Comments on the May 10 USDA Supply & Demand Report

Author:  Comments Off on Comments on the May 10 USDA Supply & Demand Report

Corn

 

In today’s report, USDA updated the old crop stocks and put forth their first official estimate of the new crop year. This report is being perceived as bearish as old crop stocks were raised rather than cut and new crop stocks are projected to be more than double old crop stocks .For new crop stocks, this could be the largest estimate of the year as the fallout from corn prices trending lower, soybean prices stable to trending higher, and higher nitrogen prices could cause a few corn acres to shift to soybeans. A record yield is projected and to be achieved will depend on ideal conditions. Lower corn prices may also stimulate additional demand. Looking at the numbers, old crop corn ending stocks were raised 50 million bushels to 851 million bushels as feed and residual use is reduced 50 million bushels. It is assumed that attractive prices for wheat compared to corn will encourage summer wheat feeding. Also the start of an early crop year will produce new crop stocks that will be available during the old crop marketing year. The stocks to use ratio is increased from 6.3% to 6.7%. The trade was expecting ending stocks of 758 million bushels. The season average price is projected to range from $5.95 to $6.25 a bushel, narrowed 5 cents on the lower end and 15 cents on the top side. Global old crop corn stocks increased 69 million bushels from last month to 4.9 billion bushels. New crop ending stocks for the 2012/13 marketing year are projected at 1.881 billion bushels, 177 million bushels higher than the average trade guess. The new crop numbers really were 84 million bushels higher than expected if the adjustment for old crop stocks is taken out. Planted acreage at 95.9 million acres is based on the March 30 USDA Prospective Plantings report and the record estimated yield of 166 bushels per acre is based on planting progress and the outlook for good growing conditions. The supply with record production is projected 2.150 billion bushels higher than last year while demand is projected at 1.120 billion bushels higher. The new crop season average price is projected to range from $4.20 to $5.00 a bushel. Global stocks are projected at 5.997 billion bushels, 976 million bushels higher than the old crop year.  September corn closed down 13 ½ cents at $5.13 ½ a bushel. Technical analysis has a strong sell bias with support at $5.02 and resistance at $5.35. In weekly comments, I added 10% priced during the week to 50% over all. Over the past 31 years the average difference between the May projection for U.S. ending stocks and the final estimate has been 55 million bushels with 14 years below the final estimate and 17 years above.  The next USDA Supply & Demand report will be released June 12, 2012. 

Supply

2004/
2005
2005/
2006
2006/
2007
2007/
2008
2008/2009  2009/2010  2010/2011  2011/2012USDA

Estimated

2012/2013USDA

Projected

 

 

 

 

 

 

 

 

 

 

Acres Planted
(million acres)

80.9

81.8

78.3

93.5

86.0

86.4

88.2

91.9

95.9

Acres Harvested

73.6

75.1

70.6

86.5

78.6

79.5

81.4

84.0

89.1

U.S. Average Yield

160.4

147.9

149.1

150.7

153.9

164.7

152.8

147.2

166.0

Beg. Stocks
(million bushels)

958

2114

1967

1304

1624

1673

1708

1128

851

Production

11807

11114

10531

13038

12092

13092

12447

12358

14790

Imports

11

9

12

20

14

8

28

20

15

Total Supply

12776

13237

12510

14362

13729

14774

14182

13506

15656

Use

         

 

 

 

 

Feed and Residual

6162

6141

5591

5913

5182

5125

4792

4550

5450

Ethanol

1323

1603

2119

3049

3709

4591

5021

5000

5000

Food, seed & industrial

1363

1378

1371

1338

1316

1370

1407

1405

1425

Exports

1814

2147

2125

2437

1849

1980

1835

1700

1900

Total Use

10662

11270

11207

12737

12056

13066

13054

12655

13775

U.S. Ending Stocks

2114

1967

1304

1624

1673

1708

1128

851

1881

Foreign Stocks

3092

2943

2983

3583

4137

3959

3771

4171

4116

U.S. Avg. Season Price

$2.06

$2.00

$3.04

$4.20

$4.06

$3.55

$5.18

$6.10

$4.60

Stocks/Use

19.8%

17.5%

11.6%

12.8%

13.9%

13.1%

8.6%

6.7%

13.7%

 

Supply and Demand Projections and Historical Data Source: USDA

Cotton

 

