S. ending stocks and the final estimate has been 301 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 January 12, 2012.

Supply and Demand Projections and Historical Data Source: USDA

 Cotton

USDA’s projection for the 2011/12 marketing year reflects a 300,000 bale decrease in ending stocks at 3.5 million bales on a 473,000 bale decrease in production from last month and a 200,000 bale decrease in domestic use. Production is estimated at 15.83 million bales, with harvested acres unchanged at 9.85 million acres and overall yield lowered 23 pounds per acre to 771 pounds. Production decreases were reduced in all regions except the far West and were a little more than expected. Domestic mill use was cut 200,000 bales at 3.6 million bales reflecting lower than expected use in recent months. Ending stocks were about expected.  The projected price range for 2011/12 was narrowed 1 cent on each end to 85 to 95 cents per pound. The stocks to use ratio is estimated at 23.5%. World projections reflect slightly higher beginning stocks, decrease in world production of 500,000 bales, and a reduction in world consumption based on continued weak mill demand with an uncertain world economic outlook and competition from polyester. Global ending stocks are forecast at 57.67 million bales, an increase of 2.7 million bales. The global stocks to use ratio is 52%, up 4% from last month. March futures at mid-day traded at 90.63 cents per pound, down 1.42 cents.  Technical indicators have a strong sell bias with support at 89.12 cents and resistance at 93.48 cents. This was friendly to U.S. numbers but due to the world numbers is considered a bearish report. Export numbers reported yesterday were bearish. Cotton has recently been in a narrow range from 89 to 94 cents and is expected to stay in that range for at least the short term. Keep in contact with your cotton buyer on current quotes. At this time, I am currently at 60% priced and would target any substantial rallies 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. December 2012 cotton traded mid-day at 87.70 cents/pound, down 1.56 cents. Over the past 30 years the average difference between the December projection for U.S. ending stocks and the final estimate has been 1.1 million bales with 9 years below the final estimate and 21 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 January 12, 2012.

Supply and Demand Projections and Historical Data Source: USDA

Soybeans

 Ending stocks for 2011/12 are increased 35 million bushels from last month to 230 million bushels as production is unchanged and exports are reduced 25 million bushels with crush cut 10 million bushels. The average trade guess was 213 million bushels for ending stocks.  Exports were reduced reflecting the slow pace of shipments and outstanding sales and strong export competition from South America. Crush was reduced due to reduced domestic soybean meal consumption and a higher meal extraction rate. The season average price for 2011/12 is estimated to range from $10.70 to $12.70 a bushel, down 90 cents on both ends. Stocks to use ratio is projected at 7.6%, up from last month’s estimate of 6.3%.  World ending stocks for 2011/12 are projected to increase 36 million bushels from the November estimate to 2.371 billion bushels on higher ending stocks in the U.S. Brazilian production was left unchanged at 2.756 billion bushels while the Brazil’s Agricultural Ministry research arm CONAB puts production 140 million bushes less. Currently, growing conditions in South America are good, but there is concern growing among some weather forecasters on the effects La Nina will have on production.  This is considered a bearish report for soybeans as reflected in January soybeans down 24 ¾ cents at $11.07 ¾ per bushel at mid-day. Technical analysis has a strong sell bias with support at $10.81 and resistance at $11.47 a bushel.  Projected U.S. ending stocks have increased 70 million bushels in the last 2 months taking a bullish situation to a bearish one. The cash market is saying to sell now and not store which is a change from a couple of months ago. The dollar is slightly weaker today, but there is still uncertainty in whether a successful resolution in the short term will be worked out with Europe’s financial situation. I would look to sell at least half of my stored crop on any short term rebound in the market and continue to hold the other half for a possible rally from South American weather or even from a weaker dollar. November soybeans traded mid-day at $11.35 a bushel, down 22 cents. Watch for opportunities to price soybeans over the next few months.  Over the past 30 years the average difference between the December projection for U.S. ending stocks and the final estimate has been 70 million bushels with 9 years below the final estimate and 21 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 January 12, 2012.

Supply and Demand Projections and Historical Data Source: USDA

 Wheat

U.S. projections for 2011/12 raised ending stocks 50 million bushels from last month to 878 million bushels compared to the average pre report trade guess of 830 million bushels. Exports are lowered 50 million bushels as larger supplies with foreign competitors are expected to limit opportunities for U.S. wheat in world trade. The season average price is estimated to range from $7.05 to $7.55 a bushel, down 20 cents on the top side. World ending stocks are projected at 7.662 billion bushels, up 218 million bushels from the November estimate as increased usage was more than offset by an increase in beginning stocks and a world production increase. July 2012 wheat traded mid-day at $6.31 ¾, down 3 ½ cents. Technical analysis shows a strong sell bias with support at $6.14 and resistance at $6.44 a bushel. Overall, this report is bearish wheat as ending stock projections came in above the pre report estimates. It appears most of the bearish news is in for wheat with production concerns for the U.S. southern Plains and Ukraine adding some support to the market. Over the past 30 years the average difference between the December projection for U.S. ending stocks and the final estimate has been 63 million bushels with 20 years below the final estimate and 10 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 January 12, 2012.

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 December 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.