Corn

In today’s report, ending stocks were unchanged at 801 million bushels and a 6.3% stock to use ratio. Based on the March 1 stocks, the trade was disappointed as the expectation was projected ending stocks of 717 million bushels. The season average price is projected to range from $6.00 to $6.40 a bushel, narrowed 10 cents on both ends. Global corn stocks decreased 72 million bushels from last month to 4.831 billion bushels on lower beginning stocks, unchanged production, and lower feed use. The global stocks to use ratio tightened up slightly to 14.2%. This report is mainly neutral to bearish on U.S. data but neutral to bullish on global information. The fast start to the corn planting season, particularly in the South, will help insure that new crop corn supplies will be available before the end of this marketing year and most likely remove any doubt that prices will be needed to ration stocks. As planting progresses and we see how weather will develop, pressure could be put on new crop prices and have a tendency to drop as we go through the season.  May corn closed down 14 ¾ at $6.34 ¾ a bushel while technical indicators have a sell bias with support at $6.21 and resistance at $6.60 a bushel. September corn closed down 7 ¾ cents at $5.60 ¾ a bushel. Technicals have a strong sell bias with support at $5.47 and resistance at $5.79. In weekly comments, I have 25% forward priced for 2012 production and would use a stop loss point of $5.43 to price more. Over the past 30 years the average difference between the April projection for U.S. ending stocks and the final estimate has been 162 million bushels with 16 years below the final estimate and 14 years above.  The next USDA Supply & Demand report will be released May10, 2012 and will be the first real look at 2012/13 marketing year.

Supply and Demand Projections and Historical Data Source: USDA

Cotton

USDA’s projection for the 2011/12 marketing year reflects a 500,000 bale decrease in ending stocks at 3.4 million bales on an 119,000 bale decrease in 2011 production and an 400,000 bale increase in exports. The cut in production is based on the USDA’s March 23 Cotton Ginnings report while exports were raised on strong shipments. The projected price range for 2011/12 was raised 1 cent on the lower end to 89 to 93 cents per pound. The stocks to use ratio is estimated at 23%, down from March’s 27.1%. While U.S. stocks were friendly, world projections were bearish as ending stocks were projected 3.75 million bales higher at 66.07 million bales. This reflects higher beginning stocks with adjustments to India’s stocks, slight reduction in production, and about a million bale cut in consumption. The global stocks to use ratio is 61.3%, up 1% from last month. India and China’s cotton policies continue to throw uncertainty on the market and for now are having a somewhat negative reaction. May futures closed at 89.73 cents per pound, up 0.25 cents.  Technical indicators have a strong sell bias with support at 88.43 cents and resistance at 91.55 cents. Keep in contact with your cotton buyer on current quotes. At this time, I am currently at 80% priced for 2011 production and am still looking for a rally back to the $1.00 – $1.05 level.  December cotton traded at 87.32 cents/pound, down 1.07 cents. Technical indicators have a strong sell bias with support at 85.27 cents and resistance at 90.79 cents. I would look for strong soybean prices and good corn planting weather to take some cotton acres. We may be seeing signs of slight improvement in demand, but prices will probably trade sideways in the near future.  Look at prices in the mid 90s as a pricing point to price a portion of the 2012 crop.  Over the past 30 years the average difference between the April projection for U.S. ending stocks and the final estimate has been 400,000 bales with 11 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. The next USDA Supply & Demand report will be released May10, 2012 and will be the first real look at 2012/13 marketing year.

Supply and Demand Projections and Historical Data Source: USDA

Soybeans

Ending stocks for 2011/12 were lowered 25 million bushels to 250 million bushels. The average trade guess was 246 million bushels for ending stocks. The season average price for 2011/12 is estimated to range from $12.00 to $12.50 a bushel, an increase of 60 cents on the lower end and a 10 cent decrease on the top side. Stocks to use ratio was projected at 8.2%, down 0.9% from last month. Crush was raised 15 million bushels due to stronger than expected domestic soybean disappearance. Exports were raised 15 million bushels to partly offset reduced export prospects for South America from drought–reduced soybean crops. Seed and residual use was lowered 5 million bushels reflecting acres in the March 30 Prospective Plantings report and soybean stocks in the Grain Stocks report.  World ending stocks for 2011/12 are projected to again decrease to 2.040 billion bushels, 65 million bushels less than the March estimate.  This is a 500 million bushel reduction from last year. May soybeans closed at $14.26, down 5 cents per bushel. Technical analysis has a strong buy bias with support at $14.10 and resistance at $14.57 a bushel.  Producers with soybeans in storage may want to use a $13.82 stop as a pricing point if nearby prices drop.  November soybeans closed at $13.64 ¾ a bushel, down 17 ¼ cents. Prices traded as high as $13.94 before dropping back to finish lower for the day. Technical analysis has a strong buy bias with support at $13.40 and resistance at $14.06 a bushel. For new crop soybeans, I would be priced at 40% of estimated 2012 production.  Alternately, if you are not ready to price I would use a $13.39 futures stop as a pricing point should prices drop back to that level. From a price risk management standpoint, a $13.80 Put would cost 89 cents and set a $12.91 futures floor. Over the past 30 years the average difference between the March projection for U.S. ending stocks and the final estimate has been 51.4 million bushels with 11 years below the final estimate and 19 years above. The next USDA Supply & Demand report will be released May 10, 2012 and will be the first real look at 2012/13 marketing year.

Supply and Demand Projections and Historical Data Source: USDA

Wheat

USDA projections for 2011/12 lowered ending stocks 32 million bushels from last month to 793 million bushels in-line with pre report expectations. Projected seed use was lowered 3 million bushels based on seedings as reported in the March 30 Prospective Plantings report. Projected feed and residual use was raised 35 million bushels reflecting stock disappearance as indicated by the March 1 stocks. The estimated season average price was narrowed 5 cents on both ends to $7.20 to $7.40 a bushel. World ending stocks are projected at 7.58 billion bushels, down 122 million bushels from the March estimate as lower beginning stocks and increased usage offset slightly increased production. July wheat closed at $6.47 ¾, down 16 cents. Technical analysis shows a strong sell bias having closed below the support point of $6.50 with resistance at $6.75 a bushel. Overall, this report is neutral to friendly wheat as ending stock projections tighten up for the U.S. and World. However, it is not overly bullish as there is still are large stocks in the U.S. and globally Winter wheat crop conditions are 61% good to excellent and spring wheat planted is at 21% compared to the five year average of 5%. Wheat prices could be at or close to a bottom with the next level of chart support at $6.31. Wheat needs help rallying either from bullish news or strong corn prices which may not be forthcoming. Cold snaps over the next week to 10 days could damage wheat in some parts of the U.S. and could help rally prices. In my weekly comments, I am priced 20% on new crop and would target any rallies to the $6.65 to $7.00 range as a point to price more. It may have difficulty getting there.  Over the past 30 years the average difference between the April projection for U.S. ending stocks and the final estimate has been 37 million bushels with 21 years below the final estimate and 9 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 May10, 2012 and will be the first real look at 2012/13 marketing year.          

Supply and Demand Projections and Historical Data Source: USDA