USDA’s projections for old and new crop would have to be considered bearish as ending stocks are unchanged for old crop and project increased stocks for both the U.S. and the world in new crop. Old crop production was increased slightly but still resulted in unchanged ending stocks of 3.4 million bales. The projected price range for 2011/12 was also unchanged at 91 cents per pound. The stocks to use ratio is unchanged at 23%. World projections for old crop ending stocks were projected 810,000 bales higher at 66.88 million bales. Projections for new crop cotton start with the March 30 USDA planting intentions acreage of 13.16 million acres, an abandonment of 20%, and a yield of 777 pounds per acre. These numbers reflect the influence of the continued drought in the Texas High Plains area. Production is projected to increase 1.43 million bales from the previous year with total supply 2.22 million bales higher at 20.41 million bales. Domestic use is increased 100,000 bales and exports increased 600,000 bales from the previous year. Ending stocks increase 1.5 million bales to 4.90 million bales. The season average price for new crop is projected to range from 65 to 85 cents per pound. The acreage estimates will most likely be the highest estimate for the year as many analysts are looking for actual acreage to come in at 12.7 -12.8 million acres as soybean prices have risen while cotton prices have declined. Demand and increased prices for the new crop year will be dependent on whether a sluggish economy in the U.S. and abroad can finally break loose from current levels. Global stocks are also slated to increase 6.87 million bales to 73.75 million bales, which would be another record stock. World production is expected to decrease 6.35 million bales but still is estimated to be 6.7 million bales above consumption. China is expected to hold 38% of the world’s stock and their policies on cotton will most likely sway the market. July futures closed limit down 4 cents at 81.82 cents per pound.  Keep in contact with your cotton buyer on current quotes. At this time, I am currently at 80% priced for 2011 production and will look to finish sales this month.  December cotton closed at 79.37 cents/pound, down the 4 cent limit. Technical analysis has a strong sell with support at 76.45 and resistance at 85.21. Today’s selloff appears overdone and may be due to some funds forced liquidation. Actual planted cotton acreage will most likely be lower than the current projection. Stronger demand will be needed to pull prices up. Over the past 31 years the average difference between the May projection for U.S. ending stocks and the final estimate has been 1.7 million bales with 15 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 June 12, 2012.

Supply

2004/
2005

2005/
2006

2006/
2007

2007/
2008

2008/2009 2009/2010  2010/2011  2011/2012USDA

Estimated

2012/2013USDA

Projected

 

 

 

 

 

 

 

 

 

 

 Acres Planted
(million acres)

13.7

14.2

15.27

10.83

9.47

9.15

10.97

14.74

13.16

Acres Harvested

13.1

13.8

12.73

10.49

7.57

7.53

10.70

9.46

10.5

U.S. Average Yield
(lbs/acre)

855

831

814

879

813

777

812

790

777

Beg. Stocks
(million bales)

3.45

5.50

6.07

9.48

10.05

6.34

2.95

2.60

3.40

Production

23.25

23.89

21.59

19.21

12.82

12.19

18.10

15.57

17.00

Imports

0.03

0.03

0.02

0.01

0.00

0.00

0.01

0.02

0.01

Total Supply

26.73

29.41

27.66

28.7

22.87

18.53

21.06

18.19

20.41

Use

         

 

 

 

 

Domestic

6.69

5.89

4.94

4.59

3.59

3.46

3.90

3.4

3.50

Exports

14.41

18.04

13.01

13.65

13.26

12.04

14.38

11.40

12.00

Total Use

21.10

23.92

17.95

18.24

16.85

15.50

18.28

14.80

15.50

U.S. Ending Stocks

5.50

6.05

9.48

10.05

6.34

2.95

2.60

3.40

4.90

Foreign Stocks

51.8

56.4

53.34

50.68

54.47

44.14

47.77

63.48

68.85

U.S. Avg. Season Price

$0.416

$0.477

$0.465

$0.593

$0.478

$0.629

$0.815

$0.91

$0.75

Stocks/Use

26.1%

25.3%

52.8%

55.0%

37.6%

19.0%

14.2%

23%

31.6%

 

Supply and Demand Projections and Historical Data Source: USDA

Soybeans

In a bullish USDA report, ending stocks for 2011/12 were lowered 40 million bushels to 210 million bushels compared to the average trade guess of 221 million bushels. Crush was increased 15 million bushels while exports were raised 25 million bushels. The season average price for 2011/12 was bumped up 10 cents to $12.35 a bushel. Stocks to use ratio was projected at 6.8%, down from 8.2% last month.  World ending stocks for 2011/12 are projected to again decrease to 1.956 billion bushels, 84 million bushels less than the April estimate.  In the new crop year, increased demand more than offsets increased production as ending stocks are projected at 145 million bushels, a historically low stocks-to-use ratio of 4.4%. Based on the March 30 USDA planting intentions report, soybean planted acreage is projected at 73.9 million acres. Acreage will most likely be increased at some point in the growing season as it is believed that higher soybean prices have encouraged either additional double crop acres or a switch from other crops. Currently, supplies are projected at 3.430 billion bushels with usage at 3.285 billion bushels. The season average price is estimated to range from $12.00 to $14.00 a bushel. Global new crop stocks are projected to increase 177 million bushels to 2.134 billion bushels as South American production is expected to rebound from their drought reduced production of 2011/12 and offset increased consumption. November soybeans closed at $13.59, up 25 ½ cents per bushel. Technical analysis has a buy bias with support at $13.16 and resistance at $13.89 a bushel. I am currently priced at 50% for the 2012 crop.  From a price risk management standpoint, a $13.60 Put would cost 80 cents and set a $12.80 futures floor. Over the past 31 years the average difference between the May projection for U.S. ending stocks and the final estimate has been 110 million bushels with 9 years below the final estimate and 22 years above. The next USDA Supply & Demand report will be released June 12, 2012.

Supply

2004/
2005

2005/
2006

2006/
2007

2007/
2008

2008/2009 2009/2010  2010/2011  2011/2012USDA

Estimated

2012/2013USDA

Projected

 

 

 

 

 

 

 

 

 

 

Acres Planted
(million acres)

75.2

72.0

75.5

64.7

75.7

77.5

77.4

75.0

73.9

Acres Harvested

74.0

71.3

74.6

64.1

74.7

76.4

76.6

73.6

73.0

U.S. Average Yield

42.2

43.0

42.9

41.7

39.7

44.0

43.5

41.5

43.9

Beg. Stocks
(million bushels)

112

256

449

574

205

138

151

215

210

Production

3124

3063

3197

2677

2967

3359

3329

3056

3205

Imports

5

4

9

10

13

15

14

15

15

Total Supply

3241

3323

3655

3261

3185

3512

3495

3286

3430

Use

         

 

 

 

 

Crushing

1696

1739

1808

1801

1662

1752

1648

1645

1655

Exports

1103

948

1116

1161

1279

1499

1501

1315

1505

Seed and Residual

186

188

156

93

106

110

130

116

125

Total Use

2985

2874

3081

3056

3047

3361

3280

3076

3285

U.S. Ending Stocks

256

449

574

205

138

151

215

210

145

Foreign Stocks

1486

1509

1727

1684

1440

2072

2360

1746

1989

U.S. Average Season Price

$5.74

$5.66

$6.43

$10.10

$9.97

$9.59

$11.30

$12.35

$13.00

Stocks/Use

8.6%

15.6%

18.6%

6.7%

4.5%

4.5%

6.6%

6.8%

4.4%

Supply and Demand Projections and Historical Data Source: USDA

 

Wheat

USDA offered a friendly to neutral wheat supply and demand report today as ending stocks for both old and new crop wheat are slightly lower than the average trade guess. Projections for 2011/12 marketing year which ends on May 31 for wheat are for ending stocks of 768 million bushels, 25 million bushels lower than last month and 13 million bushels lower than the average trade guess. Exports accounted for the change as they were raised 25 million bushels. The stocks to use ratio is estimated at 34.7%. The estimated season average price was narrowed 5 cents to $7.25 a bushel. World ending stocks are projected at 7.239 billion bushels, down 34 million bushels from April. USDA new crop projections estimate ending stocks at 735 million bushels compared to the average pre-report guess of 805 million bushels. Production and total supplies are both projected higher than the previous year with demand forecast to increase 8.3% from the 2011/12 marketing year. Stocks to use are expected to drop to 30.7% with a season average price of $5.50 to $6.70 a bushel. Global stocks are expected to decrease 327 million bushels to 6.912 billion bushels. July wheat closed at $6.01 ¼ up 1 ¼ cents. Technical analysis shows a strong sell bias with support at $5.88 with resistance at $6.13 a bushel. In my weekly comments, I am currently priced 20% on the current crop and would target any rallies to the $6.50 range as a point to price more. With harvest right around the corner and wheat looking like it has reached a bottom, if price targets aren’t met I would consider selling the remainder at harvest or possibly storing some depending on the deferred contracts basis and cash flow needs. Over the past 31 years the average difference between the May projection for U.S. ending stocks and the final estimate has been 3.7 million bushels with 17 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 June 12, 2012.

Supply

2004/
2005

2005/
2006

2006/
2007

2007/
2008

2008/2009 2009/2010  2010/2011  2011/2012USDA

Estimated

2012/2013USDA

Projected

 

 

 

 

 

 

 

 

 

 

Acres Planted
(million acres)

59.7

57.2

57.3

60.5

63.2

59.2

53.6

54.4

55.9

Acres Harvested

50.0

50.1

46.8

51.0

55.7

49.9

47.6

45.7

49.2

U.S. Average Yield

43.2

42.0

38.6

40.2

44.9

44.5

46.3

43.7

45.7

Beg. Stocks
(million bushels)

546

540

571

456

306

657

976

862

768

Production

2158

2105

1808

2051

2499

2218

2207

1999

2245

Imports

71

82

122

113

127

119

97

120

120

Total Supply

2775

2727

2501

2620

2932

2993

3279

2982

3133

Use

         

 

 

 

 

Food

907

915

938

947

927

919

926

930

945

Seed

79

78

82

88

78

69

71

79

73

Feed

187

153

117

15

255

150

132

180

230

Exports

1063

1009

908

1264

1015

879

1289

1025

1150

Total Use

2235

2155

2045

2314

2275

2018

2417

2214

2398

U.S. Ending Stocks

540

571

456

306

657

976

862

768

735

Foreign Stocks

4993

4837

4205

4322

5482

6375

6367

6471

6177

U.S. Avg. Season Price

$3.40

$3.42

$4.26

$6.48

$6.78

$4.87

$5.70

$7.25

$6.10

Stocks/Use

24.2%

26.5%

22.3%

13.2%

28.9%

48.4%

35.7%

34.7%

30.7%

Supply and Demand Projections and Historical Data Source: USDA